Thursday, April 21, 2011

MICHIGAN DIVORCE AND BANKRUPTCY

Limitations on Ability to Make Claims
The surviving party to whom property settlement payments or support payments are owed or who has remained jointly liable for debts which the decedent has not paid prior to his or her death may have difficulties claiming against the estate, even though the debts are binding on the estate.
The estate may not have sufficient assets to satisfy the obligations.
The court retains power to modify the divorce judgment and may entertain a motion to decrease or terminate the payments on petition of the decedent’s personal representative. Pingree v Pingree, 170 Mich 36, 135 NW 923 (1912); Flager v Flager, 190 Mich App 35, 475 NW2d 411 (1991).
Assets may be held jointly with a new spouse (or others), so that the property passes to the surviving owner at the time of death, which means it is not available to satisfy the outstanding debt to the former spouse.
The decedent and a new spouse may have a signed pre-nuptial agreement which conflicts with the provisions of the judgment of divorce and otherwise disposes of the assets of the decedent which could have been included in the estate and/or used to satisfy the support/property settlement obligations.
Life insurance policies which were owned by the decedent as Trustee of his or her own trust , covering his or her own life, may be included in the estate by law, if the decedent had any incidents of ownership in the three years immediately preceding his or her death (incidents of ownership include the right to change the beneficiary, the right to borrow against the policy or the right to cash in the policy). This will complicate the distribution of the proceeds from the policy and may have ramifications for taxes and/or assessing the cost of probating the estate.
The parties may no longer live in the same jurisdiction, making it cumbersome and expensive for the surviving party to monitor probate of the decedent’s estate
MCL 700.3805(1) establishes priority of claims against the estate of the decedent. The are, in order of priority: costs and expenses of administration; reasonable funeral and burial expenses; homestead allowance; family allowance; exempt property; debts and taxes with priority under federal law; reasonable and necessary medical and hospital expenses of the decedent’s last illness, including compensation of persons attending the decedent; debts and taxes with priority under other laws of this state; all other claims. The party to whom debts pursuant a judgment of divorce are still owed is eighth in line of priority.
MCL 600.5809(3) limiting actions to enforce divorce judgments to a period of ten years will prohibit the payee’s ability to claim against the estate if ten years have passed since entry of the judgment of divorce, or since the past payment was made.(See Form 4 for sample judgment clause)
MCL 600.5803 limits actions to enforce divorce judgment liens on real property to a 15-year limitation period for the foreclosure on liens. Sullivan v Sullivan, 300 Mich 640, 2 NW2d 799 (1942).
A payee who has failed for many years to seek enforcement of payments due or to initiate proceedings to collect property settlement payment or support payments may be prevented from doing so under the doctrines of laches and estoppel. Sonenfeld v Sonenfeld, 331 Mich 60, 49 NW2d 60 (1951).
Failure to timely draft and enter the appropriate Domestic Relations Orders awarding the payee his or her interest in the obligor’s retirement accounts may prevent their award to the payee on death of the obligor, or may require time consuming and expensive litigation with the estate and/or the plan administrator. www.attorneybankert.com

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