DIVORCE 30: Trial court not required to consider the tax consequences of property division.

The parties were married in 1992, and Plaintiff filed for divorce in July 2016. The marital estate was valued at $806,004.46, and the parties agreed to an equal distribution of the assets.

From the parties’ real estate, investment and banking assets, titled assets, and personal property, Plaintiff would receive $71,488.11 and defendant would receive $384,928.56. From retirement assets, Plaintiff would receive $273,896.17 and defendant would receive $71,488.11. To equalize the division of real estate, investment and banking assets, titled assets, and personal property, defendant would pay Plaintiff $154,618.47 in Non-Retirement Assets. Similarly, to equalize the division of retirement assets, Plaintiff would provide defendant with a Qualified Domestic Relations Order (QDRO) for $101,204.03 from her retirement assets.

Despite their agreement to the above, the parties disputed the method for completing the equalizing payments. Plaintiff proposed that the $154,618.47 owed to her be paid in full and in cash. However, Defendant submitted that he pays $54,618.47 in cash and, for the other $100,000, offset this from the $101,204.03 owed to him by Plaintiff, such that Plaintiff would owe him only $1,204.03 from her retirement assets.

Plaintiff challenged Defendant’s proposal, arguing that as a result of tax consequences the $100,000 offset was not equal to $100,000 paid to her in cash because once she withdrew the $100,000 from her retirement accounts she would have to pay taxes and, if she withdrew the funds early, she would also incur a penalty for early withdrawal.

In lieu of a trial and hearing, the parties submitted briefs to the trial court. The trial court ruled in favor of Defendant’s distribution proposal, concluding that it would not consider the tax consequences of the distribution. In doing so, the court rejected Plaintiff’s argument that she would “incur predicable and foreseeable tax penalties to cash in the retirement funds,” and ruled that, if it accepted Plaintiff’s argument, “it would be forced to speculate when—or even if—she would cash in the accounts.” The trial court found Defendant’s “position to more accurately and equitably divide the present value of the estate.” Plaintiff moved for reconsideration, asserting in an affidavit that she intended to immediately withdraw the retirement funds. The court denied the motion.

Plaintiff argues that the trial court erred by declining to consider the possible tax consequences arising from the selected distribution method.

In this case, the trial court could, but was not required to consider the tax consequences of the property division. In the proceedings, Plaintiff initially stated that she intended to withdraw funds from her retirement accounts sometime in the future, and she submitted evidence showing potential tax penalties arising from the withdrawal of funds from her retirement accounts. Based on the evidence presented, the trial court determined that Plaintiff had not established that the tax consequences were reasonably likely to occur and were not merely speculative. Given the record before the court, its decision was a reasonable and principled outcome and not an abuse of discretion.

In order to protect your parental and financial rights, it is important to have an experienced and understanding divorce attorney by your side at every step of the way. At the Plymouth and Ann Arbor law firm of Aldrich Legal Services, our attorneys have the skill and experience you need to address all family law issues that may arise during your divorce.

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FAMILY LAW 37: Referee recommended against changing legal custody or parenting time.

Plaintiff requested sole legal custody, arguing that she and defendant had difficulty co-parenting and that defendant would not agree to medical treatment for the diagnosis and treatment of ADHD, need for orthodontic work, and need for vision testing and glasses. Plaintiff also requested an alternating weekly or biweekly schedule during the summer, which would increase her overall parenting time.

REAL ESTATE 40: Tax Tribunal denied petitioner’s claim of a principal residence exemption (PRE).

MCL 211.7cc(2) provides that an owner of property can claim the PRE by filing an affidavit that must state that the property is owned and occupied as a principal residence by that owner of the property on the date that the affidavit is signed and shall state that the owner has not claimed a substantially similar exemption, deduction, or credit on property in another state.

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REAL ESTATE 38: Plaintiff fails to make land contract payments.

The land contract stated that T Company sold real property to plaintiff. The land contract further stated that if plaintiff failed to make a monthly payment, T Company could execute the quitclaim deed, thereby terminating plaintiff’s rights to the real property under the land contract.

CONTRACTS 6: Do you understand the clauses in your Purchase Agreement?

The trial court granted defendants’ motion for summary disposition, concluding that the claims against the realty companies were barred by the valid release contained in the purchase agreement and that the claims against sellers were required to be resolved in arbitration because they fell within the scope of the arbitration clause in the purchase agreement.

DIVORCE 29: Spousal support in gross is non-modifiable, whereas periodic is subject to modification.

As the name implies, periodic spousal support payments are made on a periodic basis. Periodic spousal support payments are subject to any contingency, such as death or remarriage of a spouse, whereas spousal support in gross is paid as a lump sum or a definite sum to be paid in installments. In addition, one major difference between the two types of spousal support is modifiability. Spousal support in gross is non-modifiable, whereas periodic spousal support is subject to modification pursuant to MCL 555.28.1.

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PROBATE 28: Probate court enters a protective order providing support for a community spouse.

A probate court’s consideration of the couple’s circumstances cannot involve an assumption that the institutionalized spouse should receive 100% free medical care under Medicaid or an assumption that a community spouse is entitled to maintain his or her standard of living. Medicaid is a need-based program, and a Medicaid recipient is obligated to contribute to his or her care.

REAL ESTATE 36: Plaintiff argued that her claim was not time-barred because it did not accrue until the grandmother’s death.

Plaintiff’s interest in the subject property is best characterized as a remainder estate, because her right to possession of the property was postponed until the occurrence of a specific contingency, that being the deaths of the grandparents. Plaintiff pursued this action within the 15-year limitation period; accordingly, this action is not barred by MCL 600.5801(4).

LITIGATION 6: The terms of the agreement prevails over the course of performance.

The trial court determined that under the UCC, the express terms of the parties’ agreements prevailed over the course of their performance and course of dealing. Although a course of performance may show that parties have waived a specific contractual term under MCL 440.1303(6), the statute does not similarly provide that a course of dealing may demonstrate waiver.

PROBATE 27: Petitioner filed a petition for mental-health treatment.

In support of the allegations, petitioner attached clinical certificates from a physician and a psychiatrist who observed respondent at the hospital. Both doctors diagnosed respondent with bipolar disorder, determined that she displayed a likelihood of injuring herself and that she did not understand the need for treatment, and recommended a course of treatment that consisted of 60 days of hospitalization and 90 days of outpatient care.

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