An FENE involves a half-day session (or two, or three, or four) with a court-appointed neutral. This neutral typically is an experienced family law attorney, or a CPA familiar with the financial issues involved in a divorce. The parties, and their lawyers, sit down with the evaluator very early in the case - in an effort to catch people before they become too embroiled in conflict, or stuck in their position.

The process begins with the exchange of information, to ensure that there has been a full and fair disclosure of all income, assets and liabilities. A balance sheet is often created, which defines the universe of assets and debts, attributes value, provides a basis for the value, carves out any non-marital claims, and then allocates the relevant item to one of the parties. Once all allocated assets and debts are added up for each litigant, the cumulative value for each should be equal. This is typically the least controversial portion of the FENE, but can take some time.

The more controversial portion of the FENE involves the issue of spousal maintenance. With the assistance of the evaluator, the income and budgets of the parties will be scrutinized. A range of possible outcomes may be discussed, and recommendations may be made by the evaluator concerning the amount, and duration, of alimony in the event that the judge is left to decide the issue. Settlement discussions begin with that opinion as a backdrop.

Why does FENE work so often? A few points:

• The parties have direct conversation with one another, and the evaluator, in a natural way. A far cry from the robotic "question and answer" method of introducing evidence during a trial.
• The rules of evidence go out the window at an FENE. Any issue is up for discussion, empowering participants to voice their real-life concerns.
• Emotions may be taken into account at an FENE. Issues concerning "fairness" and "hurt" may be addressed as part of the process. Frankly, the law of "no-fault divorce" precludes alot of this in the courtroom.
• The process can be therapeutic. People feel like they can speak their mind, and they are listened to. Sometimes all a party needs is to be heard by someone. 
• Spouses have to look each in the eye as they discuss the issues. Very different from sitting 25 feet apart in the courtroom, facing front.
• There is a real sense that the parties can "get it done" during the process. Litigants believe that closure has real value, and may be worth a compromise.
• The process is a respectful one. Most evaluators know how to keep tempers from flaring.
• The evaluators, not the lawyers, control the agenda. Both parties feel they are on a level playing field. 
• Opinions matter. Litigants afford substantial weight to the perspective of the evaluators. They know the evaluator has no stake in the outcome, and the experience to back up their opinions.
• The neutrals are forced to "show their work." What I mean is that the parties are literally walked through each of the elements of the case, together, and hear the same thing at the same time. They see how the opinions of the evaluator are created right before their eyes, giving them more credibility.
• The surroundings are comfortable. There are no robes, no gavels, no court reporters, and no security. Just people sitting around a table, with their favorite beverage, talking.

As time goes on, I suspect the FENE process will gain statewide acceptance. Most of the counties in the Twin Cities metro area have adopted such a program. Why wouldn't they? With a 3/4 reduction in divorce litigation, everybody wins....except those lawyers whose practice model is based on "dog fight" mentality. But, who's feeling sorry for them anyway?

The issue in Angell was whether federal law preempts a district court‘s award of death benefits to a non-beneficiary spouse. The Court held that Federal anti-attachment provisions preempt a district court‘s order apportioning $150,000 in federal death benefits to a non-beneficiary spouse under Minn. Stat. § 518.58, subd. 2 (2008) in a marriage dissolution.

The parties were married in 1981. One of their sons, Levi, enlisted in the Marines in 2002. He died during combat operations in Iraq in 2004. Prior to his death, Levi secured life insurance coverage through the Service members Group Life Insurance (SGLI) program. SGLI is regulated under federal law. Levi named his mother, alone, the beneficiary under the policy. She received approximately $500,000 following Levi's death.

Two years later, a dissolution action was commenced. The case required a trial, but the only issue involved the characterization of the SGLI benefit as "marital" or "non-marital."

While the district court found the SGLI benefits were non-marital in favor of Wife, Husband was awarded a share of the proceeds to prevent "unfair hardship," as permitted by state statute. Wife appealed, alleging that the SGLI benefit was under the "exclusive jurisdiction of the federal government."

The Minnesota Court of Appeals found that the district court‘s order awarding appellant a share of the federal death benefits directly conflicted with the express prohibition under federal law barring the diversion of military death benefits from designated beneficiaries of those benefits.

The Minnesota Supreme Court accepted review. In affirming, Justice Gildea opined that "Under the Supremacy Clause of the U.S. Constitution, a federal law prevails over a conflicting state law."

She noted:

A state law conflicts with a federal law when it is impossible for a private party to comply with both state and federal requirements or when the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.

