Minneapolis Divorce Attorneys
At Kathleen M. Newman Family Law, we understand the emotional toll divorce can bring. Our goal is to provide the strongest possible advocacy for our clients going through the often difficult process of divorce. We take a holistic approach to understanding the nuances of each case and always focus on our client’s well-being.
Advocacy that Matters
What are your goals? Amidst all of the emotions and confusion of a divorce, you need to create a plan for what’s next. The law office of Kathleen M. Newman Family Law takes a holistic approach to assisting people experiencing the major life event of a divorce. We know that the divorce’s impact on your children is just as important to you as obtaining a fair and equitable financial settlement.
To get clear and move forward, contact us for a consultation with our Minneapolis divorce attorneys. Even if you are in the midst of your case, we can address the reasons why things may be stalled and help you set realistic expectations for achieving your goals.
Intelligent Client Rapport
In order to design the best strategy for you, our attorneys help you focus on the critical decisions that need to be made each step of the divorce process, always keeping in mind your long-term goals and preferences. This approach is essential to our effective legal representation.
We manage all aspects of divorce, from simple matters to complex divorce issues requiring intensive investigation and litigation. To learn more about our divorce services, contact us online or by calling 612-746-5525.
High Asset Divorce
The most crucial element of a high-asset divorce is having a legal team that truly understands every nuance of your situation and what is at risk financially. We provide spot-on advice by understanding the intricacies of your case.
Regardless of their assets and other financial holdings, many of our clients find that child custody issues form the most difficult aspect of divorce. At Kathleen M. Newman Family Law, we have handled these issues for more than 35 years.
What is Spousal Maintenance?
Spousal maintenance, perhaps better known as “alimony” or “spousal support,” is sometimes awarded as part of a divorce decree or legal separation agreement. Unlike child support, spousal maintenance is not governed by strict statutory guidelines; it is not required under the law, and both the duration and amount of any award is determined by the presiding judge. Spousal maintenance was historically awarded almost exclusively to women, however, now the support goes to whichever spouse needs it, regardless of gender.
Why is Spousal Support Awarded?
Spousal maintenance awards in Minnesota are governed by the provisions set forth in § 518.552 of the Minnesota statutes. This law provides that support can be granted if the court finds that the spouse seeking it:
- lacks sufficient property, including marital property given to the spouse as part of the divorce decree or legal separation agreement, to maintain an approximation of the standard of living established during the marriage OR
- is unable to provide for themselves through appropriate employment OR
- is the custodian of a child whose condition or circumstances make employment outside of the home inappropriate or impossible.
How Does the Court Determine the Amount of an Award and its Duration?
The court relies upon a number of statutory factors to decide upon the amount payable and how long such payments are to last. When making the decision to award alimony or not, family court judges must consider all the following factors:
- The financial resources of the party seeking maintenance
- The time necessary to acquire sufficient education and/or training to reenter the workforce
- The probability, given the party’s age and skills, of becoming self-supporting (whether fully or in part)
- The standard of living established during the marriage
- The duration of the marriage
- In the case of a homemaker, the length of absence from employment
- If one party has been out of the workforce for a substantial length of time, how that time impacts the value of any prior education, skills, or experience
- Any loss of earnings, seniority, retirement benefits and other employment opportunities forgone by the spouse seeking the support
- The age, health and emotional condition of the party seeking maintenance
- The ability of the paying spouse to meet his or her own needs while helping support the one seeking maintenance
- The contribution of each party in the acquisition, preservation, depreciation or appreciation in the amount or value of the marital property
- The effort expended by one spouse as a homemaker or while encouraging the other party’s employment or business ventures
The duration of an award is essentially at the judge’s discretion after due consideration has been given to all of these factors. Maintenance can be temporary and rehabilitative in nature, designed to give the supported spouse necessary time to reenter the workforce. It could also be permanent, should the court decide that the spouse seeking it has little or no chance of ever being self-supporting.
Does the “Fault” of Either Party Affect a Spousal Maintenance Award?
Minnesota is now one of many “no-fault” divorce states. Courts no longer require a showing that one party has somehow breached the marital contract in order to dissolve the marriage. Prior to the adoption of the current guidelines for granting a divorce or legal separation, as set forth in Â§ 518.06 of the Minnesota statutes, the court could consider certain defenses (such as adultery, insanity, abuse, alienation of affection, connivance or recrimination) to the granting of a divorce decree. Now the courts need only determine that there are irreconcilable differences between the parties.
If you are considering divorce, you may have questions regarding whether to seek spousal maintenance. To learn more about how spousal support could possibly fit into your divorce decree, consult an attorney well-versed in Minnesota family law.
Ask any Family Law attorney and they will tell you that collecting legal fees is high on the list of the stressors in the practice of Family Law. In the past year, the situation has gotten much worse with home values falling and retirement accounts losing, on average, more than a third of their value.
Even good intake procedures are not the safeguard they once were. A party with a good income today can be unemployed tomorrow, and severance packages are shrinking or becoming nonexistent.
If you are representing the dependant spouse, your risk is even greater, because unless the earning spouse is going to be fair, you are relying on the court or your client’s relatives for your retainer and monthly payments.
So how can you protect yourself and your firm? By setting up good intake procedures, monthly receivable management, and obtaining protection from the court in the form of temporary interim and trial fees.
