 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 VOL. 5 NO.7 JULY 2004 |
In this Issue
A Word from Gregg Herman
Advanced Divorce Issues SeminarWisconsin Courts Updates
Stock Options; Review granted of privilege case; Modification of Legal CustodyDecisions Across the Nation
Standing for Non-Custodial Parent, Social Security Death Benefits, Binding Arbitration for Custody, Double Counting Enhanced Earnings and much more.Family Law and Mental Health
The Well-being of Adolescents in Households With No Biological ParentsBusiness Valuations
Value of Electrical Contract BusinessTax Tip Corner
Payroll Tax Rules for Transferred Stock OptionsFamily Law Mediation
Advice Giving in Mediation
On September 21 (Milwaukee) and 22 (Madison), I will be co-moderating, with Madison Attorney Steph Beilke, a program on Advanced Divorce Financial Issues. The program will include business evaluators, accountants and vocational experts to examine important financial issues which are not typically discussed at most family law seminars. The program is being sponsored by the Professional Educations Systems, Inc. (PESI).
Please reserve those dates and look for more information in your mail and in this space.
On June 8, the supreme court granted the petition for review in Dennis L.R., 2004 WI App 51. For a review of the case, see Gregg Herman's Wisconsin Law Journal article "Decision could create problems for child-therapist privilege."
•••
As we discussed in a FLU Bulletin, in early-June, the District II Court of Appeals issued their opinion in Maritato v. Maritato, No. 03-2074 (Wis. Ct. App. Jun. 2, 2004) (recommended for publication), affirming in part, reversing in part and remanding the judgment of Judge David M. Bastianelli (Kenosha County Cir. Ct.), concerning child support, the valuation and division of vested and unvested Abbott Labs stock options and the division of the 2001 income tax refund.
The court of appeals affirmed the trial court’s order which rejected Mario's request to consider Sunday as an overnight equivalent, because "there is nothing about Mario's Sunday placement that would make it substantially different than any other day of placement following an overnight for which the parent has already been credited."
However, the court of appeals reversed the trial court’s refusal to consider deviating from the child support guidelines, finding that Mario had presented arguments which the trial court had not considered. The court of appeals reversed and remanded to the trial court for consideration of each of the relevant Wis. Stat. § 767.25(1m) factors.
The court of appeals affirmed the trial court rulings regarding the wife’s vested and unvested stock options. The appellate court of appeals cited approvingly of Gregg Herman's article, Stock Options in Divorce, 19 Wis. J. Fam. L., 61 (1999), in affirming both the award and valuation of the options.Finally, the court of appeals upheld the trial court's equal division of tax refunds, rejecting husband’s arguments that he deserves more than half as the refunds were occasioned by his overwitholding.
Full Opinion (PDF)
The Petitioner-Respondent Karmin M. Maritato was represented on appeal by: Thomas W. St. John and Jennifer L. Bolger (Milwaukee)
The Respondent-Appellant Mario B. Maritato was represented on appeal by: Thomas W. Anderson, Jr. (Kenosha)
•••
In early-June, the District IV Court of Appeals issued their opinion in In re the Paternity of Nicholas B.P., Nos. 02-3390 and 03-1267 (Wis. Ct. App. Jun. 3, 2004) (recommended for publication), affirming the order of Judge John V. Finn (Portage County Cir. Ct.), which denied the father's motion for custody and placement modification.
In February, 1992, Leanne M.A. and Bradley J.P. entered into a stipulated paternity judgment which awarded Leanne sole custody (and presumably primary physical placement) of Nicholas (d/o/b 10/6/91) with Bradley having periods of physical placement "as agreed between the parties."
In August, 2001, Bradley filed a modification motion requesting joint custody and shared physical placement of Nicholas.
At the hearing on the motion in June, 2002, the social worker testified that Nicholas performs well in an accelerated learning program at school, is active in sports and is well-adjusted. The social worker, as well as the GAL, recommended joint custody and increased placement to Bradley. In December, 2002, Judge Finn issued and order denying Bradley's motion, concluding: Bradley failed to establish a substantial change in circumstances since the entry of the previous order (Wis. Stat. § 767.325(1)(b)1.b) and Bradley failed to rebut the presumption in favor of maintaining the status quo in custody and placement matters (§ 767.325(1)(b)2).