Justice Gildea ultimately concluded that:

The district court‘s award of a portion of the federal death benefits to appellant interferes with the congressional objective expressed in the federal anti-attachment statutes. In these statutes, Congress made clear through the exemption of the federal death benefits from any legal or equitable process whatever that these benefits belong only to the beneficiary.

Despite the inequities that may exist for father, the outcome in this case appears to be appropriate. There really isn't any question about the nature of the benefit as non-marital (even the district court agreed), but the dispute in this case really came down to "equity" under state law against the trumping nature of an unassignable benefit under federal law. Federal law always wins.

One has to wonder whether Levi would appreciate the outcome in this case. At the time he executed the SGLI paperwork, he named only his mother beneficiary. But, that was several years before his parents separated. Did he really want only his mother to realize the proceeds from the policy? Or, did he think she would, logically, share the proceeds with his father? Was mom the better money manager? Many things to speculate about.

Perhaps if the form itself explained to the insured the consequence of naming one parent as sole beneficiary in the event of divorce, he would have listed both parents. Then again, maybe he wouldn't have. Either way, important for anyone obtaining life insurance (in particular, through the SGLI) to knowingly name (or preclude) certain individuals from benefiting from the policy in the event of a divorce.

Every case, regardless of the age, income or educational level of the litigants, will involve an analysis of the relevant property interests of the couple - even if they've only been married for a short time.

Topics discussed in this podcast include the concealing of assets, tools for uncovering assets, the difference between marital and non-marital property, and the general rule of an equal division of assets and debts, despite the relevant statute requiring a "just and equitable" distribution.

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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.

A judge in Maryland recently decided a custody battle with a twist — it was over a beloved pet.

A childless couple heading for a divorce could not agree on who would have the right to keep Lucky, their 16-pound Lhasa apso.

Maryland treats pets as jointly owned marital property that must be sold if the divorcing couple can’t agree on who gets to keep them. The parties split the proceeds of the sale.

But retired Prince George’s County Circuit Judge Graydon S. McKee III, a dog owner himself, didn’t like that solution so he fashioned his own. After hearing testimony from both parties — Gayle, who lives in Alexandria, Va., and Craig, who resides in Dunkirk, Md. — McKee decided that the couple would split custody. Lucky will alternate homes every six months.

Comments seem to make great reading. No exception here. Law Lacky said, "That is nothing. I worked on a divorce case a decade ago that involved ferrets. The divorce decree included weekly visitations and “ferret support."

In Minnesota, pets are viewed as property, with no clear answer on how to "divide" them.

Minnesota attorney Barbara Gislason, a nationally recognized animal rights lawyer has this to say about pets and custody:

It is an interesting phenomenon that they seem almost invisible in Family Law. Because about 2/3 of households have pets and spend in excess of 40 billion per year on them, and a majority of owners consider animals to be family members, should this continue?

Barbara's position seems to make sense. I can't imagine it would take the legislature more than a few minutes to adopt a quick set of standards for the court to consider, including who has been the primarily caretaker of the animal.

CNN Headline News featured the Divorce Cost & Prep iPhone App created by Dallas Divorce Lawyer Michelle May O'Neil and Fort Worth CPA Bryan Rice. The story originally ran on CBS11 in Dallas on Wednesday night, but by Friday The Morning Express with Robin Meade Show on CNN HLN picked up the story and it spread throughout the US and the world.

According to O'Neil, the app serves two purposes. First, a person contemplating divorce can assess the hidden and direct costs of divorce, such as the cost of providing two houses, two wardrobes for the children, or transportation costs for exchanging the children between houses. Second, the app gives divorce clients a list of information and documents to gather for their lawyer to assist preparation of their divorce.

Divorce Cost & Prep is available on iTunes for $4.99. Lots of apps for lawyers to use, but only a limited number geared toward clients. Congrats to Michelle and Bryan for their creative success.

When M.R. and E.R. decided to call it quits after more than 20 years of marriage, they had no trouble agreeing on how to split the marital home or how to handle custody of their children. But when it came to figuring out how to divide more than 7,000 photographs, the picture got blurrier.

...after spending more than $2,100 to scan the photos onto a disc, the quality of the reproductions became a bone of contention. The judge attempted to broker an agreement, but the parties maintained what he called their "intractable and opposite positions."

At a hearing last week, during which both parties appeared pro se, the husband testified "in great detail about his meticulous cataloging of photographs," which he equated with the hobby of collecting rare books.

He characterized his wife's involvement in the process as "limited" and "antagonistic," and said he believed she was fighting over the albums for vindictive, rather than sentimental, reasons.

The wife testified that she had some involvement in compiling the photos and said that several of those that were copied contained imperfections.

