Sixth Circuit Selected to Hear Consolidated ETS Legal Challenges

On November 16, the United States Panel on Multi-District Litigation conducted a lottery among the federal court circuits in which lawsuits are pending over OSHA’s ETS. Under the rules applicable to the ETS, all legal challenges to the ETS are to be consolidated and transferred to one Circuit Court of Appeals for hearing and decision. The lottery resulted in the selection of the Sixth Circuit Court of Appeals to receive and hear these cases. We will continue to monitor for further developments.    

Throughout COVID-19, Varnum’s Labor and Employment Team has helped employers across the country navigate emergent laws and regulations that impact their workforce and operations, including with respect to vaccination mandates. 

On November 9, 2021, Varnum Labor and Employment attorneys presented a one-hour webinar on the most pressing concerns and questions regarding OSHA’s COVID-19 vaccine and testing rules. To request a recording of the webinar and gain access to frequently asked questions and other resources, please click here.

We stand ready to assist you with this new rule and related workplace adjustments. If you have immediate questions, please contact your Varnum attorney.

OSHA Temporarily Suspends ETS Implementation Per Fifth Circuit Injunction

Breaking News: Sixth Circuit Selected to Hear Consolidated ETS Legal Challenges

The status of OSHA’s Emergency Temporary Standard (“ETS”) mandating COVID-19 vaccinations or testing of employees for those employers with 100 or more employees remains fluid and uncertain. On November 12, 2021, the U.S. Court of Appeals for the Fifth Circuit ordered a continuation of the Fifth Circuit’s stay of the ETS, directing OSHA to take “no steps to implement or enforce the Mandate until further Court Order.” The Department of Labor has acknowledged the Fifth Circuit’s Order and posted the following message on its webpage: “OSHA has suspended its activities related to the implementation and enforcement of the ETS pending future development in the litigation.”

What does this mean? The future of the ETS remains uncertain in light of litigation in multiple forums. This week, a determination will be made regarding which federal Court of Appeals will be tasked with determining the legality and constitutionality of the ETS. Hopefully soon we will receive an indication of whether the assigned Court will take immediate action to reconsider the Fifth Circuit’s stay that is currently in place, or keep it in effect pending determination of the legal challenges. In the meantime, employers may wish to continue with steps to ensure they will be ready to comply in the event the rule is upheld or the Fifth Circuit’s stay is lifted.   

Throughout COVID-19, Varnum’s Labor and Employment Team has helped employers across the country navigate emergent laws and regulations that impact their workforce and operations, including with respect to vaccination mandates. 

On November 9, 2021, Varnum Labor and Employment attorneys presented a one-hour webinar on the most pressing concerns and questions regarding OSHA’s COVID-19 vaccine and testing rules. To request a recording of the webinar and gain access to frequently asked questions and other resources, please click here.

We stand ready to assist you with this new rule and related workplace adjustments. If you have immediate questions, please contact your Varnum attorney.

For the Record: Is There Still a Participant Exception to Michigan’s Eavesdropping Statute?

As we’ve pointed out before in our previous advisory Recording Conversations With Your Cellphone: With Great Power Comes Potential Legal Liability, modern smartphones make it easy for people to record voice memos in place of written notes, and maybe even record whole meetings or conversations for later reference. But in doing so, it is wise to exercise some caution. Under Michigan’s Eavesdropping law[1] it is a felony punishable by up to two years and $2,000 to willfully use any “device” to “eavesdrop” on (meaning to overhear, record, amplify, or transmit) a conversation without the consent of all participants in that conversation.[2] It is also a felony for a person to “use or divulge” any information that they know was obtained through illegal eavesdropping.[3] This means using your phone to record conversations could, under some circumstances, amount to a crime.

Since 1982: Michigan has recognized a “participant exception” for nearly 40 years

Fortunately (at least, for anyone who likes to casually record their own meetings or conversations), Michigan courts have consistently recognized an important exception to Michigan’s eavesdropping statute: it does not apply to recordings you make of your own conversations; it only applies to conversations of “other” people. If you are a participant in the conversation, you are free to record, even without the permission of any other participants. The Michigan Court of Appeals had seemingly settled this question back in 1982, in the published decision of Sullivan v. Gray,[4] stating “We believe the statutory language, on its face, unambiguously excludes participant recording from the definition of eavesdropping by limiting the subject conversation to ‘the private discourse of others.'” The Court of Appeals has affirmed this interpretation of the statute several times and the Michigan Supreme Court has never seen fit to overrule Sullivan. Likewise, the Michigan Legislature has not amended the statute in order to eliminate the participant exception.