All clients should be interviewed by you, or someone on your staff, before setting an appointment. They need to know your hourly rate and retainer requirements during this initial call, so that if they cannot afford you they can be immediately referred to someone who they can afford. It is not fair to you or the prospective client to spend an hour at an initial consultation, only to discover they can’t afford your fees. You should be prepared to ask a prospective client how they are going to pay your fees if it appears that they have neither the income nor assets that would allow them to pay you. Often you will find that a parent or other relative is going to pay the retainer and/or monthly bill. In that case, be sure to have the financially obligated party sign the retainer letter or a separate fee guarantee.
Before you meet with the client, have them fill out a basic intake sheet so that during the initial conference you can understand the asset picture, and can inquire as to how the client is going to pay your retainer and monthly bill. It is important that this be discussed at the initial conference, so both you and the client can make an informed decision on whether they can afford your services. Even if the prospective client has no resources to pay your retainer, but the estate has assets, or the other spouse has sufficient income, you may choose to take the client and hope to secure your fees at a temporary motion or at the end of the proceeding.
Your retainer letter should be specific as to the payment arrangements. If your agreement is a monthly payment, be specific about the amount and the due date. Your agreement should provide for a prehearing retainer, and an expense retainer for trial preparation costs. You should plan for at least 2 days of preparation for every day of trial, and reasonable time to prepare post-trial submissions. Your pretrial retainer should cover that estimated cost.
Finally make sure the retainer letter is signed, returned to your office and kept in a secure location in your office.
Monthly Receivable Management
Every office, no matter how small, should have a monthly receivable report showing a client’s previous month’s balance, any payments, itemized billing for the month and the balance of the retainer. You should have a specific time set aside every month to review this report, apply retainers to past due balances, send out letters asking for retainers to be replenished and making decisions on whether a client must be let go. This period of time is one of the most important monthly functions in your firm.
It can be done individually by sole practitioners, or in department meetings for larger groups.
One of the hardest decisions is whether to stay in a case where your fees are delinquent in the hope that you will get paid later in the case. If there are assets in the case, staying on board may be your decision, but attempt to secure your fee while the case is pending by the use of an attorney’s lien or assignment of assets. However, if there are no assets or other likelihood of getting paid, it is better to withdraw then to continue to represent a client who cannot afford your services. The time you save can be used for marketing your practice and improving your collection procedures.
At your monthly receivable meeting (even if you are only reviewing the receivables yourself), you should send letters to clients who have had their retainers used for monthly fees, send requests to replenish client retainers, ask for pretrial retainers, advise clients that no further work is being done unless their account is brought current, and send withdrawal letters. You can also make decisions on fee collection once you have withdrawn from a case, using either fee arbitration, conciliation court, or a district court proceeding.
Requesting Fees from the Court
When representing the dependent spouse, receivable management and careful screening may not be enough. Often where one spouse has little income or access to assets, an award of attorney’s fees may be the only viable method of getting paid.
In seeking attorney’s fees, you may attempt to secure your fee all at once at the end of the case, or else collect a portion of your fee at a temporary proceeding and wait until the close of the proceeding to recover the rest of your bill. In the course of a family law action, Minnesota law permits either party to seek an award of temporary costs and reasonable attorney’s fees as governed by the factors in Minn. Stat. 518.14. Minn. Stat. 518.131 Subd. 1(d), Subd. 7. Generally, requests for attorney’s fees at a temporary hearing may be made in conjunction with other motions for temporary relief-e.g. child support, maintenance and possession of the homestead.
Whenever a request for attorney’s fees is made-whether at a temporary hearing or at the close of the proceeding-it must meet the requirements of Minnesota Rule of General Practice 119, requiring that any request for attorney’s fees over $1,000 be accompanied by an affidavit of the attorney describing the work performed, the date on which the work was performed, the amount of time spent on each item, the name of the lawyer or legal assistance performing the work, and the hourly rate of each person having worked on the case. Minn. R. Gen. Prac. 119.02. Expenses and disbursements must be similarly listed and detailed. Id. Lastly, the attorney submitting the affidavit of fees must attest that the work “was actually performed for the benefit of the client and was necessary and proper for representation.” Id. Rule 119 also advises that the motion should include a memorandum of law “discuss[ing] the basis for recovery of attorney’s fees and explains the calculation of the award of fees sought and the appropriateness of that calculation under applicable law.” Whenever a motion for attorney’s fees is brought-whether at a temporary hearing or at trial-these rules should be closely adhered to in order to improve your chances of recovering fees.
Minnesota law provides that attorney’s fees may not be recovered absent specific authority. Geske v. Marcolina, 624 N.W. 2d 813, 818 (Minn. Ct. App. 2001). In family law cases, there are generally two types of attorney’s fees that can be sought either at a temporary hearing or at the close of the proceeding: need-based fees and conduct-based fees. Both types of awards are governed by Minn. Stat. 518.14. When representing a dependent spouse, an argument for need-based fees will likely be central to recovery. However, conduct-based fees may also provide grounds for recovering fees. Be warned, however, that the dependent spouse’s conduct may also potentially limit the amount of fees your client is entitled to recover.
Minnesota statute mandates an award of attorney’s fees sufficient to allow a party to carry on a proceeding where: 1) the fees are necessary for the good faith assertion of the party’s rights and will not contribute unnecessarily to the length and expense of litigation, 2) the party from whom fees are sought has the ability to pay, 3) the party seeking fees does not have the ability to pay. Minn Stat. 518.14 Subd. 1. Central to any award of need-based attorney’s fees is the relative financial situation of the parties-the need of one party balanced against the other’s ability to pay. Meyers v. Meyers, 409 N.W. 2d 532, 535 (Minn. Ct. App. 1987).
