Alimony payments are considered income for the person to whom the payments are made, and are deductible to the person who's making the payments. If the parties are in different tax brackets, the government may wind up subsidizing part of the alimony payment.

In contrast to alimony, child support payments are not considered as income to the person receiving the payments, nor are payments deductible to the person making the payment. As a result, child support payments do not have any tax consequences at all. Important, however, if alimony is also an issue, to run the child support numbers and compare available cash - as opposed to gross income - in determining need versus ability to pay.

The sale of the marital homestead does not typically involve a taxable event. Capital gains up to $500,000 from the sale of the homestead will be not subject to taxation, if you have lived there for two of the last five years.

If you choose to transfer title to the residence, allowing your spouse to retain the equity, no taxable event occurs. Many clients will opt to use the home equity as an offset against alimony payments, avoiding tax issues altogether.  

However, if you want to adjust the property division in a way that allows both partners to retain equal equity in assets, there may be sizable tax consequence to consider. For example, if one spouse retains the marital homestead and offers the other a retirement account in exchange for his/her share of equity in the house, the resulting settlement may not be fair to the one who takes the retirement account. That's because if this spouse wants to access his retirement account funds, they cannot do so without incurring a tax liability. As a result, when you factor in the tax liability, the person who received the retirement account could actually end up with a lower settlement.

Simply put, a dollar of equity in a home is worth a dollar on the street. A dollar in a 401(k) plan is worth, perhaps, 70 cents on the street. For that reason, we always consider the net value of a particular asset in creating an equal property settlement.

Of the issues involved in a divorce, child support is the most black and white. That is not to say, however, that there are no shades of gray.

Topics addressed in this podcast include the basic child support, medical support and childcare support, the modification of child support, the relationship between parenting time and child support offsets and how to calculate the appropriate level of income in child support situtations.

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Child support involves three types of financial contribution: (1) basic support; (2) medical expenses; and (3) child care costs. Basic support is a monthly cash payment made from one parent to another for the support of the children. Medical support involves the payment of insurance premiums and uninsured expenses. Child care costs involve all work or education-related child care expenses incurred by the parents of a child.

The PICS (percentage of income for child support) of each parent is critical to determining how much support will change hands. The guidelines call for the Court to combine the gross (pre-tax) income of each parent and assign a relative percentage of the combined income to each. Once determined, this percentage (or PICS) is multiplied against the total support figure listed in the guidelines to determine how much basic support must change hands. A non-custodial parent receives a credit against the amount of support to be paid based upon the amount of parenting time they exercise. That same PICS is applied to the actual cost of health premiums, uninsured expenses and daycare to appropriately allocate the obligations of each parent.

• Popel v. Popel: Minnesota Court of Appeals (Unpublished). Judge Halbrooks held that the district court did not abuse its discretion in awarding joint physical custody to the parties but remanded for a recalculation of child support and reallocation of non-marital interests.
• Blaeser v. Fiscus: Minnesota Court of Appeals (Unpublished). Judge Halbrooks opined that the district court did not abuse its discretion by failing to modify child support following the emancipation of appellant's oldest child. 
• Murphy v. Murphy: Minnesota Court of Appeals (Unpublished)  Judge Halbrooks found no error in the district court's unequal allocation of marital property.

• Donovan v. Donovan: Minnesota Court of Appeals (Unpublished). Judge Shumaker held that a child support bonus provision was unambiguous and that the doctrine of laches is inapplicable to child support cases.
• Adler v. Espinosa: Minnesota Court of Appeals (Unpublished). Judge Lansing opined that the district court appropriately determined physical custody and child support obligation.
• McCormick v. McCormick: Minnesota Court of Appeals (Unpublished)  Judge Halbrooks found no error in district court's valuation of real estate and denial of fee award, but reversed district court's award of 100% of the marital equity in the homestead to wife.

• C.O. v. Doe: Minnesota Supreme Court. Justice Page held that due process required an evidentiary hearing to take place before termination of adoption contract.
• In re the Welfare of S.R.S.: Minnesota Court of Appeals (Published). Judge Klaphake opined that Minnesota courts lacked subject matter jurisdiction to modify father's child support obligation.
• Baumgartner v. Baumgartner: Minnesota Court of Appeals (Unpublished). Chief Judge Toussaint found no abuse of discretion in disproportionate award of marital property and no error in valuation of marital property.

