I Hit the Jackpot! Does That Mean My Spouse or Ex-Spouse Did Too?

 

When someone wins the lottery, it can make headlines. When West Allis local Manuel Franco won the $768 million Powerball in April, it was big news for weeks. State lotteries are becoming a growing phenomenon, with the winnings often accruing well past the million-dollar mark. So, if you hit the jackpot, does that mean your spouse or ex-spouse did too?

Let’s talk lottery winnings and divorce. Say you’re in the middle of a contentious divorce, and the stress of it all has you on edge. You’re at the gas station filling up your car on the way home from work, and you feel like you need a win. So, you try your luck and buy a Powerball ticket. Unbeknownst to you at the time, that lottery ticket is going to make you a millionaire. The Wisconsin Lottery does the Powerball drawing, and you find out that your ticket won you the $400 million jackpot.

So, now you’re wondering – how does this big win impact my divorce?

The short answer is, those winnings are now property of the marital estate. Since Wisconsin is a community property state, the court is going to presume that your lottery winnings should be split equally. Although this may seem unfair, it is consistent with how family courts in Wisconsin split other assets (and debts) in a divorce. When considering the marital estate, the lottery winnings will go in the “assets” column of your estate, and your soon-to-be-ex will likely get a chunk.

Although Wisconsin is a community property state, that does not necessarily mean your spouse will necessarily get exactly half of the winnings. The court can unequally divide assets based on a variety of factors.  From an equitable standpoint, the court could decide that it is unfair to equally divide the lottery winnings based on the fact that the ticket was purchased after the divorce action was filed.  However, a recent case in Michigan found that the husband was required to pay the wife nearly one-half of his winnings under the same circumstances, finding that because he had regularly played the lottery during the marriage, the losses he incurred came from the marital estate so the winnings should be equally shared as well.

Further, the court will likely consider the “final” winnings from the lottery –even if you win a $400 million jackpot, there will be taxes and other deductions from that amount. So even though you win $400 million, it doesn’t mean your ex gets $200 million and you’re stuck having to pay the taxes and other deductions out of your share. Those should be split equally.

So, what happens if you aren’t in the middle of a divorce, but you’re paying child support to her pursuant to a court order from a prior divorce, or a paternity case?  Or, you aren’t divorced yet but you still would owe child support or possibly maintenance?

In situations where you are ordered to pay child support, the court generally weighs two factors when they set child support: your placement schedule, and your income. If you’re unsure how child support gets calculated, check our other blog posts for more information on calculating child support. So now you’re asking yourself – are my lottery winnings income? Those winnings aren’t regularly recurring (if you take the lump sum payout option), and you aren’t guaranteed future lottery winnings. How can they call lottery winnings “income”?

Unfortunately for you, the court can consider your lottery winnings as income when they calculate your child support. How they consider the winnings will depend (in part) on how you are being paid your winnings – did you take the lump sum payout option, or are you getting regularly recurring monthly payments of your winnings? If you are getting the regularly recurring monthly payments, then it is more likely the court will consider that “income” because it is regularly recurring and available for child support purposes. If, however, you take the lump sum payout, then it is less clear what the court will do. Child support is intended to “equalize” the households of both parents so that the children have similar experiences (and opportunities) at both parents’ houses. The court doesn’t want one parents house to the be “fun” house with lots of expensive gadgets and fancy food, and the other parents house to be boring. Clearly if one parent wins the lottery, the standard of living at their house is very likely to increase. Whether or not the courts would award the other parent a portion of your lump-sum winnings will likely depend on the facts specific to your case. It will also depend on the amount of winnings – if you win a $10,000 lottery, the court will look at those winnings differently than a $10,000,000 win.

Even though your winnings may be included for child support purposes, they may not be included for maintenance purposes.  The stated goal of maintenance under the law is to maintain your spouse at a standard of living enjoyed during the marriage.  Clearly, a large lottery jackpot is far above any standard of living that was enjoyed during the marriage.  There is a case in Wisconsin where the appellate court found that a post-divorce lottery win should not necessarily be grounds for an increase in maintenance to the other spouse for that reason.