In regards to the first criterion-that the fees be necessary to a good faith assertion of the party’s rights-of central importance is that the party seeking fees not appear to be abusing the legal system or, to quote the statute, “unnecessarily contributing to the length and the expense of the proceeding.” Minn. Stat. 518.14 Subd. 1(1). Thus even where need and an ability to pay is shown, a court may deny fees where all or part of a party’s attorney’s fees are the result of unnecessary litigation or litigation undertaken in bad faith. Peterka v. Peterka, 675 N.W. 2d 353, 360 (Minn. Ct. App. 2004). However, the requirement that the fees be necessary for a good-faith assertion of the party’s rights does not require that the party is likely to succeed.
In addition, an award of need-based attorney’s fees requires a finding that the other party has the ability to pay the fees requested. If you are the attorney representing the dependent spouse, it will be necessary to present evidence as to the other party’s ability to pay. See In re Marriage of Sammons, 642 N.W. 2d 450, 458 (Minn. Ct. App. 2002) (denying an award of need-based attorney’s fees on appeal where party requesting fees did not supply documentation sufficient to support her claim that the other party had the ability to pay).
Lastly, an award of need-based attorney’s fees requires that the party seeking fees lack the means to pay their own attorney’s fees. In determining whether a dependent spouse has the ability to pay their own fees, Courts have determined that a party should not be forced to dispose of a substantial portion of their property award or liquidate capital assets in order to pay attorney’s fees. Karg v. Karg, 418 N.W. 2d 198, 202 (Minn. Ct. App. 1998), Beck v. Kaplan, 566 N.W. 2d 723 (Minn. 1997). However, even a significant award of assets to one party may not preclude an award of need-based attorney’s fees where there is a significant disparity between the parties’ finances. Flynn v. Flynn, 402 N.W. 2d 111 (Minn. Ct. App. 1987); Campion v. Campion, 385 N.W. 2d 1 (Minn. Ct. App. 1986); 566 NW 2d 723; Marx v. Marx, 409 N.W. 2d 526 (Minn. Ct. App. 1987); Novak v. Novak, 406 N.W. 2d 64 (Minn. Ct. App. 1987); Gillis v. Gillis, 400 N.W. 2d 775 (Minn. Ct. App. 1987). Indeed, where a severe income disparity exists, it may be error for a court to fail to award attorney’s fees. See Petschel v. Petschel, 406 N.W. 2d 604 (Minn. Ct. App. 1987); Nash v. Nash, 388 N.W. 2d 777 (Minn. Ct. App. 1987); Cummings v. Cummings, 376 N.W. 2d 726 (Minn. Ct. App. 1985).
While still relevant, income disparity may no longer be as compelling as it once was. Although income disparity has been listed as one factor among others to be considered when determining one party’s need and the other party’s ability to pay (see Beck v. Kaplan), almost all Minnesota case law addressing need-based attorney’s fees and income disparity predates the current version of 518.14 with its three part “good-faith-assertion-of-rights/need-for-fees/ability-to-pay-fees analysis” and the Court of Appeals has noted that cases decided solely on the grounds of income disparity may no longer be good law. See Geske, 624 N.W. 2d 813, 817 FN1. Any application for fees should be sure to address itself to the current three part test in Minn. Stat. § 518.14 rather than merely focusing on the presence of a disparity.
You may also attempt to recover conduct-based fees by showing that the other party has unreasonably contributed to the length and expense of the proceeding. Where the other party has engaged in tactics that have prolonged litigation, it is possible to recover fees even when there is no evidence of bad faith. See Geske, 624 N.W. 2d at 818. Indeed, the only other prerequisite to recovering conduct-based attorney’s fees is that the behavior occurred within the context of litigation. Kronick v Kronick, 482 N.W. 2d 533 (Minn. Ct. App. 1992).
Conduct-based fees can, however, be a double-edged sword. While they may be one way of collecting fees when other avenues are not available, conduct-based fees are equally available to both parties, and may be awarded regardless of financial need.Dabrowski v. Dabrowski, 477 N.W. 2d 761 (Minn. Ct. App. 1991). [It is worth noting, however, that the Court of Appeals has made at least two overtures suggesting that it would be willing to make an award of conduct-based fees contingent on meeting the requirements for need-based fees in which case only parties entitled to recover fees on the basis of need could make conduct-based claims as well. See Geske at FN 5 andMize v. Mize, 621 N.W. 2d 804, 807 (Minn. Ct. App. 2001). Although the law currently allows either party to recover conduct-based fees, there are certainly suggestions that this could change.]
When or whether to seek attorney’s fees is obviously a decision to be made on a case-by-case basis. Likewise, the type of fees to seek will depend entirely on the facts in each case. When representing the dependent spouse, however, an award of attorney’s fees can be critical and should be explored as early in the litigation as good judgment permits.
An Overview of Minnesota Statutory and Case Law Requirements for a Valid Agreement.
Antenuptial  agreements are commonly seen as the antithesis of romance. What could be less romantic than planning for an ending that could be less than happily-ever-after? However, a divorce rate at nearly 50 percent for first marriages and 60 percent for second marriages may contribute to the decision to enter into an antenuptial agreement. It is also important for prospective spouses to realize that an antenuptial agreement can be just one step toward responsible financial planning rather than a vote of “no confidence” in the relationship’s future. An antenuptial agreement may be an important and practical part of estate or tax planning, especially for those with children from a previous relationship or significant accumulated assets. It may also simply be a way for a marrying couple to determine, based upon their own understanding of their relationship, what should happen with their assets and liabilities in the event things do not work out.