2019: A federal court declines to participate

Recently, however, a federal court in Michigan injected some uncertainty into this longstanding interpretation of Michigan’s eavesdropping statute. In AFT Michigan v. Project Veritas,[5] a judge for the federal district court for the Eastern District of Michigan made the surprising choice not to follow a published decision of the Michigan Court of Appeals on a question of Michigan law that had been settled for nearly 40 years. The court in AFT explained that it was only obligated to follow decisions of the Michigan Supreme Court (and not the lower Michigan Court of Appeals), which had never addressed the participant exception to eavesdropping statute. The AFT court then conducted its own analysis of the statutory language and concluded that the Michigan Legislature had not intended to exclude participants from the statute. Thus, the AFT court declined to follow Sullivan, and also certified the question of statutory interpretation to the Michigan Supreme Court for determination, affording the Supreme Court the opportunity to settle the issue once and for all if it so chose.

2021: Other courts continue to recognize the participant exception

Not long after AFT was decided, however (and before the Michigan Supreme Court took any action on the certified question from AFT), a different federal judge in the Eastern District of Michigan, in the case of Fisher v. Perron,[6] disagreed with the court in AFT and decided to follow Sullivan, holding that a participant in a conversation was incapable of violating Michigan’s eavesdropping statute. The Fisher court reasoned that all available evidence suggests that the Michigan Supreme Court would reach the same conclusion as the Court of Appeals did in Sullivan. The Fisher court noted that the Court of Appeals has affirmed Sullivan many times (including in the published case of Lewis v. LeGrow[7]) and the Federal Sixth Circuit Court of Appeals also continues to follow Sullivan (even while the certified question from AFT was pending before the Michigan Supreme Court).

In May of 2021, the Michigan Supreme Court formally declined to answer the certified question from the AFT court.[8]

The Current Status of the Participant Exception

Following these recent developments, what is the status of the participant exception to Michigan’s eavesdropping statute? The most strongly supported interpretation is that Michigan does still recognize a participant exception. That is what the Court of Appeals has consistently said for nearly 40 years, and neither the Michigan Supreme Court nor the Michigan Legislature has seen fit to respond to that interpretation. That is also what the majority of federal courts have said, including the Sixth Circuit Court of Appeals. The only notable outlier is the Eastern District of Michigan’s opinion in AFT, which was not followed by subsequent decisions within the district and whose certified question the Michigan Supreme Court declined to answer. In light of this recent history, it is unlikely that a court applying Michigan law would refuse to recognize the participant exception. (That said, it’s not impossible: the AFT court’s refusal to follow Sullivan seemed only slightly less unlikely at the time.)

Nevertheless, anyone considering implementing a practice of regularly recording conversations without the consent of all participants should consider many other legal issues that may come into play, which we referenced in an earlier article. As before, the safest route is to always get permission from everyone involved before recording a conversation or sharing a recorded conversation with anyone. If that’s not an option, consult with a lawyer who has had an opportunity to consider all of the facts involved in your specific case.

[1] MCL 750.539 et seq.
[2] MCL 750.539a; MCL 570.539c
[3] MCL 750.539e
[4] 117 Mich. App. 476, 481, 324 N.W.2d 58, 60 (1982)
[5] 397 F. Supp. 3d 981 (E.D. Mich. 2019)
[6] No. 20-12403, 2021 WL 103633, at *4 (E.D. Mich. Jan. 12, 2021)
[7] 258 Mich. App. 175; 670 N.W.2d 675, 684 (2003)
[8] In re Certified Question from United States Dist. Ct., E. Dist. of Michigan, S. Div., 959 N.W.2d 172 (Mich. 2021).

