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Family Law Update for January 2018
In this Issue …
A Word from Gregg Herman
Happy New Year and a look forward to 2018
Thoughts on Family Law Video
Where have all the family law cases gone?
Wisconsin Courts Updates
Decisions Across The Nation
Contingent fee agreements as property, Herd of cattle treated as real property, Breach of spousal fiduciary duty due to not disclosing options trading, Illegal tape recording of mother and child, Correcting a QDRO and more.
Contingent placement and parent relocation bills and new tax bill summary.
Preparing for international adoption
Family Law Articles & Publications
Family Law Quarterly issue on spousal support
A Word from Gregg Herman …
It’s hard to believe, but this is the 19th year that we have provided FLU as a free service. We thank all of our faithful readers and wish all a happy and healthy 2018.
Speaking of 2018, permit me to provide a commercial preview. For the first time, early this new year, Loeb & Herman, S.C. will provide download access to our family law case library. Our library will include a comprehensive list of all family law cases in Wisconsin for the last 40 years plus leading cases from elsewhere in the country.
This library will be organized by topic and will be linked to the full cases. Please check FLU and my web site for launch dates and information on costs and access.
Thoughts on Family Law Video
This month I discuss the paucity of family law cases decided by the Wisconsin Court of Appeals in 2017.
Wisconsin Courts Update
On the last business day of the month, the Wisconsin Supreme Court issued its decision in Sands v. Menard, 2017 WI 110.
The court noted that a cohabitation case under Watts v. Watts, 137 Wis.2d 506, 405 N.W.2d 305 (1987) and the cases that followed “make clear that unjust enrichment by a former cohabitant is founded on the premise of a mutual undertaking or joint enterprise which results in an accumulation of assets in which the parties expected to share equally but which are unfairly retained by one party.” In this case, the court held that Sands and Menard were not engaged in a “joint enterprise” as required under Watts.
- Full Opinion (PDF)
Decisions Across the Nation
The following cases are provided courtesy of Contributing Editor Laura Morgan, Family Law Consulting. Laura is available for consultation, brief writing and research on family law issues throughout the country. She can be reached through her Web site or via e-mail.
Please Note: Most decisions are posted in Adobe Acrobat (PDF) format.
Acton v. Acton
2017 WY 151
Wyoming Supreme Court
December 17, 2017
Ex-husband and ex-wife orally modified property settlement in divorce decree such that ex-husband was allowed to keep his personal property at ex-wife’s house beyond original 90-day window without forfeiting it, despite clause in settlement agreement stating that no modification of agreement would be valid unless in writing, where ex-wife asked ex-husband to wait to pick up his property until house was sold, and ex-husband agreed to wait and to pick up his property only after house was sold. Even a contract with an integration clause, for instance a divorce agreement, may be modified through oral agreement or by mutual conduct of the parties if certain conditions are met, to wit: first, there must be evidence that the parties orally modified the contract terms, and second, the parties have taken actions consistent with the new terms.
Grasch v. Grasch
Kentucky Supreme Court
December 14, 2017
Contingent fee agreements executed by husband, an attorney, with clients were marital property divisible in marriage dissolution proceeding, rather than component of income of husband when payment was received from clients; although husband, as attorney, did not possess a vested right to the actual contingent fee itself until the case was won or settled, when attorney and client signed a contract for a contingent-fee case, attorney possessed the right to work on that case for that client and to bring suit if the client unjustly interfered with that right.
Sigler v. Sigler
2017 S.D. 85
South Dakota Supreme Court
December 13, 2017
Trial court could not order application of a cross-credit that had the effect of reducing ex-husband’s monthly child-support obligation from $442 to $25 without making findings that reflected consideration of the expenses of the child in proportion to the parents’ incomes or whether the cross-credit would have had a substantial negative effect on child’s standard of living, and thus remand was necessary.
Holmes-Bracy v. Bracy
Georgia Supreme Court
December 11, 2017
Installment payments of 50% of former husband’s armed services retirement pay, which former husband was ordered to pay former wife in divorce decree, that became due within seven years preceding the initiation of wife’s contempt proceeding were collectible and enforceable, and installments that were dormant remained subject to revival, in action to hold former husband in contempt of court due to nonpayment; the dormancy period did not begin to run until each installment payment was due.