In Minnesota, absent an antenuptial agreement, property accumulated during a marriage is considered “marital property” and divided “equitably.”  While, in most instances, courts interpret an “equitable” (or fair) division of property as an equal division, an antenuptial agreement can define what marrying couples want a court to determine is equitable in the event of a divorce. Although the antenuptial statute only expressly applies to non-marital property,  the Minnesota Supreme Court has held that agreements regarding marital property can be valid.  However, certain financial aspects of a divorce, such as child support or conduct-based attorneys’ fees, are difficult to define in antenuptial agreements and a modification of the statutory framework governing them may be considered against public policy. 
Historical and Public Policy Background
Courts traditionally allowed antenuptial contracts to regulate economic rights at death, but not at the time of divorce. Antenuptial agreements in the divorce context were seen as harmful to the institution of marriage and the tradition of husbands supporting wives and wives serving husbands. Subsequent to the “divorce revolution” of the 1960’s, antenuptial agreements came to be viewed as useful tools to make divorce more efficient and cost effective. As spouses have come to be viewed as equal partners almost all states have given them the ability to contract for certain rights at the time of divorce.
The Minnesota Supreme Court first recognized the validity of an agreement in the divorce context in 1970.  The Minnesota legislature then adopted the Uniform Marriage and Divorce Act – along with its recognition of antenuptial agreements – in 1974.  The legislature enacted specific, statutory provisions regulating to antenuptial agreements in 1979. Later, in 1983, the National Conference of Commissioners on Uniform State Laws promulgated the Uniform Premarital Agreement Act (U.P.A.A.). Over half of the states have since adopted this model legislation in some form, but Minnesota has not. Although Minnesota generally follows the U.P.A.A.’s tendency to uphold agreements as executed, the Supreme Court has developed a method of reviewing antenuptial agreements with greater scrutiny than would be done under the U.P.A.A.
Statutory Law and Procedural Fairness
Clear statutory requirements dictate that an antenuptial agreement must be procedurally fair. Minn. Stat. § 519.11 governs antenuptial agreements, and sets forth six procedural criteria for executing a valid and enforceable antenuptial agreement:
•(a) There must be full and fair disclosure of both parties’ income and property;
•(b) Both parties must have had the opportunity to consult with an attorney of their own choice;
•(c) The agreement must be in writing;
•(d) The agreement must be executed before two witnesses;
•(e) Both parties must acknowledge the agreement before a notary public; and
•(f) The agreement must be executed prior to the day when the marriage is solemnized.
In order to ensure that an antenuptial agreement will be upheld, the parties must fulfill each of these requirements. The Minnesota Court of Appeals has emphasized the importance of the procedural fairness criteria in Siewert v. Siewert.  In Siewert, the district court had enforced an antenuptial agreement even though the agreement had been signed before only one witness.  The Court of Appeals reversed, holding that an antenuptial agreement can be valid only when the statutory criteria are strictly satisfied and the agreement is signed before two witnesses. 
In order to satisfy Minnesota procedural requirements, a complete written financial disclosure is particularly important. To satisfy the requirement, many people attach an Exhibit to the agreement that lists all of the parties’ assets and debts, as well as their current incomes. This information should be as accurate and detailed as possible and include specific information to describe each asset, including account numbers, balances, and dates of valuation. With respect to income and certain asset and tax issues, it is helpful to include copies of relevant tax returns. Large assets can be appraised if their value is not known.
For an antenuptial agreement to be procedurally fair, each party must also have “unrestrained access to advice from independent counsel.”  To avoid any appearance of bias, each party should retain and pay for their own attorney, and the attorney should not be recommended by anyone with a relationship to the other party. This requirement can be waived,  but doing so should be done with caution. The Supreme Court has noted that “we have never held, nor are we prepared to do so now, that an attorney should never represent both parties seeking an antenuptial agreement.” McKee-Johnson, supra at 266. However, the attorney who drafts the agreement must inform the other spouse of the rights he/she is giving up by signing the agreement or at least inquire whether he/she would like the opportunity to meet with separate legal counsel prior to signing the agreement. In re Estate of Kinney, 733 NW 2d 118 (Minn. 2007).
In Minnesota, even if the antenuptial agreement satisfies these statutory procedural requirements, the court might still invalidate the agreement if enforcing the terms of the agreement is not substantively fair, as discussed below.
