Financial Issues

Who will live in the house while the divorce is pending; who will pay the expenses?

Attempts are made to try to negotiate answers to questions such as “will either or both of you live in the home while the divorce is pending,” “with whom should the child or children live and what placement arrangements should there be for the other parent,” “how much temporary maintenance should one spouse pay to the other, if any,” and “should there be temporary child support?” It is important to note that all of these questions concern temporary arrangements, not the final resolution of these matters.

If the parties cannot resolve these temporary issues between themselves or with the help of their attorneys, then either party can ask the Family Court Commissioner to hold a hearing and decide the issues that remain unresolved. The hearing generally, but not always, takes place approximately three or six weeks after the filing of the divorce action.

How is child support determined?

Wisconsin law requires that child support usually be calculated by what is refereed to as the Percentage Standards. An order of joint legal custody does not, by itself, affect the amount of child support ordered. If the Standards are used and one of the parents has less than 25% of the placement time, his or her support will be calculated as a percentage of his or her gross income. If there is one child, the percentage is 17%, two children 25%, three children 29%, four children 31% and 34% percent for five or more children. If both parents have court–ordered periods of placement of at least 25%, or 92 days a year, the shared–placement formula may be applied. If that formula is applied, each parent is ordered to assume the child’s basic support cost in proportion to that parent’s placement time with the child and there can be a comparison of the parents’ monthly income in the calculation of support.

There are special rules that can be applied in the case of someone identified as a “low-income payer”, or a “high-income payer”. In addition, there are special rules that are applicable for what is referred to as a “serial-family payer”, which is an individual who has an existing obligation for child support and then incurs a subsequent child support obligation for a different child. Deviation from the application of the Percentage Standards can occurred in limited, specific circumstances.

The issues of support and periods of physical placement are entirely separate. If your spouse restricts or withholds your periods of physical placement with your children, you cannot unilaterally refuse to pay child support. Similarly, if your former spouse is not paying child support, you cannot restrict or withhold his or her periods of physical placement. If an order of the court is not being complied with, the attorney representing you should be contacted in order to discuss whether or not to bring a motion before the court.

How is maintenance determined?

In some other states, maintenance is referred to a spousal support or alimony. Wisconsin courts use the term maintenance.

There are two distinct but related objectives in the award of maintenance. The first objective is to support the recipient spouse in accordance with the needs and earning capacities of the parties; the second objective is to ensure a fair and equitable financial arrangement between the parties.

Several cases have held that in long-term marriages the starting point for maintenance (alimony) is 50% of the family’s total income. However, the key words are “staring point.” There are a number of factors that go into a decision regarding the amount of maintenance. In addition, what may be ordered on a temporary basis during the pendency of the case may or may not reflect the amount ordered when the divorce is granted.

The length of time the court will require that maintenance be paid varies depending on the facts of each case. In a longer marriage, where the non-earning or lower–wage earning spouse is in his or her 50′s or older, the probability is high that he or she will receive maintenance over substantial period of time, and perhaps even “permanent” maintenance. On the other hand, if the marriage is short–term, the recipient spouse will probably receive maintenance for only a few years. Often this period is about one–third to one–half the length of the marriage.

Often, the non-earning spouse will receive what is called “rehabilitative maintenance.” Sometimes rehabilitative maintenance will be paid over a period of three to five years. The three year period is often utilized in part because of provisions of the Internal Revenue Code which, in effect, require a payout of at least three years for deductibility of payments under certain circumstances. Furthermore, in many cases, a three to five year period is the time necessary to allow the recipient spouse to become self-supporting at a standard of living reasonably similar to that enjoyed before the divorce. If the parties cannot agree as to the length of time or amount of rehabilitative maintenance, the court must balance the goal of allowing the recipient spouse to become self-supporting with a consideration of the ability of the payer spouse to continue the obligation of support for an indefinite term, and the need for the court to continue jurisdiction regarding maintenance.

When discussing financial matters, it is important to consider the tax implications. Generally, the payments for maintenance are deductible by the person paying, and are income to the one who receives the payments. On the other hand, child support and division of estate payments are not deductible by the person paying and not taxable to the person receiving the funds. However, the manner in which the documents are drafted will affect the tax consequences, and must carefully be considered.

What is wage assignment?

In most cases a person required to pay maintenance or child support is required to do so by wage assignment. The wage assignment requires the employer to withhold the court-ordered payment from the employee’s wages, and pay it directly to the Wisconsin Support Collections Trust Fund (WSCT). WSCT, in turn, transfers the funds to the party who is to receive the support. There will be a delay between the time the money is received by WSCT through the wage assignment and the time the payee receives the funds. The employer may withhold a service charge each time money is withheld and sent to the court. WSCT will keep a record of payments received and disbursed on any maintenance or child support order.

How is the division of estate determined?

Prior to the granting of the divorce, each party is required to disclose all of his or her assets and liabilities. This is done in order to help determine the division of property. If either party does not provide this financial information, or if either attorney wishes to further explore the financial aspects of the case, the attorney may make formal written requests for information or may schedule a “deposition.” In a deposition, the party and his or her attorney appear before the other attorney, who asks questions. The questions and answers are taken down by a court reporter, who then types a transcript of the deposition. In some situations, depositions are taken of witnesses such as accountants, appraisers, and/or mental health professionals

When the divorce is granted, the marital estate will be divided. The marital estate generally includes all of the assets and liabilities accumulated by either the husband, the wife, or both of them. Such assets include real estate, bank accounts, stocks, bonds, mortgages and notes, cash surrender value of life insurance, interests in a partnership or corporation, personal property, future interests including retirement benefits (whether vested or non-vested), and any other financial interest or source. Property brought to the marriage by either party may or may not be included in the division depending on the facts of the case.

The starting point in most situations is that property that has been gifted to or inherited by either of the parties and whose character and identity have been preserved and the intent to share that property with the other person is not established is returned to the party who received the property by gift of inheritance. This is a very fact-sensitive issue and the outcome would depend on what facts could be established.

All of the other assets are generally divided equally between the parties. This does not mean that each asset is divided. The net marital estate, which is the total value of all divisible assets minus liabilities, is divided equally. However, the court may deviate from this 50/50 division based upon certain factors, which include the length of the marriage; the property brought to the marriage by each party; the age, physical and emotional health of the parties; the contribution by one party to the education, training or increased earning power of the other; the earning capacity of each party; the amount and duration of any order for maintenance payments; the tax consequences to each party; and other similar factors.