Proposed Build Back Better Act Necessitates Diligent Estate Planning and Tax Review

UPDATE – October 6, 2021: The BBB Bill has not been passed by the House of Representatives as the Democratic caucus has not yet reached a consensus. When and if the House Democrats pass the BBB Bill, it will head to the Senate where it will be further amended. It is unknown when the Bill will make it out of Congress and to the President’s desk, but we might see increased pressure as the October 18 deadline to raise the debt limit approaches.

On September 15, the House Ways and Means Committee approved the tax provisions of the proposed Build Back Better Act, which would fund President Biden’s social and education reforms. As we await further Congressional action, we’ll refer to this as the “BBB Bill.”

Although the BBB Bill has not yet been approved by Congress or the President – with likely modifications to come – potential changes to estate taxes, grantor trust and income taxes warrant careful consideration for high-net-worth and high-income individuals. We summarize below the most pertinent aspects of the BBB Bill.

Transfer Taxes: Exemptions Are Going Down and a Popular Planning Technique Goes Away

Congress initially created the modern estate tax back in 1914. Since then, the amount that individuals can pass to their beneficiaries without incurring tax has climbed in fits and starts. The unified estate and gift tax basic exclusion amount (BEA) – the maximum amount that may be passed from an individual to his/her beneficiaries before the transfer incurs gift or estate tax – was set at $5 million per person in 2011, to be adjusted upward for inflation annually. However, the 2017 Tax Cuts and Jobs Act doubled the BEA for nearly a decade with the legislation including a sunset provision back to the inflation-adjusted 2011 figure in 2026. Absent additional action from Congress, the BEA will continue to rise from the current $11.7 million figure in 2021 until 2026 when the figure would speculatively be approximately $6.5 million to $7 million. The figure is currently set to be $12.04 million in 2022.

However, the BBB Bill accelerates the sunset to the inflation-adjusted BEA. The proposed legislation would be effective from January 1, 2022 onward, lowering each individual’s 2022 BEA from $12.04 million to $6.02 million. As a result, individuals are able and encouraged to structure their estate plans prior to the end of the year to take advantage of the vanishing half of their BEA in the event that the BBB Bill passes and is signed into law.

In addition to the lowered BEA, a popular technique for enhancing the efficiency of gifts is on the chopping block. Under current law, gifts of interests in entities holding nonbusiness assets are eligible for valuation discounts based on the lack of marketability associated with the entity interest and the lack of entity control associated with the gifted interest. The BBB Bill proposes to explicitly disallow valuation discounts for such transfers. Additionally, whereas the reduction of the BEA is scheduled to be effective from January 1, 2022 onward, the disallowance of valuation discounts for gifts of interests in nonbusiness entities is scheduled to occur on the effective date of the BBB Bill. If you are considering such a gift, time is of the essence.

Grantor Trust Rules: All Irrevocable Grantor Trusts Would Be Treated as Separate Taxable Entities as of the Effective Date of the BBB Bill

While the exemption may be in place through the end of the year, that does not mean that individuals will have that long to take advantage of planning opportunities. For decades, individuals have been able to create irrevocable trusts and have them treated as “grantor trusts,” meaning that after the transfer of assets to the irrevocable trust (which uses a corresponding amount of the grantor’s BEA), the trust itself, including all future appreciation of the transferred assets, is excluded from the grantor’s taxable estate. At the same time, the grantor can remain individually liable for income taxes earned by the trust so that the gift to the trust would be undiminished by income taxes while the grantor’s taxable estate would be further reduced via income tax payments. Grantor trusts are commonly used as a technique to reduce or eliminate estate taxes in taxable estates.

The BBB Bill provides that any grantor trust created on or after the date of the enactment of the bill will be included in the grantor’s taxable estate, effectively eliminating their utility for gift tax planning. Under the BBB Bill, existing grantor trusts (and contributions made prior to the enactment date) will be grandfathered under the current rules whereas any amounts contributed to a preexisting grantor trust after the enactment date will be subject to the new rules and includable in the grantor’s taxable estate. Therefore, in order to take advantage of the grantor trust rules (and the increased exemption), it is imperative to have your grantor trust both executed and funded prior to the enactment date of the BBB Bill.