Bradley moved for reconsideration of the December, 2002, order, alleging that the rebuttable presumption in favor of the status quo violated his constitutional right to equal protection. in February, 2003, Judge Finn denied the motion for reconsideration, indicating that it was not unfair to presume to maintain the status quo in the eleven years since the entry of previous order and, further, Bradley should not be permitted to raise his constitutional argument six months after the hearing on his original motion.
Bradley appealed from both the December, 2002, order denying his modification motion and the February, 2003, order denying reconsideration.
The court of appeals majority opinion, authored by Judge Higginbotham, holds that the trial court erred in concluding that there was not a substantial change in circumstances, as the trial court focused on the years immediately proceeding the hearing. Instead, the court of appeals concludes, that "when the entire relevant time period is considered, the facts clearly show a substantial change in circumstances." Nevertheless, the court of appeals concluded that the trial court's error was harmless, as the trial court did proceeded to an analysis of best interest considerations to determine whether Bradley rebutted the status quo presumptions in § 767.325(1)(b)2.
Bradley argued that the trial court erred in applying the custody status quo presumption, rather than the joint legal custody presumption set forth in § 767.24(2)(am). Bradley supports his position by pointing out that § 767.325(5m), which provides that custody and placement modification proceedings be made "in a matter consistent with s. 767.24," obligates the trial court to presume that joint legal custody is in Nicholas' best interest, per § 767.24(2)(am). This result would, in effect, establish a presumption of joint legal custody in all cases, pre- or post-judgment. The court of appeals majority disagreed with Bradley's arguments.
Following an extensive foray into statutory interpretation and construction, which found the statutes ambiguous when read together, the court of appeals majority concludes:
"[T]he most reasonable interpretation of Wis. Stat. § 767.24(2)(am) is that the presumption that joint legal custody is in the child's best interest applies only in initial legal custody determinations, not in modification determinations. Were we to conclude that the § 767.24(2)(am) presumption favoring joint legal custody applied to a Wis. Stat. § 767.325(1)(b) motion for modification of custody and physical placement, such a conclusion would, in essence, eliminate the § 767.325(1)(b) presumption favoring the status quo."
The majority opinion also rejects Bradley's equal protection argument as "the state's interest in protecting the best interest of a child by imposing a rebuttable presumption of maintaining the status quo in custody and physical placement modification proceedings is compelling and that § 767.325(1)(b)2 is narrowly tailored to achieve that purpose." The court further held that all movants in modification positions are treated equally, in that that the presumption applies to all movants, which disposes of Bradley's claim that he (and those parents with their most recent custody and placement orders occurring before 1999) will never enjoy the presumption of joint custody and maximized physical placement provided in 1999 legislation.
A concurring opinion by Judge Lundsten agrees with the holdings of the majority, but concludes, unlike the majority that the statutes at issue are unambiguous, which resolves itself in the same fashion as the majority's analysis.
The dissenting opinion by Judge Deininger, agrees with the majority that there had been a substantial change in circumstances. However, he concludes that the trial court erred in giving no consideration to the joint legal custody provisions of § 767.24(2)(am) or the maximizing placement with each parent factor contained in § 767.24(4)(a)2. The dissent suggests that the trial court felt overly-constrained by the status quo presumption and, had it not been so constrained, it may have reached a different result. Interestingly, the dissent concludes that both presumptions (status quo and joint custody) should be weighed and considered by the trial court in rendering its decision. As both statutes apply, the dissent concludes there is no equal protection problem.
(N.B.: The GAL, who elected not to file a brief, nevertheless indicated that he supported Bradley's position on appeal.)
(N.B. - Part 2: Both the concurring judge and dissenting judge urge the supreme court to grant review in this case to resolve the statutory construction issues.)
The Petitioner-Respondent Leanne M.A. was represented on appeal by: Charles J. Lee (Red Wing, MN)
The Respondent-Appellant Bradley J.P. was represented on appeal by: Dale M. Eaton and Mary M. Prohaska (Wausau)
•••
Last month, we reported to you on the Chen v. Warner case.
For our analysis of the case, please see our Wisconsin Law Journal article, "Court's Consideration of 'Shirking' is Exercise in Semantics."
The following cases are provided courtesy of Contributing Editor Laura W. Morgan, Family Law Consulting. Laura is available for consultation, brief writing and research on family law issues throughout the country. Please visit her website or drop her an e-mail.
Elk Grove Unified School District v. Newdow
No. 02-1624
United States Supreme Court
June 14, 2004Where a parent is granted sole legal custody, the noncustodial parent does not have standing to pursue a claim of violation of the first amendment on behalf of the child.