The following settlement checklist will come in handy as you attempt to figure out if you've got all of your bases covered:

1. Legal Custody: Joint or sole legal custody?
2. Physical Custody: Joint or sole physical custody?
3. Routine Access Schedule: Where will the children be on a given day?
4. Vacation Access Schedule: How many weeks of uninterrupted vacation time with the children?
5. Holiday Access Schedule: Who do the children celebrate with in a given year?
6. School-Year Breaks: Where will the children spend spring break or President's Day, for example?
7. Telephone Contact: What are the rules concerning communication with the children by phone?
8. Transportation: Who will transport the children for parenting time exchanges?
9. Basic Child Support: What is the amount of guideline support to be paid?
10. Medical/Dental Child Support: Who will insure the children and how will uninsured costs be allocated?
11. Child Care Support: How much will each parent pay for daycare?
12. Security for Support: Should one or both parents secure life insurance, naming the other as beneficiary for the benefit of the children?
13. Income Tax Exemptions: Who claims the children on their income taxes?
14. Spousal Maintenance/Alimony: How much and for how long?
15. Medical Insurance: Will each party cover their own?
16. Marital Property: What is a fair and equitable way to value and divide marital property?
17. Non-Marital Property: Does the holder of a non-marital interest retain that interest?
18. Pre-Separation Debts: How is the marital debt divided?
19. Post-Separation Debts: How are debts accrued after separation divided?
20. Fees and Costs: Will one party pay, or each responsible for their own attorney fees and costs?
21. Name Change: Does either spouse wish to change their name?
22. Ongoing Conflicts: Will the parties agree to mediate or use a parenting time consultant if future problems arise?
23. Documents: Do each agree to execute all paperwork necessary to transfer property interests?
24. Non-Disclosure: Does the court retain the ability to re-open the case if it is revealed that one party has hidden assets from the other?

Naturally, there are many other issues that will need to be addressed, but the 24 items listed above will give you a general framework for discussion.

Reporter Jean Hopfensperger provides examples of mothers who are upset about the reduction in support received and writes that that "Fathers' rights groups say orders still are set too high and the formula is based on unrealistic child-rearing expenses."  

Unlike the old child support guidelines that looked only at the net income of the paying parent, the new guidelines examine the gross income of both parents and divides support based upon their relative incomes - like most other states. Hopfensperger says that with the sagging economy, more parents are seeking to re-open the issue and see if they can increase the amount received or decrease the amount paid. Many are shocked to learn that the opposite will result. 

If you are interested, you can access the Minnesota Child Support Calculator found at the Minnesota Department of Human Services web site to determine updated support amounts in your situation. Keep in mind that a "substantial" change in circumstance must present itself - meaning that under the new guidelines the difference paid or received per month must be at least 20% of the prior obligation and total more than $75.00.

At the same time, however, we have successfully persuaded the courts to deviate. In considering a deviation from the child support guidelines, the court will examine factors such as:

• Earnings, income and resources of the parties;
• Financial needs and resources of the child;
• Physical and emotional needs of the child;
• Educational needs of the child;
• Standard of living the child would enjoy in the absence of divorce;
• Tax implications associated with the child's dependency exemption;
• Debts of the parties; and
• Receipt of public assistance.

If the court deems appropriate, it may order or permit a child support obligation greater than, or less than, the Minnesota child support support guidelines. Still, the odds are against.

Let's suppose your spouse is trained as a physician and decides, for the time being, to work as a waiter at a local restaurant. The court can take an individual's education, work history, job opportunities in the local market and earnings associated with those jobs into account in calculating appropriate child or spousal support. Assuming your spouse is reasonably assured of obtaining a position as a doctor with a six-figure salary, a doctor's salary will be attributed to them.

One of the more common discussions we have with new clients involves a spouse's claim (with laughter) that they will quit their job and our client will receive nothing. "I'll quit my job" they say. Wrong strategy. Your spouse is free to work in whatever capacity they wish. At the end of the day, however, the amount of support they pay is based on what they actually earn or have the potential to earn, whichever is greater. 

The Minnesota Department of Human Services has established a link to every child support office in the State of Minnesota. Visit the link here to obtain contact information about the child support office in your county.

A divorce can be a painful and difficult experience, but if you understand the functions and limitations of the legal system, the process becomes less frustrating. It is our hope, as Judges of Family Court, that this pamphlet will give you a better understanding of the process, and help you get through your divorce with realistic ideas and goals.