This presents a number of considerations depending upon the type of grantor trust contemplated. For example, individuals creating Grantor Retained Annuity Trusts will not be able to utilize a technique known as “rolling GRATs” (where successive short-term GRATs are used to allow an investment to either succeed or fail quickly, and then begin a new annuity term) because one or more successive GRATs would not be available. Further, given the broad language of the BBB Bill, making required annuity payments to a grantor of a preexisting GRAT could trigger a deemed sale and capital gains taxes. Individuals contemplating establishing a life insurance trust as a grantor trust should consider gifting several or many years worth of insurance premium payments to the trust now since contributions to the trust to pay insurance premiums in future years will not be subject to grantor trust rules. Individuals contemplating the sale of an appreciated asset to a grantor trust should execute both their grantor trust as well as the sale documents before the BBB Bill is enacted. Under the current rules, such a sale is not a taxable event since the grantor and the trust are the same taxpayer, but under the new rules, since the grantor and the trust would be separate taxpayers, such a sale would be a taxable event triggering income tax recognition for the grantor. Often, these types of sale transactions involve substantially appreciated assets and built-in gains, and this strategy will be largely unavailable or ineffective after enactment of the BBB Bill.

The grantor trust types noted here are not an exhaustive list. There are several other types of grantor trusts, and as noted above, this type of planning is highly complex and nuanced. Acting sooner rather than later to be grandfathered into the existing grantor trust rules is imperative to ensure your ability to take advantage of this valuable estate and gift tax planning tool.

Income Taxes: They’re Going Up

The BBB Bill contemplates several changes to individual income tax rates, including increasing the top marginal income tax rate, lowering the thresholds to which the top rate applies, increasing the maximum long-term capital gains rate, imposing an additional surtax to high income, expanding the net investment income tax, limiting contributions to IRAs and increasing required minimum distributions, and limiting back door Roth IRA conversions.

The top marginal individual income tax rate would be increased to the pre-Tax Cuts and Job Act rate of 39.6 percent and would also increase the number of people to which it applies by lowering the income threshold, effective January 1, 2022. The top tax rate would apply to those with taxable income exceeding:

  • $450,000 for a jointly-filing married couple
  • $400,000 for a single individual
  • $250,000 for a separately-filing married couple
  • $12,500 for a trust or estate.

An additional 3 percent surtax would apply to non-corporate taxpayers on modified adjusted gross income in excess of $5,000,000. Note that for a separately-filing married couple, that threshold would be $2,500,000, and for trusts and estates, the threshold would be $100,000. 

As expected, the BBB Bill would increase the maximum capital gains rate from 20 percent to 25 percent. Although this is significant, this is less than Biden’s original proposal to tie out the capital gains rate bracket with the ordinary income rate bracket. The increased rate would apply to capital gains and dividends recognized after September 13, 2021, though some exceptions would apply for sales subject to a binding contract in effect on or before that date. 

Currently, an additional 3.8 percent tax is applied to a taxpayer’s net investment income earned from a business if the taxpayer is passive with respect to that business; if a taxpayer is active, that tax is not applied. The BBB Bill would subject active business income to the 3.8 percent tax if income exceeds:

  • $500,000 for a jointly-filing married couple
  • $250,000 for a separately-filing married couple
  • $400,000 for all other taxpayers

Effective January 1, 2022, the BBB Bill would inhibit high income taxpayers’ ability to defer paying these increased income taxes through contributions to IRAs by prohibiting contributions when the total balance of a contributor’s IRAs and other retirement accounts exceeds $10 million and taxable income exceeds $450,000 for a jointly-filing married couple or $400,000 for a single taxpayer or a separately-filing married couple. Further, these taxpayers would be required to take a required minimum distribution equal to 50 percent of the value that exceeds $10 million, plus 100 percent of any amount exceeding $20 million. 

Taxpayers with income that exceeds certain thresholds are barred from contributing to Roth IRAs, but in a technique referred to as “back door Roth IRA conversion,” they can make a contribution to a traditional IRA and then convert it to a Roth IRA. The BBB Bill would bar jointly-filing married couples with income exceeding $450,000 and separately-filing married couples and individuals with income exceeding $400,000 from using this technique. 

Although the cumulative effect of these changes would be substantial for some high income individuals, there is a glimmer of good news, as the BBB Bill does not include any provisions to eliminate step up in basis rules upon the death of an individual, nor does it include provisions that would trigger capital gains tax when a gift is made upon the death of a taxpayer.