Common Law and Substantive Fairness
Unlike the Uniform Premarital Agreement Act, Minnesota courts require that antenuptial agreements also conform to common-law requirements to be enforceable. Not only must antenuptial agreements be procedurally fair, as required by statute, and conscionable at the time of execution, as required by the U.P.A.A., Minnesota law requires that antenuptial agreements also be substantively fair at the time the agreement is to be enforced. This difference in state antenuptial law may require the courts to deal with the issue of choice-of-law when an antenuptial agreement has been executed in a state other than the state in which the divorce is taking place. Minnesota appellate courts have not yet made a choice-of-law decision in the context of an antenuptial agreement in a published decision, but did address choice-of-law in Jundt v. Jundt, Nos. A05-693, A05-955, 2006 WL 917592 (Minn. App. April 11, 2006). In Jundt, the parties executed an antenuptial agreement in California and lived in California for approximately nine months following the marriage, the couple then moved to Minnesota where they resided for just over ten and a half years until the dissolution process was commenced. Id. at *1. Wife challenged the validity of the antenuptial agreement and the district court addressed the choice-of-law issue, upholding the choice-of-law provision in the antenuptial agreement and concluding the validity would be determined under California law. The Court of Appeals cited cases involving choice-of-law provisions in contracts other than antenuptial agreements and held that the application of another state’s law is constitutionally permissible when that state has a “significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.” Id. at *2, citing Allstate Ins. V. Hague, 449 U.S. 302, 312-313, 101 S. Ct. 633, 640 (1981). The Court found that the parties had sufficient contact with California to allow application of California law due to the fact that the parties lived in California when they entered into the antenuptial agreement and for a portion of the time they were married. Id.
In considering substantive fairness, the court must also consider whether events have occurred during the marriage that would make enforcement of the terms of the agreement unfair at the time of the parties’ divorce. In 1989, the Minnesota Supreme Court issued its opinion in McKee-Johnson v. Johnson, which still stands today as the preeminent authority on antenuptial agreements in Minnesota,  although it has been superseded, in part, regarding the requirement of dependant counsel. See Estate of Kinney. In McKee, the Supreme Court established the principle that in order to be enforceable – and in addition to satisfying the criteria of procedural fairness – an antenuptial agreement must be substantively fair both at the time of the creation of the agreement and at the time of enforcement.  Specifically, the court held that an antenuptial agreement is not valid “if the premises upon which they were originally based have so drastically changed that enforcement would not comport with the reasonable expectation of the parties at the inception” and if enforcement of the agreement would therefore be “oppressive and unconscionable.” 
In McKee-Johnson, the court took the view that antenuptial agreements require greater scrutiny than other contracts because of the unique nature of the relationship and rights involved between two people contemplating marriage.
Even though the public policy of the state, as reflected by the common law, has long favored antenuptial agreements, nonetheless, this court has always scrutinized challenged premarital agreements purporting to allot property or limit maintenance for procedural and substantive fairness at the inception. This scrutiny has been prompted by a recognition of the existence of potentiality for overreaching by one party over the other due to the relationship existing between them at the time of the execution. We ascertain no reason why courts should not extend a similar scrutiny to challenged provisions of antenuptial agreements[.] 
This emphasis on heightened scrutiny recognizes that because the purpose of the antenuptial agreement is to change state laws regarding property and other important rights, such agreements are of paramount interest and importance to the state. 
After McKee-Johnson, courts considering a challenge to an antenuptial agreement must first determine whether any event has occurred during the marriage that would constitute a change in circumstances as contemplated by McKee-Johnson .  For example, the birth of children may constitute a change in circumstances that prompts further substantive fairness analysis.  This first inquiry does not require that the change be unforeseeable. In fact, in the unpublished case of Mazzitelli v. Mazzitelli, discussed more fully below, the antenuptial agreement expressly contemplated that the wife would stay home with children and provided her with nominal financial compensation during that period.  However, the Court of Appeals held that when the wife stayed home significantly longer than anticipated, there was a change of circumstances that triggered further inquiry. 
The presence of changed circumstances triggers a second inquiry, requiring the court to determine whether the premises upon which the antenuptial agreement was originally based “have so drastically changed that enforcement would not comport with the reasonable expectations of the parties at the inception to such an extent that to validate them at the time of enforcement would be unconscionable.”  The Court of Appeals applied this test in In re Estate of Aspenson,  In Aspenson, the Court emphasized that the potential for overreaching by one party is exacerbated if there are significant inequalities between the parties.  The Court noted that the parties were close in age and had a similar amount of assets when they married.  During eight years of marriage, that equality continued.  As such, there was no drastic change that rendered the antenuptial agreement substantively unfair.  Similarly, the court upheld an antenuptial agreement where the parties had been [in equal standing at the time of execution], were both well-educated and capable of self-support, were relatively young and in good health and had contributed equally during the marriage. 
The Court of Appeals most recently affirmed a substantive unfairness finding inMazzitelli v. Mazzitelli, an unpublished opinion, finding that a change in circumstances during the marriage made enforcement of the agreement substantively unfair.  InMazzitelli, husband was 41 years old at the time the parties were married and had more than $600,000 in assets. In contrast, wife was 27 years old and had debts of $355. The parties entered into an antenuptial agreement in which they agreed that in the event of a divorce, each would be entitled to those assets that they acquired individually during the marriage.  The parties also specifically agreed that if wife stayed home from work, husband would compensate her each month. 
After 16 years of marriage, the wife in Mazzitelli sought a divorce and challenged the property division portions of the antenuptial agreement as substantively unfair. Specifically, because she had stayed out of the workforce to care for the parties’ children for nearly 10 years, enforcement of the agreement would have resulted in husband being awarded $1 million in retirement assets, his law practice, a homestead, and a cabin.  In contrast, wife would have been awarded only $31,000 in retirement assets.  On these facts, the Court of Appeals held that even though the parties had anticipated having children, “[t]he reasonable expectations of the parties did not include [wife] remaining out of the work force for almost ten years, unable to accumulate substantial assets, while [husband] was earning a regular income and building a financial estate.”  Accordingly, the Court of Appeals upheld the district court’s determination that the property provisions of the antenuptial agreement were substantively unfair at the time of enforcement and therefore invalid. 
