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.

 

 

Can the Court Award Custody of a Pet in Wisconsin?

 

When going through a divorce, the process is typically focused on the “big” issues. For most couples, this includes the division of assets and liabilities, support, and the custody/placement of minor children (where applicable). Most attorneys and judges are well versed in these issues because they are foundational to divorces.

A less common issue is what happens to family pets in the divorce. Are they considered “property” to be valued and accounted for in the division of assets and liabilities? Or are they more similar to minor children, and require a placement schedule for each party to spend time with the pet? According to the current applications of Wisconsin state law, pets are generally considered “property” and will be considered in the division of assets and liabilities. Although parties can agree to share the custody and placement of their pets, it is currently an uncommon practice in Wisconsin and courts are unlikely to approve or enforce an order which attempts to address custody of a pet.

While Wisconsin does not have laws pertaining to “animal custody”, a recent national trend in the law regarding pets may change that. A number of states, including Wisconsin, have enacted laws recognizing the need to include companion animals in domestic violence protective orders, with some going as far as ordering that abusers pay financial support for pets in the care of a victim of domestic violence.  Wisconsin Statute § 813.12(4)(a) states, part:

A judge or circuit court commissioner may grant an injunction ordering the respondent to refrain from … removing, hiding, damaging, harming, or mistreating, or disposing of, a household pet, to allow the petitioner or a family member or household member of the petitioner acting on his or her behalf to retrieve a household pet…

Further solidifying this trend in recognizing pets as more than property, Congress signed a law entitled the Pets and Women Safety (PAWS) Act in December 2018. The PAWS Act provides shelter and housing assistance for domestic violence survivors and their pets, service animals, and emotional support animals. This law recognizes that pets are more than simple property to their owners..

Although Wisconsin does not have any laws specifically granting custody rights to pets in a divorce or family law case, the court can still consider the facts unique to your case.  Even though the pet is considered to be property, if there is a dispute as to who receives the pet, some of the factors the court may consider are: who first purchased the pet; was it purchased during the marriage or before; who is primarily responsible for caring for the pet.  These are all factors worth considering, and although Wisconsin law doesn’t require family courts in Wisconsin to consider pets as more than property, legislation like the PAWS Act makes it easier for attorneys to argue that pets deserve special consideration in legal actions.

If you have a divorce or family law matter involving a beloved pet, contact the experienced legal team at Nelson, Krueger & Millenbach, LLC at 414-258-1644 or visit our website at http://www.nkmfamilylaw.com to set up a free consultation.

 

Marital Assets Often Overlooked in Divorce

Wisconsin is a marital property state, which means that all assets and debts that are a part of the martial estate are subject to a fifty-fifty division in divorce. Generally, it is fairly simple to identify marital assets and to determine how to fairly divide them. However, couples may overlook certain intangible assets when they are dividing the marital estate in their divorce.

Intangible assets may include credit card reward points, travel miles or hotel points, which are accrued during the marriage. Dividing these assets could be tricky given that they can be tied to the individual who was doing the traveling or tied to the credit card holder. One of the first steps to take when you and your spouse have credit card rewards, hotel points, or travel miles is to contact the company to determine their policy in dividing these assets. Remember, there may be fees associated with dividing these assets, so keep that in mind in determining how you would like to proceed. It is also important to keep in mind that some companies will not divide these rewards into two separate accounts.

However, many companies may assign a monetary value to the rewards points or travel miles.  If they do, you can determine if a buy-out of the other spouse’s interest in those rewards is the best option.  It may also prove helpful to assign a value to these rewards to gain a better perspective of how much you wish to argue over these assets. Determining the value may be difficult when the company that you have these rewards or points through does not assign a value.  In this case you may need help agreeing upon a value of these assets.

You may also want to consider how these assets were accumulated. For example, if you and your spouse have accrued a large amount of travel miles because you have a child attending college in another state, then agreeing to allocate the travel miles for the use of your child’s travel may be a creative way to resolve the conflict in dividing the travel miles. Or, perhaps there simply can be an agreement that the other spouse can use the miles to book a certain number of trips and how that will occur.

Another often overlooked asset are stock options or restricted stock options offered by one spouse’s employer. It is unusual for these options to be split between the parties, and usually requires either a buy-out of the value of the stock.  However, it can be very difficult to determine such value, or determining a method which would allow the non-employee spouse an opportunity to exercise the stock option through the employee spouse. There are several factors which also must be considered when dividing stock options, especially the tax consequences for both parties in exercising the options.

Another asset unique to Wisconsin that can be overlooked are Packers season tickets. It is common that season tickets be passed down generation to generation, and to be a highly coveted asset by Packers fans. If a spouse acquires Packers season tickets during the marriage, then those tickets are also subject to division as a marital asset, as they can stay in the family for years.

If you believe that you or your spouse have the types of assets as those mentioned above, or that you believe you need help identifying these assets and dividing them in your divorce, call us at (414) 258-1644 to schedule a free initial consultation to discuss your case.

Prenuptial Agreements in a Divorce in Wisconsin

Ein Ehevertrag mit zwei goldenen Eheringen

Prenuptial, or Premarital, Agreements are legally binding contracts entered into by couples before they get married to each other. They are also called Marital Reclassification Agreements. The purpose of a Prenuptial Agreement is to opt out of marital property laws in whole or in part. Most prenuptial agreements establish the financial rights of each spouse in the event of a death or divorce. It is important to note, however, that unless a Prenuptial Agreement specifically discusses what happens in the event of a divorce, it does not necessary apply in a divorce.  If all requirements are met, however, prenuptial agreements are generally found to be valid in Wisconsin.