Please stay tuned as the BBB Bill makes its way through the legislative process and contact a Varnum estate planning attorney with your questions. As described above, you will not want to wait until legislation is passed to take action.

IRS Collection: Current Enforcement Updates and Trends

Since the pandemic began in March 2020, IRS Collection has taken efforts to assist taxpayers facing financial challenges, including holding off on taking enforcement action against many taxpayers. However, the gloves come off on June 15, 2021. Beginning June 15, the IRS will begin issuing Final Notices of Intent to Levy. Enforcement action, including levies on wages and bank accounts, will begin 45 days after issuance for taxpayers that have not resolved their accounts. In addition, you can expect federal tax liens to be filed in cases that meet certain criteria. Resolving your tax debt early in the process can help alleviate the burdens caused by these actions.

But that is not all that IRS Collection is doing. According to Darren Guillot, IRS Small Business/Self-Employed Deputy Commissioner for Collection, the IRS is continuing its collaboration with the IRS Office of Fraud Enforcement which stood up in March 2020. With this collaboration, the IRS has been able to effectively and efficiently refer cases to the IRS Criminal Investigation Division. Case referrals are taking half the time they did in the past, which has resulted in more cases being referred than before. In addition, historically, most of the referrals to Criminal Investigation from IRS Collection have been employment tax cases. However, IRS Collection is now referring high income non-filing cases as well. 

The IRS is responsible for collecting almost 95 percent of total federal revenue through its compliance and collection activities. Current enforcement activities and programs at the IRS include the following:

  • HiDeF/Operation Surround Sound. These enforcement efforts are geared towards high income non-filers. Taxpayers that fall within this program have income of $100,000 or more and have not filed federal income tax returns.   
  • Operation Liquidation. This effort involves the IRS Insolvency Unit. Insolvency is looking into taxpayers that file bankruptcy and matching taxpayer disclosures to FATCA information and other information obtained through data analytics.
  • Ghost Employer Project. A Ghost Employer is one who issues Forms W-2 to its employees, but who has not filed those forms with the Social Security Administration and has not filed employment tax returns, Form 941 and Form 940, with the IRS. Both the IRS Examination Division and IRS Collection are working these cases and making criminal referrals in these cases.
  • Repatriation Suits. IRS Collection is using FATCA and data analytics to locate foreign assets held by taxpayers. Once located, they are working with IRS Chief Counsel and the Department of Justice to pursue mutual collection assistance requests with U.S. Treaty Partners.
  • Cryptocurrency Projects. The message is clear from Darren Guillot. “The IRS knows if you have virtual currency…. Taxpayers need to tell the truth [about their virtual currency].” More information about IRS cryptocurrency enforcement efforts can be found here.

If you fall within any of the IRS’s current enforcement priorities, or if you have unpaid taxes or unfiled returns, you need an experienced tax attorney to represent you in your dealings with the IRS or the Department of Justice. An accountant or enrolled agent is not protected by the attorney/client privilege. Please contact Eric Nemeth of Varnum’s Tax Team with any questions.

New Federal Program Provides Discount on Internet Service for People With Disabilities

A new federal program will provide a $50 per month discount on internet service for many people with disabilities. A discount of $75 per month will be available to those on tribal lands who qualify. The discounts are available to any household with a person receiving Medicaid, Supplemental Social Security (SSI), SNAP (food stamps), or Federal Housing assistance, among other benefits.

Many people with disabilities receive these and thus qualify for the discount. The discount will be put on the customer’s bill, and the service provider (cable, phone, cell phone, etc.) will be reimbursed by the feds.

The program, administered through the Universal Service Administrative Company (USAC), is new, of limited duration and is slated to begin in late April. It will expire six months after the COVID pandemic ends or when the $3.2 billion Congress appropriated for the discounts runs out, whichever comes first. To get the maximum benefit, eligible participants should sign up as soon as possible.

How to Register for the Discount

People with disabilities (or others on Medicaid, SSI, etc.) are required to register to show that they qualify for the discount. To register, go to www.usac.org. Please note that USAC is in the process of creating the web page to register for this program and expects it to be completed by mid-April.

