Minnesota Alternative Dispute Resolution Methods: Alternatives to Trial

mediation1Trial. In family court, it may be the most difficult thing a litigant can experience. The time, cost and emotion involved in litigating a case can be significant – not to mention the unpredictability of leaving your future in the hands of a stranger in a black robe.

The good news is that in Minnesota there are a number of alternatives available to those who are facing a divorce. In this post, I’ll outline the most common forms of alternative dispute resolution in a marital dissolution action.

Mediation. Bar far the most well-known ADR method involves mediation. Mediation involves a forum in which a neutral third party facilitates communication among parties, and their counsel, to promote settlement. Mediators may not impose their own judgment on the issues in dispute – unless the parties ask them to. In that situation, the process is typically referred to a “evaluative” mediation.

Arbitration. In an arbitration, the parties, and their lawyers, present their position on an issue before a neutral third party. That neutral follows with an opinion and/or order. By default, the arbitrator’s opinion is not binding upon the parties. If agreed by the parties in advance, however, the order of the arbitrator can be binding and enforceable – as though the arbitrator sits with the same power as as judge.

Mediation-Arbitration. A “Med-Arb” involves a hybrid of traditional mediation and arbitration. The parties initially mediate their disputed issues. If they reach an impasse, the arbitrator will make a decision.

Consensual Special Magistrate. The retention of a consensual special magistrate allow each party, and their lawyers, to present the matter as though the magistrate sits in the position of the judge. The matter is actually “tried” to the magistrate, and  his/her opinion is subject to appeal directly to the Minnesota Court of Appeals. You might think of a CSM as a “rental judge.”

Early Neutral Evaluation. In an early neutral evaluation, the lawyers and parties present the issues in dispute to a neutral evaluator (sometimes a team of evaluators). The process occurs rather early in the matter (before formal motions and/or discovery). Once all of the relevant facts and arguments have been made, the evaluator will offer his/her opinion about the strengths and weaknesses of each side, and the likely outcome in the event that a trial occurs. The parties, in reliance upon that opinion, begin mediating their dispute. About 80% of the time, a settlement is reached.

 

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Minnesota Divorce Basics: Jurisdiction and Venue

tips difficultJurisdiction and venue are two issues that serve as an undercurrent to Minnesota divorce and family law cases.

While not typically a “front and center” problem, it is important to recognize that the outcome of your case can hinge on where a case is handled, or whether the court has jurisdiction over it at all.

There are two types of jurisdiction: (1) subject matter jurisdiction; and (2) personal jurisdiction.

Subject matter jurisdiction is not typically an issue in a marital dissolution action, as there are statutes that specifically grant Minnesota Courts with the authority to dissolve one’s marriage, determining custody, child support, property allocation and spousal maintenance in the process. Naturally, subject matter jurisdiction deals with the “subject” of divorce. With clear statutory authority, there is usually little point to contesting an action for marital dissolution on such a basis.

There are two situations, however, in which the Court may not have subject matter jurisdiction over a particular marriage. The first involves a situation in which neither party has been a resident of the State of Minnesota for more than 180 days. The second involves a situation in which your marriage is void as a matter of law.

Personal jurisdiction involves the Court’s authority over an individual, and is viewed on a “statewide” basis. So long as a litigant is a resident of the State of Minnesota, and is served properly, Minnesota Courts have personal jurisdiction.

Questions arise, however, when one party resides in the State of Minnesota, and the other party does not. A litigant can either submit to personal jurisdiction, or they may be found to have sufficient “minimum contacts” with Minnesota, so as to justify the Court exercising authority over that individual.

Even if the Minnesota Courts do not have personal jurisdiction over your marriage, they may have personal jurisdiction over the issues surrounding custody and parenting time of a child.

The Uniform Child Custody Jurisdiction and Enforcement Act (UCCJEA) is a national set of statutes that determine where the most appropriate locale is for various custody disputes. It is important to keep in mind that those laws govern only custody disputes – they do not confer jurisdiction concerning the dissolution of a marriage. In other words, it is entirely possible to have two separate cases (one divorce and one custody) in two separate states.

“Venue” refers to the specific county in which a case may be brought. The general rule is that a dissolution action may be brought in any county in which either party is a resident at the time of filing.

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Parenting Time in Minnesota: Legislative Changes Make Equal Time Easier

custody2Equal access schedules with children have become easier to achieve, following amendments to Minnesota’s parenting time modification statute.

Pursuant to caselaw, a parent who sought to achieve a 50/50 parenting time schedule, following the issuance of a divorce decree granting them less, had to demonstrate the child’s home environment with the other parent endangered their physical or emotional health. Proving endangerment is one of the most difficult things to do in family court.