Osantowski v. Osantowski
298 Neb. 339
Nebraska Supreme Court
December 8, 2017
A herd of cattle is more similar to real property than to personal property. A herd of cattle is generally self-sustaining, through reproduction and reinvestment, and is not subject to depreciation, because it consistently maintains its number- and income-producing capabilities. Crops, on the other hand, are more similar to milk products produced by a herd of dairy cattle. Both are short-term assets that are the product of investing input, maintenance, and equipment costs. They are liquidated on a short-term basis and continuously rolled into production. While a crop cycle is longer and crops may be stored for several years, crops, like milk products, are still end products that account for the income of the individuals raising them. Even if a crop could be used as a source of seed for replanting, it would result only in a decrease in the input cost of the production of the short-term asset that is produced through the continued cycle of cultivation and liquidation. "Accordingly, we hold that agricultural crops are categorically different in nature from a herd of cattle and, therefore, are not entitled to the same treatment for tracing purposes."
In re Marriage of Kamgar
California Court of Appeal, Fourth Appellate District, Division Three
December 8, 2017
Husband appealed a judgment ordering him to pay Wife $1,952,056.50 for breach of his spousal fiduciary duties in failing to disclose to her that he risked in options trading an additional $8 million more than the $2.5 million in community assets she agreed he could trade in their investment account. The trial court determined that the Husband’s undisclosed and reckless trading resulted in a loss of almost $4 million, in addition to losing the initial $2.5 million. Affirmed.
Abid v. Abid
Nevada Supreme Court
December 7, 2017
Psychologist was permitted to consider tape recording of mother, made illegally by father of child when he placed a recording device in child’s backpack, in making best interest determination in proceeding in which father sought to modify custody of child; a contemporaneous recording of a parent’s unfiltered interactions with child was the type of evidence a psychologist would consider in forming an opinion as to child’s welfare, and prohibiting an expert from considering evidence punished child by hindering psychologist’s inquiry into the child’s best interests. Tape recording, made illegally by father of child when he placed a recording device in child’s backpack, was not per se inadmissible in proceeding in which father sought to modify custody of child; statute prohibiting unauthorized recordings did not rebut presumption of the admissibility of relevant evidence, and a per se rule of inadmissibility would force the district court to close its eyes to relevant evidence and possibly place or leave a child in a dangerous living situation.
TSR v. State ex rel. Department of Family Services, Child Support Enforcement Division
2017 WY 144
Wyoming Supreme Court
December 7, 2017
The noncustodial parent of a child from a prior marriage on whose behalf a child support modification petition is filed can ask the court to take into consideration that party’s support obligation to later-born minor children from subsequent marriages as a deviation factor.
Vincent v. Shanovich
779 Ariz. Adv. Rep. 18, 405 P.3d 1120
Arizona Supreme Court
December 6, 2017
Family court’s order denying former husband’s motion to correct qualified domestic relations order (QDRO) that awarded former wife 50% of husband’s retirement benefits, but which did not tie accrual of wife’s benefit to date of petition for marriage dissolution, consistent with dissolution decree, was "special order made after final judgment" that Court of Appeals had jurisdiction to review, where issue whether QDRO contained clerical error warranting correction to tie wife’s accrual of benefits to date of petition for dissolution could not have been raised in prior, timely appeal, but instead had to be raised in family court in first instance, and family court’s order denying husband’s motion to correct QDRO affected QDRO and its enforcement.
Faison v. MCOCSE ex rel. Murray
No. 1486, Sept. Term, 2016
Maryland Court of Special Appeals
December 4, 2017
Putative father who alleged he signed affidavit of parentage under a mistake of fact and that he was not child’s father was entitled to a genetic test for the purpose of attempting to prove that he signed it pursuant to a mistake or that he was otherwise entitled to have his declaration of parentage set aside.
Sinnott v. Peck
2017 VT 115
Vermont Supreme Court
December 1, 2017
Domestic partner of same-sex female adoptive parent brought action to establish parentage of two children whom the couple had raised together. Held: In action to establish parentage, allegations by domestic partner of same-sex adoptive parent were sufficient to withstand dismissal for lack of jurisdiction; domestic partner alleged that she jointly decided with adoptive mother to adopt second child, that they jointly decided to legally name adoptive mother as sole adoptive parent only because adoption agency prohibited adoption by same-sex couples, that they mutually intended to co-parent child and held themselves out as child’s parents, with child referring to domestic partner as "mom," that they intended for domestic partner to adopt child as second parent, despite failing to actually do so, that they entered into shared custody agreement after separating, with equal division of child’s time, and that they attended family counseling after separation to work on co-parenting.