Once registered, participants should contact their cell phone, telephone company, cable company etc. to get the discount. Note that those who qualify for this discount due to Medicaid, SSI, etc. should also check out the USAC “Lifeline” web page as they may also qualify for an additional, permanent internet and phone discount.

The $50 or $75 discount is part of an “Emergency Broadband Benefit” program created by Congress to provide internet service to low-income families during the pandemic. The discount is also available to (1) people with a substantial loss of income since last year, (2) students who receive free or reduced cost meals, (3) Pell grant recipients, and (4) persons receiving certain Tribal benefits.

For more information:

MDHHS COVID-19 Order: Relaxed Restrictions on Restaurants and Other Gatherings Take Effect March 5

The Michigan Department of Health and Human Services (MDHHS) announced revisions to its Gatherings and Face Mask Order that relax restaurant capacity restrictions and loosen gathering requirements in other settings. Specifically, the revised Gatherings and Face Mask Order, which takes effect on Friday, March 5 permits increased capacity limitations at residential and nonresidential gatherings, as well as other entertainment and recreational facilities. A summary of the Order’s most notable changes can be found below.

Gatherings

  • Indoor gatherings of up to 15 individuals from three households are permitted at residential venues, and nonresidential venues may host gatherings of up to 25 individuals.
  • Outdoor gatherings of up to 50 individuals are permitted at residential venues, and nonresidential venues may host gatherings of up to 300 individuals.
  • As a condition of hosting a gathering, organizers and facilities must design the gathering to encourage and maintain social distancing and must ensure that persons not part of the same group maintain six feet of distance from one another to the extent possible. Additionally, all persons participating in the gathering are required to wear a face mask, unless an exemption applies.

Restaurants

  • Restaurants may operate at the lesser of (i) 50 percent of their normal seating capacity (up from 25 percent), or (ii) 100 persons. Restaurants also may remain open until 11 PM instead of 10 PM.
  • Groups of patrons must still be separated by six feet from other groups, and no more than six persons may be seated at a table.
  • Masks are still required to be worn by patrons, unless an individual is eating or drinking while seated.

Other Capacity Changes

  • Retail stores, libraries, and museums may operate at 50 percent capacity.
  • Exercise facilities and indoor pools may operate at 30 percent occupancy limits.
  • Indoor venues including stadiums and arenas may operate at 50 percent capacity, provided (i) no more than 375 patrons are permitted to be gathered at venues with seating capacities under 10,000, and (ii) no more than 750 patrons are permitted to be gathered at venues with seating capacities over 10,000.
  • Outdoor entertainment and recreation facilities may permit gatherings of up to 1,000 patrons.

While the Order generally relaxes restrictions as noted above, individuals remain required to wear masks and maintain social distancing while in these various settings. Similarly, exercise facilities, restaurants, and personal care service establishments must continue to abide by contract tracing requirements as set forth in the Order, which include keeping accurate records of a patron’s date and time of entry, name, and contact information. Should you have any questions related to how the Order will affect you and your business, Varnum’s attorneys stand ready to assist you.

Gray Divorces and Silver Separations Present Special Challenges

This column was originally published in the Grand Rapids Business Journal on August 5, 2016 and is republished with permission.

Let’s hear it one more time for those of us in the “Baby Boom” generation — Americans born between roughly 1946 and 1964.

Once again, we’ve come up with something new and all about us. It’s called “the Gray Divorce.”

Used to reference the series of noteworthy legal events occurring when couples end marriages after the age of 50, the term “Gray Divorce” denotes not only changes in marital status occurring later in life, but also the myriad of issues faced by the AARP generation that are not always faced by younger couples.

In other words, the so-called Gray Divorce involves much more than simply telling one’s spouse, “I shoulda left you way back when I was 40. . . .”

Truth be told, divorce ought seldom be the subject of kidding, regardless of the ages of divorcing couples. At the end of the day, every divorce involves the break up and resolution of the physical and economic partnership formed when a couple marries. Thus, each divorce involves an inventory of property, assets, and other things acquired and/or owned by a couple both prior to and during marriage, so that the court can decide the often complicated question of “who leaves with what” when a marriage is legally dissolved.

In bygone times — when couples who managed to stay together for 30 years would often remain married forever — issues that now regularly occur when couples divorce after age 50 were few and far between.

