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Spousal Maintenance and Related Financial Laws

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Last month I updated you on the changes occurring to the custody laws.  The 2015 legislature decided that the changes to the laws on custody were not the only laws that needed a shining (See e-blog on 2015 Changes to Custody Laws, dated June 25).  They also decided that some financial laws related primarily to spousal maintenance needed an update.

Here is what else our noble lawmakers have done this past session.

  1. There is a concept under the law called a Karon Waiver. This contract premise essentially provides that spouses can limit spousal maintenance payments in amount and/or duration if there is proper consideration and appropriate language in a divorce decree.  This is a concept that is not embodied in the law and thus the Courts cannot offer a Karon Waiver in their decisions.  It has to be agreed to by the parties.In an order regarding spousal maintenance the Karon Waiver language provides that the court is divested of all further jurisdiction (i.e. authority) to modify spousal maintenance in amount and/or duration, typically both.  The concept of a Karon Waiver has existed for many decades.There is also a concept that once a court is deprived of jurisdiction that is it.  Jurisdiction is dead and cannot be restored to a court.  There are those however who believe in the Lazarus principle which is that jurisdiction is not really dead it can, under the right circumstances, be brought back to life.

     

    There was a case issued by the Court of Appeals in 2014, Gossman v. Gossman, 847 N.W.d 718 (Minn.App. 2014) in which two former spouses signed a Karon Waiver regarding spousal maintenance and later agreed to undo the provisions of their Karon Waiver and restore jurisdiction to the Court.  The appellate court said jurisdiction was dead, the parties had no power to reinstate jurisdiction and sent the parties packing, irrespective of their agreement (of course it was a much more complicated case than my explanation but this is an e-blog).

     

    This law enacted this session is what I call a Lazarus law.  It allows two parties to agree to irrevocably remove jurisdiction from the court and later say “oopsie” we want to give you back your jurisdiction. Per this new law as long as both parties agree in writing, presumably with competent counsel and no duress, voila! jurisdiction is miraculously restored to the Court, much as Lazarus rose from the dead.

     

    The law also specifically allows former spouses to agree to a post-decree Karon Waiver of maintenance, just in case there was ever a question about whether they could do so, which I do not think there was.  All that is needed is consideration and the right language.

  1. A really good change to the law was made because of the Leifur case (820 N.W.2d 40 (Minn.App. 2012)(review denied November 1, 2012). In this case the former spouses were in mediation, endeavoring to save money by negotiating before filing modification motion pleadings with the court. In mediation the parties agreed to a date on which spousal maintenance would be modified.  The parties were not able to reach agreement on the terms of modification.  The appellate court made a strict interpretation of Minn.Stat. §518A.39 which provides that support and maintenance can only be retroactively modified to the date on which motion pleadings are served and filed, i.e. parties cannot stipulate to do what the law does not allow.

     

    The change to Minn.Stat. §518A.39 is effective August 1, 2015 and it corrects the injustice of Leifur by permitting former spouses to set the date on which of support or maintenance will be modified and have their agreement be accepted by a court without running afoul of the law regarding retroactivity.

  1. There is no specific statutory authority for allocating the dependency tax exemption to the parent who does not have physical custody. In 2014 a Federal court issued a decision in which the Court provided that the parent who did not have physical custody could not rely on a court order that gave them the right to take the dependency tax exemption unless the custodial parent signed off on Form 8332.  Form 8332 must accompany the tax return of the noncustodial parent when claiming the exemption and is essentially a consent form from the custodial parent that allows the noncustodial parent to take the dependency tax exemption.

     

    In an effort to correct this problem Minn.Stat. §518A.39 subd. 7 was added to the statute.  This law grants courts the authority to allocate dependency exemptions between the parents effective August 1, 2015.  The court has the authority to place conditions on the award, provide the basis for modification of the allocation and it provides sanctions for the wrongful claiming of an exemption or wrongful refusal to execute Form 8332.The most significant part of this law is that it provides financial consequences for the custodial parent if they fail to sign Form 8332.  Of course if the custodial parent does not have money the consequence may have no impact except for contempt of court which could be a nightmare.

  1. In 2009 Minn.Stat. § 549.09 amended the law that set interest rates on judgments. The law allowed for a 10% rate of interest to be applied to judgments in excess of $50,000.  The law was not ambiguous and the appellate courts allowed that the rate was to be applied to divorce cases with property settlements and property division equalizers that were above $50,000.   The new provision to the law exempts family law property settlements and judgments from the 10% interest rate and permits interest to be applied at the generally lower interest rate applied to standard judgments.  With findings the courts can apply an interest rate lower than provided by law and can waive interest if there is consideration that an unfair hardship would be caused by the imposition of interest.

     

    If double digit inflation ever rears its ugly head again the party holding the judgment will feel the pain of a lower than 10% interest rate.  Indexing anyone?