The judge ultimately awarded the husband 75% of the original photos and said:

The method of selection shall be in a manner agreed to by the parties or the selection process shall be as follows: starting with the first album, the Wife shall, counting from the first page thereof, be entitled to receive every fourth original photograph in that album.

Whether the division of a set of porcelain cougars, Nascar paraphernalia or beer mugs from Norway, we've been involved in a good number of disputes similar to the one reported by Walder. And they drive judges nuts. It's an interesting study in human nature. To witness the sentimental value clients attach to things that, to the general public, are basically worthless. I get it, through. I've got a treasured lamp from my mom's side of the family and a cool wooden candy dish from my dad's parents. Photos are no different.

I often tell clients that their spouse knows better than anyone how to push their buttons. Unfortunately, a lot of button-pushing goes on during litigation. If you find yourself in the early stages of divorce, you may still have the ability to prevent problems later. My suggestion? Box your treasures up and get it out of the house...right now. Take them to your lawyer's office, or leave it with a trusted friend or family member. You can't sell them, but you can "store" things until the divorce is final. I'm willing to bet your spouse will forget about your Gumby clock altogether.

As to family photos and videos? This couple seemed to have it right at the onset. But, courts typically order the parties to split the cost of reproducing everything and dividing the originals equally. Looks like husband scored a victory.

Truth be told, the Court wants nothing to do with dividing items of personal property of nominal value. If parties can't agree on how to divide "the stuff" the judge will simply order everything auctioned and divide the sale proceeds. As you might expect, at auction you'll receive perhaps ten cents on the dollar. We're talking garage sale prices. Then, you, and your spouse, will have to turn right around and purchase another iron, toaster, DVD player and living room set. Makes little sense.

The good news is that there are tried and true processes that we have utilized in assisting couples through the division of "stuff." Here's what has worked for our clients:

• Two Lists: One of you makes two lists of items, of roughly equal value. The lists are presented to the other. The person who didn't draft the lists gets to pick which list they want. There is an incentive for the person drafting to fairly and equitably divide things or they'll get burned during the selection process.
• Silent Auction: This is my favorite. A master list of all of your personal property is created. Each party blindly puts a dollar value next to each item. The high bid takes the item at the value listed. Once all items are bid on, the totals for each party are added up. The party receiving the higher dollar value pays the other a cash equalizer to make up the other's shortfall. Parties are free to place a high value on items they really want, but won't list a ridiculous bid out of fear of paying a large offset.
• Arbitration: An arbitrator is basically a private judge. You pay this person, usually a lawyer, to listen to your side of things in an informal conference setting. Then, your spouse does the same. The arbitrator is given the authority to divide the entire list of items as they deem fair and equitable. Costs are saved because the parties attend the arbitration without counsel and divide the arbitrator's fee. Most couples submit to binding arbitration so that the decision of the arbitrator is final.
• Rotating Lists: Make a master list and take turns going back and fourth until all of the personal property is divided. Flip a coin to see who goes first.

The bottom line is that usually the personal property of the parties isn't worth the money that will be spent fighting over it. It's true...we've been caught in the middle of disputes over Christmas ornaments, but not by choice. By the time all was said and done, both parties could have purchased a collection of new decor with the legal fees they would have saved by putting down the swords and agreeing to a process that would fairly, and cost-effectively, get the issue of personal property division resolved.

Marital property is usually divided equally while non-marital property is allocated entirely to the party who maintains the non-marital interest. Non-marital property involves the interest a party has in property accumulated prior to a marriage or property received as a gift or inheritence by one spouse, individually, during a marriage. Marital property involves any property that the parties accumulate during their marriage, including home equity, retirement assets, business interests, bank accounts, investments, motor vehicles and other property of value.

In order to ascertain the value of property, experts are typically retained. These include real estate appraisers, actuaries, business valuators and other individuals with specialized knowledge in determining the market value of various assets.  These experts can be retained by one or both of the parties.

Once all property interests are valued, a balance sheet is put together to reflect the allocation each party will receive.  Naturally, one party will receive more property than the other as items are divided.  When this occurs, a cash payment (equalization) is typically made from the spouse receiving more property to the spouse receiving less property in order to equalize the cumulative value of the assets they receive as a result of the dissolution of marriage.

Debts are typically treated the same way as assets.  Quite often, the court will allocate all debts incurred during the marriage equally.  Debts that remain from a time preceding the marriage are typically allocated to the party incurring the debt.  The same is true for debts incurred post-separation. The value of a particular debt is usually verified through a recent statement. Typically, if the party is allocated an asset they will take any debt that accompanies it.  A prime example involves an automobile.  If one spouse takes a car, they will likely have to accept responsibility for the debt associated with it.