But times change. People live longer. Sometimes more familiarity breeds more contempt.

Today, one in four people currently experiencing divorce is over 50, which is double the rate of just 20 years ago. And while divorcing 55-year-olds may not have to battle over child custody in the way that 30-year-old couples might battle, there are many issues to be determined that were analyzed far less frequently back when “Silver Separations” were less common.

Dividing up Property

When considering divorce later in life, many people first ask, “Will I end up with enough to live comfortably?” While courts start at a roughly equal division, several factors influence the final division.

  • Prenup? The existence of a prenuptial agreement can alter how an estate gets divided. Many who had assets — or expected to inherit assets — utilized a prenup to spell out how property would be split. Even with a prenup, particularly one drafted years ago, the analysis continues. Courts may try to “invade” the otherwise separate property of one spouse to get to a division the judge prefers. The old saying that “the devil is in the details” squarely applies here.
  • Separate versus marital property. A judge’s first job in carving up property is to determine what is “marital” and what is “separate.” Separate property could include assets a party brought into the marriage or that a party received through gift or inheritance during the marriage. Conversely, property that comes to the marriage either by reason of the marriage or because it is earned during the marriage belongs to the marriage. Of course, in the murky waters of the law, it is simply not that clear. Property that one party says is “definitely mine” can, through the often unintended actions of the parties themselves, change to martial. Titling an inherited asset jointly, such as for estate planning, depositing funds into a joint account, or paying income taxes or insurance premiums from joint funds can all cause the once separate asset to be “comingled” with, and turned into, marital property. Similarly, parties can contribute to appreciation of the separate asset, even via labor, which could affect the category into which the court places the property. But let’s not stop there. Michigan courts have authority by statute to award one party’s separate property to the other. One statute deals with a party’s contribution to the asset as described above, and another allows invasion if the court simply feels the martial settlement to a party is “insufficient for suitable support”.
  • What can be divided? The universe of property to divide includes the usual suspects such as real estate, business interests, financial and retirement accounts and “stuff,” like household goods. Other less obvious things that could be divided include deferred comp plans, banked vacation time, frequent flyer miles, lifetime health benefits, workers comp benefits, escrow funds, pre-paid end-of-life arrangements, season tickets (ouch UofM fans), patents, voting rights, professional degrees, life estates, rights of first refusal, referral fees, and litigation rights. In short, people will argue about, and the court can consider, anything that has an ascertainable value. The court allocates debts as well.
  • What’s it worth? Valuation of property is another big issue. Many older folks have significant retirement benefits, vehicles and homes, antiques or artworks, and closely held business interests. All must be valued in a divorce, and the burden of establishing value rests on the shoulders of the party who wants it divided. Hiring a qualified valuation expert is an absolute must. Since these people don’t come cheap, this can significantly add to the case expense. The assumptions utilized in making value calculations, can also cause a significant difference in value. For example, is the business worth the $850,000 that one expert suggests, or $8,500,000 as indicated by the other? Predictably, bigger numbers mean bigger arguments.

Spousal Support

Another major issue often present in later life breakups is spousal support. Will I pay or receive support is a question many people ask. Here, Courts will look at several factors.

  • Need versus ability to pay. If one spouse was typically stay-at-home, and the other generated significant income, support is likely. If the breadwinner is now retired, but pulls in more money — such as SS benefits, retirement, and interest — than the other, support is probable.
  • Property each receives. In the larger estates of the older set, it is more likely that each party receives sizable property awards that may generate sizeable incomes. The court will see what income a party may receive to determine whether to award support.
  • Health. A party’s special health costs can also influence the court. The costs of prescriptions, treatments and care givers may be issues in later life divorce cases.

Divorce for the baby boomer generation, while excluding all the kid issues of younger couples, presents certain unique legal challenges. These can be more significant than “who gets the house?”

A lawyer with proper information, knowledge of the law, and an understanding of the attitudes of opposing counsel and the judge can advance a client’s cause so that a fair and equitable result occurs.

A divorcing person can help his or her own cause considerably by providing the lawyer with a complete, accurate, and current list of assets, liabilities, and income, supplemented by reliable documents. The lawyer is no better than the facts to be dealt with, and the sooner the lawyer has sufficient information the better the chances for a favorable result.