The property division in a divorce in Michigan is based on many factors. Usually when I interview a client I ask my prospective client what he or she owned on the date of the marriage and what they own today.
A major factor in the split involves the length of the marriage for reason that in a very long marriage the judge is more inclined to throw everything in the pot. Unless there is a pre or post nuptial agreement it makes no difference whose name is on the assets to be split so long as the money used for acquiring the assets was earned by husband or wife during the marriage. There are various rules for property acquired by inheritance or gift and as to these two items it is always best for the person receiving the gift or the inheritance to keep the asset in their own name.
The factors that a judge needs to consider in dividing assets in a divorce in Michigan are set forth in a case named Sparks v Sparks. They are as follows:
a. The source of the property
b. Contribution towards its acquisition
c. The length of the marriage
d. The needs of the parties
e. The earning capacity and work history of the parties
f. The interruption of the personal career or education of either party
g. Contribution of each party to the marital estate
h. Cause for the breakup of the marriage
i. The age of the parties
j. The health of the parties
k. The lifestyle of the parties
l. The necessities and circumstances of the parties
m. The past relations and conduct of the parties
Before making a distribution the judge must value the property and the decision cannot be based on future events that happen after the divorce. Usually the value will be calculated as of the date of the divorce but sometimes it can be the date of the separation or filing of the divorce. One needs to remember that it is also important to be able to establish the value of an asset on the date of the marriage if one seeks credit for the assets value as of the date of the marriage. This is especially true on mid length marriages. Some assets are easy to value with publically traded stocks being a good example. Other values are more difficult. An example of this would be a business owned in a fifteen year marriage where the party who owned the business found valuation to be difficult based on the fact that he or she no longer had the business records or the tax returns from the year of the marriage. In some cases it is important to be a pack rat and to keep old records and this is a prime example.
The value of real estate assets is best determined by using an appraisal. Usually I like using an appraiser that is well known and trusted in the court in which I am appearing. The last thing a client needs is a scenario where the lawyer who wants the value high to hire an appaiser who is going to lean high with the opposite attorney hiring an appraiser who is going to come in low on the value. I never like fighting over personal property as it is too expensive to have two attorneys paid by the hour to fight over tables, snowmobiles, lamps, etc. If the clients can’t agree I recommend that they arbitrate in front of a third attorney who makes the call after each party tells him or her which personal property items they should get and why they should get it.
Another asset that is split during a divorce are any stock options earned during the marriage. There can also be a claim on an advanced degree. Note that the degree itself is not considered an asset but based on the fact that divorce is an equitable action the spouse who makes a sacrifice or makes a disproportionate contribution can be compensated for their efforts. In looking at this issue the court will examine the following areas:
A mutual plan to sacrifice for a degree and to share in ancillary benefits
A mutual decision for one of the parties to pursue the degree
A decline in the parties standard of living
The parties respective financial contributions to the education and household expenses
Possible relocation to obtain the degree
Career setbacks or postponement of education of the non-degreed spouse that results in past or future monetary loss
Emotional price paid by sharing in the stress of professional degree studies.
Note that the compensation due to the non-degreed spouse varies greatly based on which judge you draw and on the facts presented.
The value of a business is quite frequentely a major area of dispute in a divorce and even more so if the business was acquired or started prior to the marriage. Note that the business value is based on current value and not on how much money was invested during the marriage. Usually if there is a dispute on the value of a business then each party needs to hire an expert to determine value. If you need an expert then it is always smart to select an expert who is known by your judge to be fair and even handed. Sometimes people will try to dig up an expert who will go low by the party seeking to retain the business and the opposite is true as quite frequently the party seeking to be bought out will hire an expert who is known to five high values. Note that the value in a divorce is not necessarily the true cash value and is quite frequently based on cash flow and income. A prime example in this area involves professional practices in which the assets don’t amount to much but where high incomes are earned. Worse yet quite frequently a spouse will claim that they are entitled to spousal support and half the value of the business. As you can see this is a very complex area in the law.
These days the biggest assets in the marriage are pension benefits and retirement money. There are two main types of retirement benefits. The first is known as a defined benefit plan which is a plan in which the employee is due monthly benefits based on length of sevice, income earned, and age. When this type of plan is split the pre-marital portion of the plan is awarded to the spouse who has the plan and any benefits earned during the marriage are split between the parties. When this type of plan is split it is done so through a court order known as a Qualified Domestic Relations Order (QDRO). There are frequent disputes involving the language of these orders and usually an attorney who specializes in retirement benefits prepares the order.
The second main area of retirement benefits are plans known as defined contribution plans. These include 401ks, 403bs, 457s, and other similar plans. Under these plans either the employee and/or the employer make contributions to the account which can vary from year to year. Usually the party who has the account gets a credit for the pre-marital portion of the account. Retirement account distributions also can include IRA’s which are accounts that are set up by a person using their own money. These accounts are also split based on whether they are marital or pre-marital.
Another area that is addressed on defined contribution accounts centers on the division of any gains in the account which accrue during the marriage. Usually the court will try to determine whether the gains are what is known as active or passive. Gains are active if they are derived from investment activity which occrurs during the marriage. For example if a 401k had a fund which was losing money and the person holding the account changes funds to a high flying investment that doubles then the opposite party would claim that they are entitled to half the gain because it was derived from active income. On the other hand if a party enters the marriage with an investment in a high flying fund and never touches the money or changes investments then that party is going to claim thay they are entitled to all the increase because the gain was derived from passive activity.
These are major issues that need to be addressed in a divorce. When negotiating a property settlement it is wise to be consulting with an attorney. If you have any questions or need help with your issues or someone you know call me at the office 248.380.8787 or on my cell 248.672.6112 and I can help. I have handled hundreds of divorces for clients in Wayne, Oakland, and Livingston County. My offices are in Howell and Novi. I have been practicing law for over 26 years for clients living in Novi, Farmington Hills, Northville, Walled Lake, Wixom, Commerce, South Lyon, Milford, Highland, Plymouth. Livonia, Howell, Brighton, Fowlerville, and in many other communities in South Eastern Michigan.