The worst thing you can do, however, is to try to hide your winnings. Any time someone tries to hide assets during a divorce, the court could penalize that person by awarding the entire asset, or an unequal share, to the other party.  After all, one-half of $400 million is still $200 million dollars!

Navigating the family courts, whether its through a divorce of a paternity, can be complex. Introducing something like lottery winnings into the equation is likely to make things even more complicated. If you are going through a divorce of paternity case, contact the experienced attorneys at Nelson, Krueger & Millenbach, LLC at 414-258-1644 or at www.nkmfamilylaw.com for a free consultation to see what we can do for you.

 

 

Children as Beneficiaries on a Life Insurance Policy in Divorce

When divorcing parties have minor children, the parents may want to consider what could happen if either parent dies before their children become adults.. While this is a very unsettling topic to consider, it is important and necessary to think about and include specific language in your agreement so as to protect your minor children. It is common for the court to grant an order and/or for parents to agree to require the parents to keep in effect or to obtain a life insurance policy, naming the minor children as the sole beneficiaries. This policy would essentially cover the remainder of the “child support” should a parent pass away and certainly would provide more financial stability for the child’s benefit. The court can also order that if a parent does not follow this order, (for example, changes the beneficiary on the life insurance policy or cancels the life insurance policy altogether), then the policy amount must be paid to the minor children from the deceased parent’s estate.  However, the problem with this remedy for violating such an order of the court has recently been addressed by the Wisconsin Supreme Court.

Recently, the Circuit Court in Waukesha County addressed this issue when a parent passed away shortly after the date of divorce.  The father was to name his children as the beneficiaries on his life insurance policy, with the value of $250,000, pursuant to the Marital Settlement Agreement, but instead he changed the beneficiary to his new spouse. Upon his death, the new spouse received the $250,000 life insurance payout, not his minor children. Based upon the parties’ Marital Settlement Agreement, the court could force the parent’s estate to pay the $250,000, but the parent’s estate only had $5,600 in it. Obviously, this  was a significant shortfall and unfair to the parties’ children.

The Circuit Court acknowledges that this was a “raw deal” for the children, but believed that there was no other option but to seek compensation from the deficient estate because of the language of the Marital Settlement Agreement.  The Court of Appeals, however, determined that the Circuit Court’s decision was in error because family court is a court of equity, and such an outcome unjustly enriched the new spouse to the detriment of the minor children and was in violation of the Marital Settlement Agreement.. The Court of Appeals overturned the Circuit Court, and ordered that the $250,000 be placed in a constructive trust for the minor children.   While this result is what the parties originally agreed to in their Marital Settlement Agreement, it was very costly and time consuming to get to this end result and protect the children in the case.

One way to avoid this issue is to include very specific language in a Marital Settlement Agreement to account for this situation and specifically include language allowing for a constructive trust as a remedy.  It is difficult to discuss topics like death during a divorce. Unfortunately, these considerations are necessary, even during a stressful divorce, in order to best protect your minor children and to avoid an unnecessary court battle in the event that children suffer the loss of a parent.  It is important to retain an experienced family law attorney to assist you through this process and to be aware of the changing law in this field.

If you are in the process of a divorce and wish to protect your children’s future support, please call our office at (414) 258-1644 to schedule a free initial consultation with one of our family law attorneys to discuss your case.

 

Post Judgment Modifications and Enforcement of Court Orders in Wisconsin

 

Change ahead warning sign over blue sky

In Wisconsin, spousal support (maintenance/alimony), child support, custody and placement (visitation) arrangements may be modified at any time under certain circumstances.  Situations can change which may require the court to modify your order. A change in financial circumstances may warrant a modification of child support or maintenance; whereas a physical or emotional change in your children, a change in schedule or a move may warrant a modification of placement.   There may also be times where you need the court’s assistance in enforcing orders.  If you have concerns regarding a modification or enforcement of a court order, the experienced lawyers at Nelson, Krueger & Millenbach, LLC can assist you in evaluating your case and navigate you through the process. Give the a call for your free office consultation.

What changes can warrant a modification?