The parties were married in 1979. Husband filed a Petition for divorce in 2001, serving Wife and showing her a proposed Marital Termination Agreement. She failed to provide an Answer and Husband moved for default judgment. The district court granted default judgment and signed a Judgment and Decree that was consistent with Husband's proposed Marital Termination Agreement.

In January of 2006, Wife moved to re-open, based upon allegations that Husband misrepresented the value of assets, claimed pre-marital assets that he could not trace and referenced an inheritance that Wife "was to" receive in the relevant Agreement. The district court found that husband committed a fraud upon the court and valued his retirement plan as of January of 2006 - five years after the dissolution of the marriage. Husband appealed.

While the court of appeals found that the court did properly re-open, it also found that the district court improperly applied Minnesota's valuation statute, which reads:

[t]he court shall value marital assets for purposes of division between the parties as of the day of the initially scheduled prehearing settlement conference, unless a different date is agreed upon by the parties, or unless the court makes specific findings that another date of valuation is fair and equitable. If there is a substantial change in value of an asset between the date of valuation and the final distribution, the court may adjust the valuation of that asset as necessary to effect an equitable distribution.

Judge Hudson wrote:

Here, it is undisputed that the parties’ marriage was dissolved in 2001. Thus, during their post-dissolution cohabitation, they were not living in a marital or purportedly marital relationship; accordingly, property acquired during that cohabitation was not marital. Because the district court’s application of the presumption of marital property ignores the part of the statute requiring a marital or purportedly marital relationship, the district court’s application of the presumption runs afoul of the requirement that “[e]very law shall be construed, if possible, to give effect to all its provisions.”

The court of appeals reversed, and ordered the district court to value and divide the account appropriately.

In his dissent, Judge Worke opined that "[b]ecause disregard of legal process and lack of due diligence in objecting to the dissolution weigh heavily against reopening the judgment and decree after so much time has passed, I part from the majority, and determine that the district court abused its discretion by vacating the judgment and decree."

Troubling to many clients is the fact that the court will often value assets as of the date of the first pre-trial conference. This hearing is the final hearing to take place before trial and often occurs more than a year following the service of the Summons and Petition. It seems to me that the standard would be just if the date of service of the initial pleadings served as the valuation date. That way, litigants wouldn't be deterred from purchasing property, placing money into retirement accounts or saving money for the difficult future they face.

Here are of a few excerpts:

Recession and divorce, it is said, go together like carriage and horse. Those who labor in Splitsville have several explanations for why that might be. There's the lawyer theory, that money provides the soft fatty tissue that insulates the marital skeleton; once it's cut back and people get a good look at the guts of their relationship, they want out. And there's the marriage-counselor theory, that couples who were never quite on the same page in the checkbook finally get pushed off the ledger by endless bickering over their dwindling resources. And the therapist theory, that financial worries cause stress, stress can cause depression, and depression is a total connubial buzz kill. 

The two assets that typically need to be divided are 401(k)s and the family residence. But suddenly 401(k)s aren't worth as much, and that home whose mortgage was the mother of all argument starters is not an asset at all. It can't be sold - or at least not for a price that provides money to start over. Instead of working out who owns what, lawyers and mediators are trying to figure out the fiendishly trickier conundrum of who owes what. "We're negotiating debts - not assets," says Henry Gornbein, a family-law attorney in Oakland County, Mich. "Two, three years ago, I'd be telling you that houses had equity, and you'd either be doing a buying out or selling the house and splitting whatever the proceeds were. Now it's the reverse. You go into court; the judges just don't know what to do."

Therein lies the dilemma.

Not long ago, people had lots stuff (equity in homes and retirement accounts) to divide. No more. The vast majority of homes involved in a divorce are mortgaged for more than market price (perhaps 80% of our present clients find themselves in this situation) and retirement assets are worth one-half of what they worth a year ago. Tax what's left (oh, and penalize another ten percent for early withdrawal), and then begin to discuss the $20,000 marital credit card debt outstanding. Not a pretty picture.

The good news for families (children in particular) is that we are seeing a sharp increase in a more respectful, uncontested approach to divorce. I don't know if that's because there's nothing to divide, or because people don't have the resources to litigate.

Couples seem to be in the mood to work together. Some agree to keep one spouse in the home, but both continue to split the mortgage payments and ride out the market. They might be able to sell and break even (or even yield a profit) in a few years. Others remain business partners, in a sense, renting out their home when they vacate with a plan to sell when the market picks up. Others are agreeing to let the home go into foreclosure and banking money along the way. Still others are working with the lender to arrange for a short sale.

Elsewhere in our Blog, you will find information concerning property division, home foreclosure, bankruptcy and uncontested divorce. Always best to learn as much as you can about your options going forward.

• 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.