The new legislation, regardless of whether a parent has sole physical custody or joint physical custody, provides that a parent, so long as a child’s primary residence does not change, need only demonstrate that the child’s “best interests” are served by the modification – if the parent seeking modification wishes to exercise between 45% and 55% of the available time with a child.

“Best interest” is a much easier hurdle to overcome than “endangerment;” up to 17 different factors play a role in the analysis. One such factor involves the wishes of a child, if that child is of suitable age and maturity. The older the child, the more weight the court will afford that preference.

Accordingly, it has become much easier to secure an equal access schedule with a child who is a bit older, and wishes to do so.

A very common scenario involves a young teen who has lived primarily with one parent and, as they age, now seeks to divide time among two households. This new legislation makes the child’s desired outcome much more likely.

Keep in mind, the custody label is not referenced anywhere in the amended statute. Accordingly, even if a parent does not have “physical custody” by label, they can seek to modify the schedule to a 50/50 split without worrying about endangerment (drug use by the other parent, neglect, assaultive conduct, etc.) in the other parent’s home.

This new legislation seems like a step in the direction of a joint physical custody presumption. More to come, this session.

new-custody-factors-article

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Methods For Resolving Spousal Maintenance Claims In Minnesota

rieSpousal maintenance (often referred to as “alimony”) involves one party to a divorce paying the other to assist them with routine household expenses following the dissolution of the marriage. The law in this area is extremely complex. For purposes of this post, it is presumed that an award of spousal maintenance is appropriate among the litigants.

The classic view of spousal maintenance involves a permanent award of support – some amount, paid monthly, for an indefinite period of time. However, the law in Minnesota allows the litigants much more latitude than a judge in terms of resolving the issue of alimony.

Following a trial, the Court really only has a few options. First, the judge can award permanent spousal maintenance. Second, the judge can award spousal maintenance on a temporary basis (some amount, paid monthly, for a defined period of time). At the end of the temporary time period, the recipient of spousal maintenance has the ability to file a motion with the Court, seeking an extension of the maintenance timeframe. Third, the judge can deny the requesting party any award of alimony.

The nice thing about resolving the issue of spousal maintenance through settlement discussions, rather than by way of trial, is that the parties to the case have many more options available to them.

For example, the parties can agree to something called a Karon waiver. A Karon waiver (named after a Minnesota Supreme Court case involving the Karon family) involves a finite amount of maintenance paid for a finite period of time. Each side receives the benefit of certainty, as the amount of support is not subject to modification. The risk with a Karon waiver involves: (1) the potential for the payor to suffer a pay reduction, making payments more difficult; and (2) the potential for the recipient to need alimony once the relevant timeframe for payments has passed.

In either situation, the litigants would be out of luck, as the nature of a Karon waiver involves certainty of payment amount and duration. The benefits, however, usually outweigh the risks. Most often, the payor appreciates knowing exactly how much, and for how long, payments must be made. They can plan their future accordingly.

Another way to resolve the issue of alimony involves a lump sum buyout. If the parties have enough equity in various assets, they may wish to consider a lump sum payment in lieu of ongoing payments. The source of payment rests in the payor’s share of the marital estate. For example, let’s suppose that a spouse is willing to accept $1,000.00 per month in alimony for a period of ten years (120 months).

The cumulative value of those payments, at least on the surface, totals $120,000.00. Yet, alimony is taxable income to the recipient (property settlements are not). And, the time value of money would suggest that a lump sum “up front” requires a bit of a discount relative to payments over time. Consequently, the recipient may be willing to accept an extra $80,000.00 in marital assets in lieu of payments totaling $120,000.00 over a decade. Of course, each case is fact specific. Do not rely on this quick example in negotiating your own divorce. All sorts of variables come in to play – such as income tax brackets, investment options and the risks to each in accepting a lump sum buyout.

Of course, the litigants are also free to do a “partial buyout,” in which a lump sum payment is made in exchange for reduced monthly spousal maintenance payments.

Finally, we often see litigants agree to assume responsibility for a greater share of the marital debt as an offset to spousal maintenance payments – a lump sum in disguise.

If you have questions about spousal maintenance, you are invited to contact our law firm for a free consultation. Call (763) 323-6555 and an experienced family law attorney will assist you.

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Common Minnesota Child Support Questions

chxOf the issues involved in a divorce in Minnesota, child support is generally recognized as the simplest to resolve. That does not mean, however, that the determination of basic support, medical support and daycare support is necessarily easy in every case.

Here are some of the more common questions our child support lawyers are asked concerning child support in Minnesota:

Who Must Pay Child Support?

Parents of minor children have a duty to provide for their financial support. Marital status does not matter. In other words, the same standards apply in a paternity case (involving unmarried individuals) and a traditional marital dissolution action.