In The News
Proposed Change Would Allow Kentucky Parents To Accrue
Up To $10,000 In Back Child Support Without Felony Charges
LOUISVILLE, Ky. (WDRB) –Kentucky is considering a change to child support laws that could allow parents to go years without paying before it’s a serious crime.
The following was provided by Lynne Davis, Government Relations Coordinator, State Bar of Wisconsin.
Contingent Placement and Parent Relocation Bills
Both the contingent placement and parent relocation bills unanimously passed out of Assembly Children & Families Committee on December 6, 2017. They are AB 586 and AB 581, repectively.
Next, the Senate will set their hearing, hopefully later this month or early January.
• • •
New Tax Bill Summary
The following summaries are provided courtesy of Contributing Editor Laura Morgan, Family Law Consulting. Laura is available for consultation, brief writing and research on family law issues throughout the country. She can be reached through her Web site or via e-mail.
The provisions in the 2017 tax bill are to be effective January 1, 2018. Here’s how the final bill addresses key areas of the tax code:
Individual Rates: The top individual rate would be 37 percent for individuals earning $500,000 and above and joint filers earning at least $600,000. There would be seven tax brackets – 10, 12, 22, 24, 32, 35 and 37 percent. The tax bill would nearly double the standard deduction – to $24,000 – for a couple filing jointly, but would eliminate the deduction for personal exemptions. The tax rates, standard deduction expansion and exemption elimination would expire in 2026.
Medical Expense Deduction: The bill would allow taxpayers to deduct medical expenses exceeding 7.5 percent of adjusted gross income for 2017 and 2018, reverting to 10 percent of adjusted gross income in 2019.
State and Local Tax Deduction: The deduction for state and local taxes paid would be limited to $10,000. The deductible taxes may include property taxes and either income taxes or sales taxes.
Mortgage Interest Deduction: The bill would preserve the deduction for existing mortgages and cap it at $750,000 for newly purchased homes starting January 1, 2018 (the current limit is $1 million). The plan would also end the deduction for interest on home equity loans.
Charitable Contributions: The current 80 percent deduction for contributions made for university athletic seating rights would be repealed, and such contributions will no longer be deductible, effective for contributions made in tax years beginning after 2017.
Miscellaneous Itemized Deductions: The deduction for miscellaneous itemized deductions (investment expenses, tax preparation fees, etc.) that are subject to the 2 percent floor under present law would be eliminated for tax years beginning after December 31, 2017, and before January 1, 2026.
Child Tax Credit: The child tax credit would be increased to $2,000 per child, with up to $1,400 of it being refundable. The bill also increases the threshold amount where the credit would begin to phase out to $400,000.
Individual Alternative Minimum Tax: The individual AMT threshold would be increased to apply to individual filers earning more than $500,000 or joint filers earning $1 million or more.
Corporate Rate: The corporate rate would be cut to 21 percent starting January 1, 2018.
Pass-through Taxation: Pass-through entity owners (i.e. partnerships, S corporations, sole proprietors and some trusts and estates) that meet certain conditions would be eligible for a 20 percent deduction on their business income. Pass-through owners who file jointly and have at least $315,000 in taxable income are subject to certain limitations on the deduction. The limitation is based on how much the pass-through pays in wages or invests in equipment and machinery. Service businesses, such as law and accounting firms, are eligible for the deduction if owners are under the $315,000 threshold. The conference agreement provides that trusts and estates are eligible for the 20 percent deduction under the provision with limitations based on wages paid. The bill also includes a provision that would limit a partnership’s ability to offset passive income – dividends or interest or rental income – with losses from an active trade or business in excess of $500,000 for joint filers or $250,000 for an individual.
Interest Deductibility: The legislation would limit the business interest deduction to 30 percent of a company’s earnings before interest, tax, depreciation, and amortization (EBITDA) for four years. After that, the bill would limit the deduction to 30 percent of earnings before interest and taxes (EBIT). The conference agreement would exempt taxpayers with average gross receipts of $25 million or less from the interest limitation. It would also exempt car dealers using floor plan financing loans to fund their inventory.