 There are many situations which may warrant a modification.  The court will look at requests to modify placement and custody differently depending on how long it has been since the original order was made.   When considering a request to modify or change placement the court will look at;

  • Physical or emotional harm to the child
  • Changes in the child(ren)’s behavior and or grades
  • A substance or physical abuse problem
  • Move to a new city or state

When looking at financial modifications (i.e. child support, maintenance or family support), changes in income, job status, graduation of child or placement change may all be reasons to modify an existing order.

What can I do if the other party is not following court orders?

If your ex-spouse is not following the court order, you have options available to you.  Our attorneys are experienced in litigating contempt issues in Milwaukee, Waukesha and the surrounding areas.  There are remedies available to you.  If you are due child support or a medical bill payment, the court can garnish wages or even order jail time for non-compliance.  If placement is being withheld, the law allows for you to be awarded your attorney fees as well as make up time with your child(ren).  Give the attorneys at Nelson, Krueger & Millenbach, LLC a call at 414-258-1644 to set up a free office consultation to see how we can help you in your post-judgment divorce or family law issue.

Post Judgment Considerations for Child Custody, Physical Placement, and Child Support in Wisconsin

          Multi Ethnic People Holding The Word Change

Given the nature of custody, placement, and child support issues, parents can often find themselves going back to Court to request changes, or modifications, to an initial or previous order in their divorce or paternity matter. These matters are often referenced as “post judgment” matters. In Wisconsin, there are specific rules that apply to post judgment matters that are different than what parties may have encountered previously when they originally addressed these issues. The list below outlines some important rules and considerations for parents who may wish to initiate, or are involved in, a post judgment matter for child custody, placement or child support:

  1. When was your initial order entered by the Court?
    1. If a party is requesting a change to custody and placement within 2 years from the date of the original judgment, that party must provide substantial evidence that the change is necessary because the current conditions are physically or emotionally harmful to the best interest of the child. This rule makes a change to custody or placement much more difficult before the first two (2) years after the court’s initial order. The intended goal is to provide a cooling off period to help encourage parties to work together and avoid over using the Court system to settle their parenting disputes as well as provide stability for the children.
    2. If the initial order was entered over two (2) years ago, the Court can modify the current order if it finds that the request is in the child’s best interest, and that there has been a substantial change of circumstances since the last order.

 

  1. What is a “substantial change in circumstances” to change custody or physical placement?
    1. The term, “substantial change in circumstances” is very broad. It could mean a variety of things, such as, the parties’ inability to communicate, a change in work hours that effects a parents availability, a move, a change in a child’s medical or developmental needs, or a combination of several factors that makes the current custodial, or physical placement order unworkable. However, merely the passage of time or the aging of the children is generally not considered to be a substantial change in circumstances.

 

  1. What is the point of court ordered mediation?
    1. The Court requires parties attempt mediation in an effort to facilitate an agreement between the parties to avoid further litigation. Many parties are able to come to an agreement on some, if not all, issues in mediation. This benefits everyone involved because both the parties, and the Court, will save the time and the money necessary to proceed through the Court system. The only exceptions to mediation are if there have been domestic violence between the parties, child abuse allegations or one of the parties is impaired due to drugs, alcohol or mental illness.

 

  1. Why was a Guardian ad Litem appointed?
    1. If the parties cannot reach an agreement in mediation, the statutes require that the Court appoint a Guardian ad Litem (an attorney) in order to help determine what is in the best interest of the child or children. The Court relies on the Guardian ad Litem to conduct an investigation in order to provide a recommendation as to what solution to the parties’ issues is in the best interest of the children.
    2. In certain circumstances, such as in cases of domestic violence, the Court may decide to bypass mediation, and immediately appoint a Guardian ad Litem.
    3. There is usually a fee associated with the appointment of a Guardian ad Litem that both parties must pay. The Court will also set an hourly pay rate for the Guardian ad Litem as well. The county pay rate varies by county.

 

  1. What if I simply want to change the child support amount?
    1. If there has been a substantial change in circumstances, then a party may file a motion with the court to change child support. Child support will not automatically change simply because one parties’ income has changed. If you want child support to be changed, you must file a motion with the court. It is important to determine first whether there has been a substantial change in circumstances and what any new child support amount should be before you file a motion.
    2. A substantial change of circumstances to change child support is a very broad standard. It can mean that a party may have received a raise, changed jobs, lost their job, etc. It could also mean that the placement arrangement with the child or children has changed, which would also alter the support amount. Or, if one of your children has reached the age of majority and/or graduated from high school.
    3. If you believe that the other party has had an increase in income, you should request that they provide to you paystubs or some form of income documentation so that you can determine if you should ask the court for a change in child support.