Who Is A Child?

Pursuant to the Minnesota child support statutes, a child is defined as an individual under 18 years of age, or 20 years of age who is either: (1) still in high school; or (2) incapable of self support because of physical or mental impairment.

Can I Be Ordered To Pay Support For An Adult Child?

If a child has emancipated, or reaches the age of majority (18) , the Court loses jurisdiction over the issue of child support – again, unless one of the exceptions noted above is triggered.

What Is Basic Child Support?

Basic child support is the more traditional form of child support – a cash payment made from one parent to the other for the needs of the minor child (such as food, housing, clothing, education, and transportation).

What Is Medical Support?

Under Minnesota law, parents are obligated to divide, in proportion to their income, the cost for medical and dental insurance premiums for a child. They are also required to divide uninsured medical and dental expenses in proportion to their income (known as the PICS).

What Is Childcare Support?

Pursuant to Minnesota’s child support statutes, parents will be ordered to divide, pursuant to the PICS, the work-related childcare costs associated with minor children.

Can Parents Waive Child Support?

Because the Court considers child support to be “the child’s money,” it will not permit an outright waiver of child support. Instead, a “reservation” of support may take place. A reservation simply allows the parties to have no order on the issue in the moment, but return to Court later to address it, if they choose to do so.

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Minnesota Divorce Basics: Invading Non-Marital Property

propertydivIn terms of dividing the assets and liabilities of the parties following divorce, the first step in the analysis involves determining which assets are “marital” and which assets are “non-marital.”

Simply stated, marital assets are those acquired during the marriage, through marital efforts. Non-marital assets are those that one spouse: (1) brings into the marriage; (2) inherits during the marriage; (3) receives as a gift during the marriage; or (4) acquires through the sale of other non-marital property.

The general rule is that non-marital assets are awarded, in their entirety, to the spouse who demonstrates that their property interest is, indeed, non-marital. There are, however, exceptions.

In some situations, the Court may determine that it is appropriate to divide a non-marital asset. Pursuant to Minn. Stat. Sec. 518.58, Subd. 2:

If the court finds that either spouse’s resources or property, including the spouse’s portion of the marital property … are so inadequate as to work an unfair hardship, considering all relevant circumstances, the court may, in addition to the marital property, apportion up to one-half of the property otherwise [non-marital] to prevent the unfair hardship. If the court apportions property other than marital property, it shall make findings in support of the apportionment. The findings shall be based on all relevant factors including the length of the marriage, any prior marriage of a party, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, needs, and opportunity for future acquisition of capital assets and income of each party.

The practical reality is that the Court will rarely invade non-marital property. There are two common situation in which the Court will do so: (1) if one spouse will be left insolvent; or (2) if non-marital interests represent the entire estate of the parties.

If the estate of the parties contains some marital and some non-marital interests, the Court may unequally allocate marital property in lieu of a division of non-marital interests.

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Key Concepts In Dividing Property During Divorce In Minnesota

homAt the end of the day, the vast majority of divorces in Minnesota result in an equal division of the marital estate (those assets and liabilities incurred, or accrued, during the marriage.

“Equal division,” however, is not the relevant standard. Pursuant to Minn. Stat. Sec. 518.58, the Court must make a “just and equitable division of the marital property of the parties.” What constitutes a “just and equitable” allocation? Well, usually equal – but not always.

In Minnesota, the family law judge has the ability to consider a number of statutory factors in dividing property unequally, including:

  • The length of the parties’ marriage;
  • Whether either party has been married before;
  • The age, health, occupation and sources of income of each party;
  • The vocational skills of each party;
  • The employability of each party;
  • The income of each party; and
  • The nature of the marital estate (both assets and debts).

Does this happen very often? No – except for cases involving a dissipation of assets.

“Dissipation” is described by statute as “without the consent of the other party…in contemplation of divorce, separation or annulment…” transferring, encumbering (creating debt against), concealing or disposing of marital assets, except in the usual course of business or for necessities of life.

Here are a few examples of dissipation:

  • Selling a motorcycle to a family member for $1.00, knowing it will be bought back for $1.00 following divorce;
  • Placing large amounts of debt relative to an extra-marital affair (hotel rooms, restaurants, airline tickets) on a credit card;
  • Incurring significant gambling losses;
  • Destruction of items of personal property (electronics, furniture or clothing);
  • Investment losses relating to an obvious scam; or
  • Spending large quantities of money on drugs or alcohol.

Should dissipation occur, the Court will likely allocate assets in such a way that the non-offending spouse is put back in the position they would have been, but for the dissipation – usually by allocating other assets to them. The party claiming dissipation bears the burden of proving that it occurred.