Business Expensing: Full expensing of new and used capital investments would be permitted for five years. After 2022, the 100 percent allowance would be phased down by 20 percent each year. Section 179 expensing, which doubles the amount eligible for the special small business investment write-offs, to $1 million, would also be made permanent.
Deduction for Income Attributable to Domestic Production Activities: The bill would repeal the deduction for domestic production activities.
Carried Interest: The legislation would impose a three-year holding period requirement for partnership interests received in connection with performing services, to be eligible for the long-term capital gain tax rate. The change would triple the length of time an asset must be held to qualify for the lower rate. Carried interest is the portion of an investment fund’s profit that is paid to investment managers.
Private Activity Bonds: Private activity bond provisions used to finance infrastructure would be retained.
Corporate Alternative Minimum Tax: The corporate AMT would be repealed.
Estate and Gift Tax: The exemption amount would be increased to $10 million, with inflation adjustments, effective for decedents dying and gifts made after 2017 and before 2026. The exemptions would revert to current levels after 2025.
College Endowments: The legislation would set a 1.4 percent excise tax on the net investment income of private university and college endowments. The tax applies to schools with assets of more than $500,000 per tuition-paying student.
Individual Mandate: The plan would zero out the penalties for not obtaining health coverage under the Affordable Care Act’s individual mandate.
International Regime: The bill would move toward a territorial system, and would include a base erosion and anti-abuse tax (BEAT), which requires U.S. multinationals making "excessive" deductible payments to their foreign affiliates to pay a 10 percent tax on their income without those deductions, after a one-year, 5 percent transition rate. In 2026, the rate would increase to 12.5 percent. Some credits, such as the low-income housing credit and several energy credits under tax code Sections 45 and 48, count against the BEAT up to an 80 percent limit, ensuring that some tax is paid. The plan would also impose a tax on global intangible low-taxed income (GILTI). Overseas profits would be taxed automatically at a 15.5 percent rate for cash assets and 8 percent rate for illiquid assets.
Following is provided courtesy of Contributing Editors Stephen Hayes and Elizabeth Neary of Grady, Hayes & Neary, LLC in Waukesha, WI. They can be reached at (262) 347-2001 or via e-mail.
Preparing for International Adoption
1. Have a firm game plan in mind.
In a recent second placement adoption dissolution case, the family adopting internationally began by planning to adopt one child. However, upon arriving in the sending country, officials persuaded them to adopt other children, arguing that the adopted child would be losing a best friend or a sibling. The court from the sending country insisted that in order to obtain an approval, they must adopt three children of the family when the original plan was to adopt one. Deviating from the initial plan resulted in a dysfunctional family which caused the outplacement of all three children. Have an initial plan, prepare for it and stick with it.
2. Be sure to obtain current physical and mental health information about the child you are considering adopting.
Such information should be made available through the orphanage, through physicians and through the agency coordinating the adoption process. Physicians in this country are available for a small fee to examine those records, as well as photos and videos of the subject child. Such evaluations help an adoptive family understand the issues they may expect if the adoption of that child goes through. Conversely, the information may persuade a family not to take a child for adoption after concluding that the degree of mental or physical health needs of the child cannot be met in that household of the prospective adoptive parents. Information about physicians willing to examine medical information from the sending country can usually be obtained from the nearest children’s hospital.
Family Law Articles & Publications
The Spring, 2017 edition (Vol. 51, No. 1) of the Family Law Quarterly offers an update onSpousal Support in Practice.
A Survey of Lawyers’ Observations About the Principles Governing the award of Spousal Support Throughout the United States
By J. Thomas Oldham
A Nationwide Review of Alimony Legislation, 2007-2016
By Laura W. Morgan
New York’s Spousal Maintenance Guidelines
By Elena Karabatos & Eric A. Tepper
For ordering or subscription information (the current issue may not be available yet), please visit the Family Law Quarterly web site.
Our contributing editors include:
- CPA Scott Franklin. Kohler & Franklin, Milwaukee (Tax Tips)
- Atty. Stephen Hayes (Adoption)
- Gregory J. Ksicinski, CPA/ABV, MSTSVA Certified Public Accountants, S.C.
- Atty. Laura Morgan, Family Law Consulting, Charlottesville, VA (Family Law Cases)
- Atty. Elizabeth Neary (adoption)
We Thank Them for Their Contributions!