Termination of Parental Rights- Frequently Asked Questions

alcoholismWhile our firm does not specifically handle termination of parental rights cases, we frequently are asked questions about this area of law. Therefore, this blog is intended to provide general responses to frequently asked questions regarding what does and does not trigger this type of action in Wisconsin.

It is important to know that in nearly all cases of termination of parental rights in Wisconsin, except in very limited circumstances as discussed below, there must be an accompanying step-parent adoption.  The court does not want to leave a child without two legal parents.  The general philosophy is an indifferent or even bad parent is better than no parent. Your child has inheritance rights and rights to see extended family, even if they seemingly receive no current benefit from their parental relationship.

Here are the answers to some of the specific questions we often receive:

Refusal or failure to pay child support: Frustrated parents who are not receiving child support from the other parent for the benefit of their children will sometimes ask if they can terminate the other parent’s rights to the child. Likewise, parents who are court ordered to pay child support and wish to stop that obligation will ask if they can terminate his/her parental rights to avoid a child support obligation. The answer is no to both of these questions. Refusal or failure to pay child support is not a trigger to this type of action.  The obligation to support your children remains no matter what kind of parent is on the other side.  The court will not allow your child to go without support just because the parent is a bad parent.

Failing to see the child(ren): If one parent is not seeing the child(ren) consistently it may prompt the parent who cares full-time for the child to seek a termination of the other parent’s rights. Generally speaking, however, this cannot happen unless abandonment is proven (failure to see or communicate with the child for longer than six (6) months without good cause) AND there is an accompanying step-parent adoption.  So, the simple fact that a parent is not seeing their child may not be a trigger to this type of action.

“Bad parenting”: The same idea applies here as it does for failing to see the children. Unless there is another parent willing to step in to the child’s life so the child has two legal parents, the court is unwilling to terminate rights due to someone being a “bad parent.” Further, the court does not entertain the idea of terminating a parent’s rights simply because one parent thinks the other parent is not a good parent. If, however, the issue of “bad parenting” is a serious issue (such as the parent committed child abuse) this could be a trigger to a termination of parental rights action.

Some of the grounds that do trigger a termination of parental rights action are mentioned above (i.e. abandonment and abuse). Some other grounds are: failure to assume parental responsibility, incest, sexual assault, homicide or attempted homicide of the other parent and a parent who has a continuing disability.

Like all areas of law, each case has specific and unique facts that may not fall squarely in these general overviews. As such, we suggest that you retain an attorney to help you navigate this most serious of actions.

For additional information about this type of matter, please see our previous blog related to this topic. https://wisconsinfamilylaw.info/2012/10/02/terminating-parental-rights-in-wisconsin/

Tax Considerations in a Divorce

Tax on dollar currency

Filing one’s taxes during or immediately after a divorce can be especially challenging. Before your divorce is finalized, there are a few tax considerations that should be addressed.  Addressing these issues prior to finalizing your divorce will help ease the transition during tax season post-divorce, and may help you avoid any negative tax consequences or an IRS audit. The following points should be considered during the divorce proceeding, and are important to discuss with an attorney or your tax preparer to determine the tax consequences of your divorce agreements:

  • When can you file as single, married filing jointly, married filing separately, or head of household, and which options offer the best possible benefits? Once your divorce is finalized, you are considered unmarried for the entire year of your divorce, this includes if you get divorced on December 31st. If your divorce is not finalized by December 31st, you will have to file your taxes as married filing jointly or married filing separately. There are rare occasions when you can even file head of household even though you are married.  Determining your tax filing status, should be done with the assistance of an experienced tax preparer with the goal of maximizing the best financial result to you and your spouse.  This may require you to work cooperatively with your soon-to-be-ex to determine the best means to file your taxes and to take advantage of the benefits offered by doing so.
  • Which parent can claim the child or children for the dependency exemption and take the applicable tax credits offered to parents? Generally, the parent with primary placement of the child(ren) may claim the child(ren) on their tax return. However, parties can negotiate who can claim the exemption in divorce cases or the court can order the same. It is imperative to include in the Marital Settlement Agreement an award of how each party shall claim the child(ren) on their respective tax returns.
  • What do parents need to claim the child(ren) as a dependent? Parents must complete an IRS Form 8332 “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent,” to allow the other parent to attach it to his or her tax return if they are claiming the child(ren) Form 8332 is the document that allows a parent to claim a child on his or her taxes even though he or she may not fit the requirements under IRS rules to do so.
  • Do I have to report child support as income? Child support payments are not deductible by the paying parent or taxable to the parent receiving the child support.
  • Can I deduct maintenance payments? Maintenance payments (or alimony) are generally tax deductible by the party making the payment, and must be claimed as income by the recipient. It may be helpful to include a reference to the federal tax code IRC 71 in your divorce decree can ensure that the parties are aware of their responsibilities regarding maintenance payments.
  • Do I have to pay taxes on assets awarded to me in my divorce? A property transfer between divorcing spouses does not create any additional tax liabilities, if it is ordered in the divorce decree.
  • Do I have to pay taxes on retirement assets awarded to me in my divorce? In order to avoid tax consequences when dividing a retirement account incident to a divorce, a Qualified Domestic Relations Order or QDRO, may need to be drafted after the date of divorce to instruct the retirement plan administrator to divide the benefits as ordered by the divorce decree. If the recipient spouse does not liquidate such funds and follows the IRS rules to invest such funds into a qualified plan, there are no tax consequences to such a transfer.
  • Will I be audited post-divorce? You risk being audited if you do one or both of the following: 1. both parents claim the same child on their taxes, 2. The amount of maintenance the recipient lists on line 11 of his or her 1040 does not match the number that the payor lists on line 31a. It is always good practice to speak to your ex-spouse before filing your taxes to make sure that you are claiming the correct child(ren) and that the amount of maintenance listed as received on your tax form matches the amount of maintenance paid.

There are several considerations in determining what options are best for you to maximize your tax benefits and to avoid any additional tax burdens after a divorce. Because each divorce is unique, it may be important to speak with an attorney or a tax professional to best address the tax consequences of your proposed divorce agreement before finalizing your divorce. If you are getting a divorce and have questions regarding the tax consequences of the issues outlined above, call us at (414) 258-1644 to schedule a free initial consultation to discuss your case.

How To Modify or Change Child Support in Wisconsin

Child support letters and cashOnce a child support order has been established, in Wisconsin, it can only be changed or modified if there has been a substantial change in circumstances. How do you modify or change child support in Wisconsin? If you can prove there has been a substantial change, then you must file a motion and schedule a hearing before the family court commissioner or the judge.  You can also file a Stipulation with the court if you and the other parent can reach an agreement.  All of these forms are available here:  Wisconsin Family Law Forms.

What does a substantial change in circumstances mean when addressing child support?  That is often up to the court but some common examples are:

1.  A substantial change in the income of either party.  The definition of “substantial” is often based on the facts of the situation but usually this requires a change in gross income of at least $5,000 per year or more.  Keep in mind this is relative, however.  If a $5,000 change in gross income only results in a $50 per month change in child support, that would generally not be considered to be substantial.

2.  The Wisconsin statutes provide that if at least 33 months has passed since the last child support order, a substantial change in circumstances is presumed to have occurred.

3.  A child “ages out” by reaching the age of 18 or graduates from high school.

4.  A change in the placement schedule.

5.  A move by one party or the other resulting in additional transportation costs.

6.  A substantial change in the needs of either parent or the child.  For example, if a child develops special needs, incurs unusual costs or if a parent becomes disabled.

If any of these changes apply to your situation or you believe you may have grounds to modify or change your child support order, you should seek the advice of an experienced family law attorney to determine exactly what your options are and what the likely results will be if you file a request to change your child support order.

The experienced attorneys at Nelson, Krueger & Millenbach, LLC offer free initial office consultations and we frequently deal with this kind of situation.  If you are interested in scheduling an appointment with one of our attorneys, please contact us at 414-258-1644.