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Hennepin County Divorce Resources

henAbout one-half of the divorce and family law cases our lawyers handle are venued in Hennepin County. Located in downtown Minneapolis, the Hennepin County Family Justice Center provides a central hub for all sorts of resources for litigants doing through a divorce, custody dispute, or domestic abuse proceeding. The nice thing about Hennepin County is that there are a number of terrific resources available outside the four walls of the courthouse as well.

Here’s our “best of” list of helpful Hennepin County divorce and family law links:

If you have an idea for an additional link, I invite you contact our office with the relevant information.

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Methods Utilized By Real Estate Appraisers During Divorce

propertyIn the vast majority of the divorce cases we handle, the parties own real property. Sometimes that property is a primary residence, while other times the property takes the form of a lake cabin, vacation home, investment property or business property.

Generally speaking, the equity resting in each piece of real estate is subject to equal division among the parties. It is, therefore, appropriate to determine how the parties will realize their equity. Will they sell the property and split the proceeds? Do they agree on the value of the property? Or, is an appraisal of the real estate necessary because one party wishes to keep the property and “buy the other side out.”

When an appraisal becomes necessary, there are a number of approaches utilized by the professional hired to value the property. They are characterized as the:

  • Cost Approach;
  • Market Approach;
  • Income Approach;
  • Investment Value Approach; and
  • Development Cost Approach

The cost approach involves a determination of what it would cost to rebuild the same property from scratch. This includes not only the structure itself, but also the improvements to land that would be necessary to complete the sale and take ownership. This approach is typically reserved for relatively new construction.

The market approach involves a comparison of similar properties that have recently been sold. Comparable sales offer a measuring stick based on recent economic activity. So as sufficient data is available, the market approach is most often relied upon in determining the value of a traditional home.

The income approach involves market value being determined as a multiple of profits derived from the use of the property. What would a willing investor pay to receive a return of “x?” Naturally, the more earned from the property, the higher the value of the property itself. This approach is often used to value investments, such as apartment buildings, commercial office buildings and shopping centers.

The investment value approach (rather uncommon) applies to property with sophisticated metrics for measuring the benefits, both short and long-term, associated with a piece of real estate. The more highly unique a piece of property, the more likely the investment value approach will be utilized.

Finally, the development cost approach may be utilized in a situation in which the parties own raw, undeveloped land. Questions involving future use and development potential, and then profits that may arise therefrom, are taken into account.

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Minnesota Child Support & Alimony: How Will The Court Measure Income?

taxThe question most commonly asked of our divorce (and sometimes custody and paternity) clients involves how much support (either alimony or child support) they may receive, or pay, as part of their case.

The the answer to that inquiry can be rather complex, but the starting point in either situation involves a determination of “income” for each side.

Often overlooked by the litigants, “income” includes more than straight wages; it also involves unearned income, retained earnings, self-employment income, gifts, imputed income, housing benefits, per diem payments, and perks received as the owner of a business, or highly compensated individual.

For individuals who are W-2 employees, the determination of income is relatively straightforward. More digging occurs, however, when an individual is self-employed.

We often think of litigants as landing in one of four broad categories of earners: (1) W-2 employees; (2) self-employed individuals who run a “legitimate” business; (3) self-employed individuals who run a business haphazardly – often working for cash under the table; and (4) individuals who are not earning any income at all.

For the W-2 employee, a simple review of payroll records usually answers all questions.

A “legit” business owner typically employs an accountant, manages cashflow accurately, and files taxes on time. An interview the accountant and review of the relevant profit and loss statements and tax returns will typically result in a solid income figure.

Individuals who are unemployed will have income “imputed” to them at 150% of the state or federal minimum wage, whichever is larger.

The most difficulty arises in trying to determine the income of a business owner who is hiding money – either from their spouse, or the IRS. We often rely on a “lifestyle” argument in that situation, by presenting the Court with the basic facts about how large his/her home is (we’ve argued with “broke” parents who live in a $900,000 home), and what kind of car they drive, clothes they wear and vacations they take.

In general, the relevant statutes define income as “any periodic payment to an individual.” These types of payment can include:

  • Wages;
  • Tips;
  • Commissions;
  • Bonuses;
  • Workers’ Compensation Benefits;
  • Unemployment Benefits;
  • Annuity Payments;
  • Pension Payments;
  • Spousal Maintenance from a Prior Order;
  • Child Support from a Prior Order;
  • Social Security Benefits; or
  • Veteran’s Benefits.

Our clients also regularly ask about overtime pay. The law generally disfavors the inclusion of overtime pay (or other moonlighting earnings), unless overtime is required for employment, and was regularly worked during the relationship of the parties.

For more answers concerning alimony and child support, check out our spousal maintenance podcast and child support podcast.

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