Minnesota’s divorce system is based on the principle of “no-fault,” meaning that a dissolution will be granted if either party believes that the marriage is over. Generally the causes of the failure of the marriage are not an issue in court. All that matters is that the marriage needs to be ended.
It is impossible for us to heal the emotional wounds created by your divorce. You must understand that the legal system is not a tool for punishment of your spouse. The courtroom isn't the place for revenge. We must decide your case on the basis of unique facts. In most cases, the law does not permit us to compensate either of you for the other’s misconduct.

Settlement

The best way to conclude your case is to settle it. Through compromise and cooperation, a settlement can lead to greater mutual satisfaction and lessened animosity between you and your spouse. In most cases, negotiations toward settlement can be more productive and far less expensive than trial. If negotiations fail and you must try your case, we will make rulings that will permanently affect you and your children. Our rulings must be made exclusively upon the limited evidence that is presented in court, and nothing else. Because we are restricted in what we can and cannot do, a settlement can offer a wider range of options. Ask the court administrator for information about mediation programs. A mediator is a neutral person trained to help you and your spouse reach a settlement.

Variations

Every dissolution is different. Your results may be very different from your neighbor’s, friend’s, or relative’s. You cannot rely upon what happened in their cases and assume that your results will be the same. Cases that seem similar may, in fact, be very different and will be treated differently under the law. For this reason, you should look to your lawyer for your legal advice and information. Your friends and relatives usually do not have a grasp of the law and your case, and accepting their advice may hinder you in the long run.

Finances

In the marriage dissolution, the income, assets and debts accumulated during the marriage must be allocated between you and your spouse. The law is that you and your spouse are financial partners during the marriage and are presumed entitled to share in both the assets and income the partnership made. You must make a full disclosure of your finances. For most people, life-styles change after a divorce. Since divorces do not create property or income, we must divide the marital resources between two separate households. It costs more to run two households than one. If you or your spouse have not been employed during the marriage, it may be necessary to seek employment. In considering a settlement, you should consider whether you can afford the attorney’s fees to fully litigate your case. Fees and costs in contested cases can be quite high. Usually, a settlement prior to trial reduces the expenses considerably, an important consideration if you come to the divorce with limited resources.

Issues

Dissolutions generally involve four major issues: child custody and parenting time, child support, spousal maintenance and a division of property and debts. After the case is concluded, we may later be asked to modify custody, parenting time or support. You need to understand each of these aspects of your case.

Child Custody

Both parents and their children may be required to attend an education program before the dissolution is granted. The program will help you understand what affect divorce has on children, and how you can make the transition less traumatic for them. Remember, your marriage may be ending, but you will always be parents to your children. Most parents will share parental responsibility for their children after the dissolution. In doing so, you must communicate and confer with each other in making decisions that will affect your children.

Usually, we will give one parent primary residential care (custody) of the children. Unless there is a good reason to limit parenting time, we will grant the other parent frequent parenting time. We decide custody solely on what is best for the children. Often, one of the parties is hurt by our decision, especially if that party sees the decision in a "win/lose" light. In truth, there can be no loser if the children’s welfare is protected.

In virtually all custody contests we will direct both parties to participate in mediation to resolve that issue. A mediator is an unbiased third party who can often assist the parties in reaching agreement upon what is best for the children. An agreement on custody will certainly make your case easier and help your children immeasurably in dealing with your divorce. If domestic violence has occurred, the Court cannot require you to participate in mediation.

If an agreement regarding parenting time is not reached, a custody study may be ordered, with costs assessed to the parties.

In cases where child abuse or neglect is alleged by a parent during a dissolution, we must appoint a guardian ad litem (GAL) to represent the best interests of the child with respect to custody, support and parenting time. A GAL may also be appointed if the court believes the conflict in the case presents a potential hazard to the child’s welfare or the child’s interests are not being adequately served. The GAL is to conduct an independent investigation into what would be best for the child and to advocate for the child’s best interests. GAL’s must maintain confidentiality of information, monitor the child’s best interest throughout the proceedings, and present written reports to the court on the child’s best interests. If a GAL is appointed, you are likely to be assessed a fee for their services.