The Court of Appeals has found an agreement to be substantively unfair in one other unpublished case, In re Marriage of Kubes v. Kubes. 1995 WL 238805 (Minn. App. 1995). In Kubes, the Court of Appeals upheld the trial court’s determination that an antenuptial agreement was unfair after change in employment and a change in retirement planning, resulting in husband receiving an additional $89,540 in retirement assets. However, the Supreme Court reversed the Court of Appeals, finding that the record on appeal did not support the trial court’s determination that enforcement of the agreement at the time of dissolution would be “unconscionable and unfair.” Kubes v. Kubes, 534 N.W.2d 706 (Minn. 1995).
In contrast, the Court of Appeals upheld the validity of a challenged antenuptial agreement despite arguments of substantive unfairness in the unpublished decision ofGrossman v. Grossman, No. A05-2045, 2006 WL 1806409 (Minn. Ct. App. July 3, 2006). Wife argued that the antenuptial agreement was invalid due to a change of circumstances from the parties’ reasonable expectations at the time of execution of the agreement and that made enforcement of the agreement was unconscionable. In addition, the Supreme Court found that the trial court erred by instead focusing on the “foreseeability” of the change in circumstances. Id. at *2.
Wife argued that because she stayed at home following the birth of two children in one year there was a change in circumstances that made the agreement unenforceable. Id. The court disagreed, and the Court of Appeals affirmed, given the mention of children in the antenuptial agreement and the parties’ discussions regarding having children before executing the agreement. Id. While Wife stayed at home after the birth of the couple’s second child, Wife “was in good health and fully capable of returning to work.” Id. The parties had employed a full-time nanny and the antenuptial agreement mentioned the possibility of one or both of the parties being unemployed at some point in the future.Id. The Court of Appeals agreed that Wife staying home was foreseeable and completely within her control.
Wife argued, in the alternative, that the increase in the parties’ standard of living constituted a change of circumstances that made the agreement unenforceable. Id. The parties lived a “comfortable” lifestyle both before and after the marriage and given the nature of Husband’s assets (real estate and investments), his net worth fluctuated quite dramatically during the marriage “with the rise and fall of real estate and financial markets” (between $8,830,000 and $26,000,000). Id. at *3. The Court of Appeals concluded that this fluctuation was also foreseeable.
Wife lastly argued that the waiver of spousal maintenance and attorneys’ fees was substantively unfair at the time of enforcement. The Court of Appeals disagreed, given the short-term of the marriage (6 years), Wife’s good health, experience as an attorney, and a significant increase in her net worth during the marriage ($30,000 to $1,000,000).Id.
If, during a divorce, one of the spouses challenges the antenuptial agreement, that spouse will have the burden of proving that the agreement was procedurally defective or substantively unfair at the time of execution or has become substantively unfair. 
Anyone contemplating an antenuptial agreement should keep all of these requirements in mind. If the agreement is contested, the court will examine procedural and substantive fairness, and, although there is no way to guarantee that an agreement will be upheld, careful consideration of these criteria and standards will assist parties as they draft an agreement. Knowledge of the criteria will not only help with drafting an effective agreement, but will also help parties and attorneys to understand how various changes in circumstances might affect the enforceability of the agreement. 
 Commonly referred to as “prenuptial” agreements, Minnesota Statutes use the terms “antenuptial” and “postnuptial” agreement.
 See Minn. Stat. §518.58.
 Nonmarital property is generally defined as property that is 1) received as a gift from a third party, 2) acquired before the marriage, or 3) appreciation on other nonmarital property or acquired in exchanged for nonmarital property. See Minn. Stat. § 518.54, subd. 5.
 See McKee-Johnson v. Johnson, 444 N.W.2d 259, 268 (Minn. 1989) superseded on other grounds by In re Estate of Kinney 733 N.W.2d 118 (Minn. 2007).
 See, e.g., Aumock v. Aumock, 410 N.W.2d 420, 421-22 (holding that the district court erred in approving a permanent waiver of child support).
 Englund v. Englund, 175 N.W.2d 461 (Minn. 1970).
 Adopted through Minn. Stat. §§518.002-.66 (1990).
 691 N.W.2d 504 (Minn. App. 2005).
 See id.
 Id. at 507.
 See Pollock-Halvarson v. McGuire, 576 N.W.2d 451 (Minn. App. 1998).
 McKee-Johnson v. Johnson, 444 N.W.2d 259, 266 (Minn. 1989) superseded on other grounds see page 10.
 See Pollock-Halvarson v. McGuire, 576 N.W.2d 451 (Minn. App. 1998).
 444 N.W.2d 259 (Minn. 1989).
 See id. at 267.
 McKee-Johnson v. Johnson, 444 N.W.2d 259, 267.(Minn. 1989).
 See id.
 See id.
 See id.
 Mazzitelli v. Mazzitelli, 2005 WL 221683 (Minn. App. Feb. 1, 2005).
 See id.
 McKee-Johnson v. Johnson, 444 N.W.2d 259, 266 (Minn. 1989).
 470 N.W.2d 692 (Minn. App. 1991).
 Id. at 696.
 See id.
 See id.
 See id.
 See Petty v. Reese, No. C8-98-1576, 1999 WL 261952 (Minn. App. May 7, 1999).
 No. A-04-420, 2005 WL 221683, (Minn. Ct. App. Feb. 1, 2005).
 See id. at *2.
 See id.
 See id. at *3.
 See id. at *2.
 See id. at *3.