Some common circumstances where prenuptial agreements are entered into are when one spouse is significantly wealthier than the other spouse, when a spouse has children from a different marriage or relationship, when one spouse has a family business he/she wishes to protect from the other spouse in the event of divorce, or when one spouse has significant debt that the other spouse does not want to be responsible for in the event of divorce.

Pursuant to statute, Wisconsin law presumes that all assets shall be divided equally in the event of a divorce. However, a Prenuptial Agreement could overcome that presumption if it specifically addresses what happens in the event of a divorce and if the court determines that it is a valid Prenuptial Agreement that will be upheld in a divorce. Additionally, it is important to know that parts of a Prenuptial Agreement may be upheld by the court, while other parts may not be. The court has the discretion to uphold all, none or only parts of the Prenuptial Agreement.

When deciding whether to uphold a Prenuptial Agreement, the court must insure that certain requirements and standards are met in order for all or part of a Prenuptial Agreement to be enforced and upheld at the time of the divorce. Some of the factors that the court looks at to determine whether a Prenuptial Agreement should apply in a divorce are whether or not the agreements were fair at the time of the signing of the Agreement (i.e. did the parties knowingly and voluntarily enter into the agreement?), whether there was a complete financial disclosure by both parties, whether both parties had adequate legal representation and whether or not a Prenuptial Agreement is fair at the time of the divorce (i.e. has their been a substantial and unforeseeable change in circumstances?).

An example of a situation that may be scrutinized for lack of fairness at the time of entering the agreement is the following: When the husband-to-be is insisting on a Prenuptial Agreement and only presents it to the bride-to-be on the eve of the wedding day (guests have already come to town, non-refundable deposits have been paid). In that circumstance, the bride-to-be may sign the Agreement without sufficiently reviewing the Agreement, without fully understanding the Agreement and her rights under the Agreement and without fully grasping what she is giving up in the future. In the case, the court may decide not to apply a Prenuptial Agreement in a divorce.

If you have questions about a Prenuptial Agreement in a divorce, please call our office at 414-258-1644 to schedule a free half-hour consultation with an attorney.

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 Does Bankruptcy Affect an Ex-Spouse After Divorce?

Finance series

Once your divorce is complete you expect that any financial ties you and your ex-spouse once shared are severed forever.  However, what happens when your ex-spouse defaults on a debt or files for bankruptcy and seeks to discharge debts that belonged to both of you during the marriage?  In marital property states such as Wisconsin, when a debt is incurred during the marriage, it does not matter if the debt is in one spouses name or the other.  Any debt incurred during the marriage is deemed to be a joint debt under marital property laws.   A judgment of divorce separates the debts as to the spouses, but not  as to the creditors.  If a spouse who was assigned a debt under the judgment of divorce defaults on said debt or files for bankruptcy, it is possible that the creditor will seek payment from the other spouse.   Creditors are not part of the divorce process and are not required to follow the terms laid out in the agreement.   So what do you do when a creditor comes after you for a debt that was assigned to your ex-spouse?

If you hired a proactive divorce lawyer, the answer to the problem is clearly laid out in your Judgment of Divorce.  A well thought out Marital Settlement Agreement will have language dealing with this type of situation.   Should a spouse default on a debt, then the Judgment of Divorce should have language which will allow you to seek remedies from your ex-spouse in family court.   Understand, this does not sever the responsibility you have to the creditor, but it will require your ex-spouse to pay you so you can pay the creditor.   Therefore, if a debt is discharged in bankruptcy and the creditor starts collection efforts against the non-bankrupt spouse, the non-bankrupt spouse can go back to family court to obtain an order for the bankrupt spouse to pay the discharged debt.   In Wisconsin, the court will often order maintenance or “spousal support” to assist you in re-paying the debt which was the responsibility of your ex-spouse.  If your divorce decree is silent with regard to this situation, you can file a contempt action against your ex-spouse in hopes of recovering the money you have to pay the creditor.

To further protect ex-spouses, the Bankruptcy Code was modified in 2005 which changed the type of debt that can be discharged.  Under the new law, if your ex-spouse filed a Chapter 7, a debt owed to a spouse that resulted from a Judgment of Divorce or any subsequent court order may not be discharged (i.e. property division, spousal support, child support arrears, payment towards children’s medical bills).

If a Chapter 13 is filed and completed, the rules are different and you must consult with a bankruptcy attorney to determine how your debt is affected.    If you find yourself in this situation where your ex-spouse files for bankruptcy, you may want to consult with a bankruptcy lawyer to confirm the whether your particular debt is dischargeable.

There are also times where as a result of a post-judgment motion the court orders your ex-spouse to pay you an amount of money as a result of a motion for clarification, contempt or reconsideration of the orders.  For instance, a court may order your ex-spouse to reimburse you for expenses related to the sale of a home or other asset, reimbursement for variable costs or even attorney fees.  Your ex-spouse will not be able to discharge these debts in Chapter 7 bankruptcy (the rules may be different for Chapter 13) and he or she will still owe you the debt after the bankruptcy.  It may be necessary to file a motion in family court to ensure your ex-spouse is specifically aware that his or her responsibility still exists.

Should you find yourself in a situation where a creditor is attempting collections from you and the debt is your ex-spouses responsibility under the Judgment of Divorce, contact Nelson, Krueger & Millenbach at 414-258-1644 to schedule a free initial office consultation to discuss your situation and options.