Gillett-Netting v. Barnhart
No. 03-15442
United States Court of Appeals Ninth Circuit
June 9, 2004Twins conceived through artificial insemination after their father’s death are qualified to receive Social Security death benefits.
Perlow v. Berg-Perlow
No. SC02-1317
Florida Supreme Court
June 10, 2004In a revised opinion, the Florida Supreme Court set out procedures in a dissolution of marriage case, holding that: (1) the trial judge may ask both parties or one party to submit a proposed final judgment; (2) if proposed final judgments are filed, each party should be given an opportunity to review the other party's proposed final judgment and make objections; (3) if only one party submits a proposed final judgment, there must be an opportunity for review and objections by the opposing party; and (4) prior to requesting proposed final judgments, the trial judge should, when possible indicate on the record the court's findings of fact and conclusions of law.
Grecian v. Grecian
No. 29630
Idaho Court of Appeals
June 3, 2004When the court divides a 401(k) plan between the parties, the non-owning spouse is entitled to the value of the benefits on the date of the divorce rather than the date the plan issues a distribution of the benefits.
Harvey v. Harvey
No. 124234
Michigan Supreme Court
June 9, 2004Joining a growing number of states that have considered the issue, the Michigan Supreme Court held that a couple’s agreement to submit questions of custody to binding arbitration, unreviewable by a court, is void as against public policy.
Martin v. Martin
No. 37581
Nevada Supreme Court
June 10, 2004A father’s remarriage does not constitute a change of circumstances sufficient to warrant a change of custody from the still-single mother to the father.
Weishaus v. Weishaus
No. A-3/4-03
New Jersey Supreme Court
June 9, 2004In an uncontested divorce action, where the parties have submitted a spousal support agreement for approval by the court, the court does not need to make findings as to the marital standard of living.
Holterman v. Holterman
No. 73
New York Court of Appeals
June 10, 2004Even though the court distributed to the husband and wife the husband’s "enhanced earnings" attributable to his medical license, it was not "double counting" to consider the husband’s earnings in the child support award.
Presby v. Presby
No. 03 MA 198
Ohio Court of Appeals
June 9, 2004The coverture fraction for a pension should include accumulated sick leave which the employee spouse is entitled to.
O’Donnell-Lamont and Lamont
No. S50551
Oregon Supreme Court
June 10, 2004In considering the appropriate application of changes that the legislature made to the third-party custody statute in 2001, following the United States Supreme Court's decision in Troxel v. Granville, the Supreme Court affirmed the trial court’s award of custody of the two children in this proceeding to maternal grandparents (grandparents) rather than to father.
Family Law and Mental Health The following is provided courtesy of Contributing Editor Christine Harness, Phd. Dr. Harness can be reached at (414) 961-3208:
Study Details Impact of Non-Biological
Parent Households on AdolescentsA recent study in the Journal of Marriage and Family entitled "The Well-being of Adolescents in Households With No Biological Parents" (Volume 65, November, 2003) analyzed a large, nationally representative sample of 19,000 American middle-school students with regard to family structure and adolescent well-being. The study investigated five family structures across a number of mental health outcomes. Although the results suggest some disadvantages of living with neither parent, the disadvantages relative to nontraditional families were limited. Differences in family resources either partially or completely accounted for outcome differences between non-biological parent and other family structures. Finally, boys and girls living in non-biological-parent households seemed to fare similarly.
This journal is published by the National Council on Family Relations, and can be accessed online, or by contacting the National Council on Family Relations at 1-888-781-9331.
The following is provided by Contributing Editor Timothy P. Muehler, JD, CPA/ABV, CVA, Clifton Gunderson LLP, Certified Public Accountants. Tim can be contacted via e-mail.
Trenhaile v. Findorff
2004 Wisc. App. LEXIS 384
May 4, 2004This case deals with the valuation of an electrical contractor in a breach of contract case. The Appellate Court upheld and modified the Trial Court's valuation of the contractor.
The following is provided courtesy of Contributing Editor Scott B. Franklin, Certified Public Accountant and Attorney. You can reach Scott via e-mail.
IRS Clarifies Payroll Tax Rules for Transferred Stock Options
The IRS previously has ruled that when a non-employee spouse receives a portion of the other spouse's nonstatutory stock options as part of the marital settlement, the transfer of the options does not result in taxable income until the exercise actually occurs.