 See id.
 See id.
 See Minn. Stat. § 519.11, subd. 5.
By Andrew Johnson
We all know the scenario: Mommy and Daddy are divorced, not on speaking terms, more like shouting terms, yet decisions still need to be made about young Billy. How to facilitate them? Better call in a parent consultant.
Parent consultants, who are often attorneys, are trained to help divorced parents in high-conflict situations make child-focused decisions regarding parenting time, custody and educational issues. Along with keeping children out of court and conflict out of the home, parenting consultants provide significant time and cost benefits to those who use them. Without a parenting consultant, a simple day-to-day parenting decision would require filing a court motion, costing parents months of time and thousands of dollars before a decision is finally reached.
Parenting consultants can resolve those issues within a week or two and cost the parties just a few hours of the consultant’s time, says 25-year family law attorney Kathleen Newman of Kathleen M. Newman Family Law. In some instances, emergency situations can be discussed via conference calls or e-mails and have resolution within 24 hours.
“Many people find making their own decisions is better than what a judge can do in the short period of time they have to devote to the case,” says Newman.
Parenting consultants have been used significantly more over the last few years as the number of joint custody decisions has increased, Newman says.
“Courts don’t have the time or inclination to deal with these joint custody decisions after the divorce,” she says. “If the parties can’t make a decision on their own, somebody has to be the tie-breaker.”
Parenting consultants are typically appointed to two-year terms with families. But as they work to resolve parenting issues, consultants also work to provide parents with effective communication skills so their need for a consultant diminishes over time.
“The amount divorce impacts children is largely measured by how well parents can make decisions together and shield the children from conflict,” Newman says. “Parents need to learn those skills, and lawyers can help teach them.”
As parenting consultants save time, money and stress for families, they do the same for the judicial system by cleaning out the congestion on family court dockets.
“Every decision a parenting consultant makes is one less decision that clogs up the court system,” Newman says.
Gone are the traditional days when getting married meant automatically commingling all money in a common bank account and putting both names jointly on every property title. Many societal changes influence why spouses may want to retain control of their own money and other assets after marriage:
- People are older when they marry and live longer on average, and are used to making their own spending, saving and investment decisions guided by their own values.
- Women may earn as much as men and sometimes more.
- Divorce is much more common.
- People may enter second and third marriages with assets and children from previous marriages.
- Childless couples with dual incomes may want to support their families of origin or contribute to charitable causes when they die, rather than pass their money only to their spouses who may have little need for it.
The Minnesota legislature has clearly defined property ownership in marriage by creating a marital and nonmarital property system.
- Marital property is that which is acquired by spouses, alone or together, during the marriage. Whether marital property is owned singly or jointly, each spouse is deemed to have an interest in the property. In a divorce, the court divides marital property equitably, taking into account all relevant circumstances.
- Nonmarital property is that which is acquired by either spouse before marriage; during or after the marriage by “gift, bequest, devise or inheritance made by a third party to one but not to the other spouse”; or after the date the court values the property for divorce purposes. Property received in exchange for these types of property or the passive increase in value of these types of property is also considered nonmarital in nature. Finally, property maybe classified as nonmarital pursuant to an antenuptial agreement, also known as a prenuptial agreement, where the parties agree on how property will be classified, owned, valued or disposed in the future.
Marital Property Presumption
Significantly, Minnesota law presumes that all property acquired during marriage is marital in nature, and a spouse challenging this presumption has the burden of proving by a “preponderance of the evidence” that it is instead nonmarital. Property proven to be nonmarital will go to the spouse that owns it. However, the court may give up to one-half of the nonmarital property to the other spouse if the court finds that not to do so would cause an “unfair hardship” to the spouse who is not the owner of the nonmarital property.
If a nonmarital asset has changed its nature during the course of the marriage, the spouse making the nonmarital claim must trace the original nonmarital asset to an asset existing at the time of the divorce. For example, a nonmarital gift of money to one spouse alone may have been used to purchase stocks, so the link between the money and the investment is easily traceable and the investment takes on the nonmarital nature of the original gift of money.
Commingling marital property with nonmarital property can make it hard to determine the true nature of the property. A spouse trying to show that part of commingled property is nonmarital may need to hire an accountant to try to reconstruct the history of transactions that created the mixed assets. If a husband or wife wants to keep nonmarital property designated as such, it is a good idea to keep it in a separate account during the marriage.
Legal Counsel Important
Before entering into a marriage, and whenever ownership or inheritance questions arise during marriage, a spouse should seek the input of an experienced, knowledgeable family law attorney. Get legal advice before you commingle money and assets in a marriage. The possibility of a prenuptial agreement that would control property ownership and distribution should also be explored.
Hennepin County Divorce Lawyers
When divorcing spouses cannot agree on how to divide their property, Minnesota law requires the court to do so fairly and equitably. But when the major asset is the family business — often a closely held corporation running a retail, service or professional enterprise — assigning a realistic, reasonable value to such a unique enterprise can be daunting.
In addition to the practical difficulty in divorce of family-business valuation, the process can be emotionally charged. It is not unusual for such a business to have been in the family for years, even for generations, and family pride is easily wounded. Sometimes the thought of selling or liquidating the family business, or the sting of a low assignment of value can be not just professionally, but personally devastating.
In addition to the failure of a marriage, the family’s livelihood that was to be passed down to the children is suddenly threatened. A family business becomes part of the family heritage. The business is often strongly tied to one family member largely responsible for its success through his or her hard work, wise decisions and business connections.
