Does the Court Have to Consider Tax Consequences When Dividing Property?
Apparently, in Michigan the answer is no. Case law states that while the overarching goal of property distribution in a divorce is equity, this does not mean the court is required to divide the property equally. Further, it is established law that where a trial court declines to consider the tax consequences in the distribution of marital assets, this is not an abuse of discretion that will allow a court of appeals to overturn that decision. The court may (and really should) consider the tax consequences, but it is not required to do so.
The case of Huggler v Huggler, Michigan Court of Appeals Docket No. 343904 (June 25, 2019) provides an example of a case where the court refused to consider the tax consequences when dividing the property. In that case, the parties had a marital estate with a value of approximately $800,000. The court equally divide the property but in essence granted $100,000 of non-retirement assets to the husband which was offset by $100,000 worth of retirement assets that were awarded to the wife. The wife contested this, claiming that if she withdrew the funds, she would incur approximately $39,469 in taxes and penalties.
The trial court rejected the wife's argument that she would “incur predicable and foreseeable tax penalties to cash in the retirement funds,” and ruled that, if it accepted her argument, “it would be forced to speculate when—or even if—she would cash in the accounts.” The trial court held that its division of property reflects more accurately and equitably the present value of the estate.
Call a Michigan Divorce Attorney Now to Schedule a ConsultationA Michigan divorce attorney can assess your situation and provide guidance for how to make the division of property as favorable as possible. Contact Michigan divorce attorney Cameron C. Goulding to discuss your options.