In Revenue Ruling 2004-60 released in mid-June, the IRS addresses what payroll taxes are due on this transaction. The IRS ruled that FICA and Medicare payroll taxes are due on the exercise income and is taxable to the EMPLOYEE spouse even though the shares are exercised by the non-employee spouse. This would be added to the FICA and Medicare wages and taxes boxes on the employee's Form W-2. The IRS further held that FUTA (unemployment) taxes are also due with respect to the EMPLOYEE spouse. This is added to the employer's Form 940 payroll return. (Presumably, this is also taxable for SUTA (state unemployment purposes) as well.) The non-employee spouse should have income tax withholding on the exercise income. The income and related withholding is reportable on Form 1099-MISC to the non-employee spouse cashing in the options and paid by the employer on Form 945, not on Form W-2 since the non-employee spouse is, by definition, not an employee of the company.
What is the practical result? If the EMPLOYEE spouse's annual wages are in excess of $7,000, no incremental FUTA tax will occur. If the EMPLOYEE spouse's annual wages are in excess of $10,500, no incremental SUTA tax will occur. If the EMPLOYEE spouse's annual wages are in excess of the $87,900 FICA limit, only 1.45% additional Medicare taxes will result. This is probably the most likely scenario. And, of course, the non-employee spouse expects to pay income taxes on the exercise already. However, counsel should take the payroll taxes into account when structuring the settlement and provide for some reimbursement mechanism to the EMPLOYEE spouse.
In those cases where the employer can't or won't actually divide the option grants, the result is usually the non-employee spouse having equitable control over the EMPLOYEE spouse's exercise of a set portion of the grant. Then, all taxes are assessed to the EMPLOYEE and the net after-tax proceeds should be given to the non-employee spouse as a tax free property settlement, not any different than is the current suggested practice.
Rev. Ruling 2004-60 is printed at Page 1051 of Internal Revenue Bulletin 2004-24, available at the IRS website.
Family Law Mediation The following is provided courtesy of Contributing Editor Kathleen Baird, a family law attorney and mediator in Wauwatosa, Wisconsin. She can be reached via e-mail.
Advice Giving in Mediation
In an intensive year- long mediation program at Woodbury College in Vermont, new students are told," the only rule for the year is No Advice Giving." The problem with advice giving in mediation is that advice is focused on outcomes. It is difficult to offer advice that doesn't originate in the mediator's own thoughts about what outcome would be best. Therefore, the "No Advice Giving" approach at Woodbury is based upon the belief that advice giving interferes with the mediator's ability to listen carefully and use other more appropriate tools to help parties explore their own motivations, beliefs, interests, ideas, challenges, concerns or goals. Christopher Moore, author of The Mediation Process, draws a distinction between giving advice and giving suggestions. When giving suggestions, a mediator includes a range of ideas, whereas advice giving involves only one idea. However, he instructs that mediators not offer suggestions until the parties have fully explored their own thinking. Advice giving, if used at all, should be directed at the process the parties are using to communicate and assist them in developing better approaches to problem solving. Students at Woodbury are given no training in deciding the best outcome for any given conflict, but have extensive training in ways of approaching disagreements that give the discussion its best chance of producing an acceptable outcome for the parties. Woodbury Professors Alice Esley and Sandi Adams believe that advice giving tends to be a fall back position when the mediator is stumped about what to do; and, that mediators don't need to resort to advice giving when they have filled their toolboxes with every available mediation tool and learned how to use them well.
See "A Case Against Advice Giving", by Alice Esley and Sandi Adams at Mediate.com
Our Contributing Editors
Atty. Kathy Baird (Mediation)
CPA Scott Franklin. Kohler & Franklin, Milwaukee (Tax Tips)
Prof. Charles Kindregan, Suffolk University Law School
Dr. Christine Harness, Ph.D., Milwaukee (Mental Health)
Atty. Laura Morgan, Family Law Consulting, Charlottesville, VA (Family Law Cases)
CPA Timothy P. Muehler, Clifton Gunderson LLP
Dr. Sanford Portnoy, Boston, MA (Mental Health)
CPA Everett Stone (Taxes and business valuations)
Scott J. Wildman, CPA/ABV, CVA of V/B Business Valuations, Inc.
Atty. William Brown (Employee Benefits)We thank them for their contributions!
|
Our Firm | Meet
Our Attorneys | Practice Areas
| Articles & Resources |
| FamLaw Update e-Mail | Contact
& Directions | Back to Main |
©
2009, Loeb & Herman, S.C.
Suite 1725 - Chase Tower
111 East Wisconsin Avenue
Milwaukee, WI 53202-4868
414.272.5632 | Fax 414.272.7918