The Closely Held Corporation
A closely held corporation is one with few shares publicly available, and those are usually owned by a circle of family members. The closed nature of the family business means it is not really part of a viable market of similar concerns, so there can be a shortage of similar businesses to compare it to for valuation purposes.
The Right Expert
It can be difficult to find a financial expert with the expertise needed to fairly evaluate a closely held family business. He or she will need to understand the local market, the particular type of business, its reputation and the impact of the economy on business value. In addition to obviously relevant financial and sales data, important to the strength of the business but hard to place a price on are customer lists, good will and reputation in the community, and the spouse’s particular knowledge and skill in running the business.
Professional appraisal organizations may be able to provide names of people with particular professional certifications or training relevant to family business evaluation.
Methods of Division
The Minnesota Supreme Court offers three ways to divide an asset in a divorce:
- Division and distribution
- Sale and division of proceeds
- Award of entire asset to one spouse with an arrangement to fairly pay off the other for his or her share
When the asset being divided is a family business concern, none of these methods is perfect; all have downsides.
Methods of Valuation
The valuation of a closely held corporation is not a perfect science; indeed, the Minnesota Supreme Court has said, “No matter how experienced and objective the appraiser, the valuation of a business is an art, influenced by various subtle and subjective factors.” In this valuation exercise, the court has noted with approval eight factors used by the Internal Revenue Service:
- Nature and history of the business
- The economy and the health of the particular industry
- Financial data
- Earning capacity
- Ability to pay dividends
- Goodwill and other intangible assets
- Volume and value of stock sales
- Market price of stocks of similar businesses
The court requires “the application of common sense, sound and informed judgment, and reasonableness” in the process of considering these important factors in the valuation process.
Legal Counsel With Business Savvy
Hiring an experienced family lawyer with a business background can be crucial for someone entering divorce negotiations when a family business is front and center to the dispute. The parties may be able to negotiate a way to keep the family business going and still provide fairly for both spouses. Your family law attorney can also help you to find a skilled appraiser for the business.
If you have questions about family law or divorce law, contact us by calling 612-746-5525 . Our office is centrally located in downtown Minneapolis, with valet parking provided in our underground parking facility.
Collectively, family businesses are the engine that drives the U.S. economy, not to mention a repository of passion, historical significance and familial pride. In fact, according to figures from the Small Business Administration, 90 percent of businesses in the United States are family owned.
The close-knit structure that accompanies most family businesses has many advantages – convenience, flexibility, employment cost savings and getting to work with the people you love, to name a few. Yet, when mounting family tensions culminate in divorce, this strength can quickly turn into a crippling business weakness.
Divorce can tear a family business apart. However, with the proper planning, a measured response to divorce proceedings and assistance from a Hennepin County Family Law firm, you can takes measures to prevent your Minnesota family business from faltering in the wake of a marital split.
An Overview of How Family Businesses Are Treated Under Minnesota Divorce Law
In Minnesota, family businesses, like any other type of property, may be considered assets subject to equitable division upon divorce. Absent consideration of some prior arrangement between the splitting couple, equitable division means that property will be divided based solely on what a court deems to be fair, taking into account factors including the length of the marriage, the age, health, and income potential of each party, and the contribution of each spouse to the marital property (including contributions made as a stay-at-home partner). But an equitable division does not necessarily mean a 50-50 split.
Unlike other types of property, however, family businesses raise a unique and complex set of questions in divorce. Is the business subject to other claims not related to the property division in the marriage? What are the business’s debts, and how will the ultimate disposition of the family business impact the tax considerations of each party? And, what will be the process for Minnesota family business valuation? Even with an objective appraiser, setting the value of a business is more an art than a science; among other things, the valuation can be based on the nature and history of the business, the current economy, financial records, putting a price on intangibles like goodwill and customer relations, and, of course, the value of stock sales (if any have taken place). Considering all the variables and what a huge impact the “on paper” value of a business has on how much property each party is entitled to in divorce, it is critical to retain a credible valuation expert and a strong advocate to argue for a fair business valuation.
Planning For Every Eventuality Is Essential
Many couples do not want to consider the possibility of divorce at the time they marry. While this sentiment is certainly understandable, it is not always prudent, especially when a family business is involved: preparing a prenuptial agreement can establish a plan for keeping a business intact in the event of a divorce.
Even if couples do not execute a prenuptial agreement in advance of their wedding day, a postmarital agreement regarding division of property and assets may be an option later in the marriage. Postmarital agreements can be especially important if a family business grows and changes during the course of a marriage (under Minnesota law, prenuptial agreements must be fair both at the time they are signed and at the time of divorce, so even a valid prenuptial agree can become obsolete if by the time of a couple’s divorce their circumstances have changed substantially).
Get Help Navigating Minnesota Divorce Law
As important as planning for the possibility of divorce is, even without a prenuptial agreement there are other measures that can be taken to keep a family business from breaking up along with a marriage.
The viability of the family business should be prioritized, and business concerns should be addressed objectively, regardless of the emotions both parties in a divorce are likely to be feeling. An independent business appraiser can help you and your former spouse agree on the value of your family business. And, stick to legal strategies to reach a solution – intentionally decreasing revenue and similar ploys to secure a more favorable divorce settlement can have serious consequences and may even put your business in jeopardy.
If you are concerned about how a divorce could affect your family business, get in touch with a divorce lawyer experienced in asset protection today.