Child Support

Aside from continuing to love your children and seeing them often, you have no higher obligation as a parent than to continue supporting your children after the divorce. Child support is more important than any other debt or financial obligation. Both parents are required to support the children but the non-residential parent will be directed to pay his/her portion of the support to the other. This does not mean that the residential parent is not contributing to the support.
Minnesota has adopted guidelines for child support that we are required to follow. Your friends and relatives may have been involved in divorces years ago or in other states and receive or pay higher or lower support than our guidelines provide. The child support in your case will be based upon the incomes of both parents and the needs of your children under the guidelines established by the State. It is possible to deviate from the guideline amount but you must prove that the deviation is legally justifiable.

Spousal Maintenance

We find it necessary to award spousal support in some cases. As with child support, we will consider two factors: one party’s need and the other’s ability to pay. Both of these factors must be proven in court by the requesting spouse. Spousal support may be awarded to either a husband or wife and, depending on the length of the marriage and other factors, the spousal support may be permanent or for only a short duration.

Property Division

Under Minnesota law, we must try to make a “fair and equitable distribution” of marital property and debts. “Equitable” does not always mean “equal.” Many factors, including child support, custody and spousal support awards, can cause us to make an unequal (but still equitable) division of property. We will not generally divide the property and debts that arise outside the marriage.

Attorney’s Fees

We can order one party to pay some or all of the other’s attorney’s fees. We do this to assure that both parties have equal access to competent counsel. We do not award fees in every case, we must first find that one party has a greater ability to pay than the other does.
You cannot ever be certain that we will award fees. For this reason, and because of the great drain that fees can be on marital assets, everyone (parties and attorneys alike) should make every effort to resolve a dissolution case as economically as possible.

Do Not Write Letters To Your Judge

We are not permitted to read letters containing facts or allegations about your case, nor can we speak with you or your friends/relatives on the telephone. If there is something we need to know, inform us by scheduling a hearing and filing motion papers.

Have Reasonable Expectations

You will certainly be disappointed if you expect to “win” on every issue. Rarely is either party happy about every ruling in a case. Even the best rulings leave both parties somewhat dissatisfied. Encourage your attorney to give you a realistic projection of the outcome of your case.

Keep Communication Open With Your Spouse/ Former Spouse

As long as children are involved, you and your former spouse will have to work together. Your children will suffer to the degree that you and your former spouse cannot communicate or cooperate.

Get Professional Help To Deal With Your Emotions

Please do your best to keep emotions out of the case. Your feelings of anger, pain, and betrayal are understandable, but expressing them inappropriately in court may interfere with your ability to provide us with the information we need. If you have trouble with the hostility, anger, or depression that often occurs in divorces, don’t hesitate to get counseling to help you through it. A good counselor can help you, and your children, get through this difficult time and avoid having the anger become counterproductive.

Encourage and Support Parenting Time (Visitation)

If you are the custodial parent and the court has ordered parenting time between your children and your ex-spouse, you have a duty to encourage parenting time. You must do more than just stay out of the way or leave the choice to the children. Encourage your children to see your former spouse frequently and to enjoy the contact. Never use support or parenting time as a lever or bargaining chip in dealing with the other parent. However, if mental health, chemical dependency, abuse or other issues arise and you think your children are not safe with your ex-spouse, seek professional advice on what to do.

Give Your Children a Chance

The way you and your spouse handle your divorce will have an enormous impact upon your children. If you argue and fight, their problems and pain will be magnified. By acting reasonably, you can help your children through one of the most difficult events of their lives.
 

• Restrain the abusing party from committing acts of domestic abuse;
• Exclude the abusing party from the dwelling which the parties share or from the residence of the petitioner;
• Exclude the abusing party from a reasonable area surrounding the dwelling or residences
• Award temporary custody or establish temporary visitation with regard to minor children of the parties on a basis which gives primary consideration to the safety of the victim and the children;
• Establish temporary support for minor children or a spouse and order the withholding of support from the income of the person obligated to pay the support;
• Upon request of the petitioner, provide counseling or other social services for the parties, if married, or if there are minor children;
• Order the abusing party to participate in treatment or counseling services;
• Award temporary use and possession of property and make other orders regarding property;
• Exclude the abusing party from the place of employment of the petitioner or otherwise limit the abusing party’s access to the petitioner at the petitioner’s place of employment;
• Order the abusing party to pay restitution to the petitioner;
• Order the continuance of all currently available insurance coverage without change in coverage or beneficiary designation; or
• Order, in its discretion, other relief it deems necessary for the protection of a family or household member, including orders or directives to the sheriff or constable.

Relief that is granted by the order is for a fixed period of time, not to exceed one year, except when the court determines a longer fixed period is appropriate.