In Curtis v. Curtis, A14-1841, (Minn 2016) the Supreme Court reaffirmed that a trial court has broad discretion to consider investment income to determine whether a spouse is need of spousal maintenance.
In Curtis, the husband worked as a dentist and his wife was a homemaker who had raised two children, who were now adults. The parties were married 22 years and had built a substantial marital estate, including a marital home, lake home, a second home, a vacation property in South Carolina and a commercial building. They also had an investment account worth $2,038,000 and a certificate of deposit with an approximate value of $171,000 and various other assets. By stipulation wife was awarded marital property totaling $2,800,000(57% of the marital estate), including the investment accounts and certificate of deposit, and husband was awarded $2,170,000(43% of the marital estate). The court approved the stipulated property settlement and the parties litigated the issue of spousal maintenance. The trial court denied wife spousal maintenance determining the wife could exchange the assets in the investment accounts and the certificate of deposit for higher yielding investments to produce income sufficient to meet her monthly expenses. The court did not consider the tax consequences of the restructuring and reallocation of assets. The court of appeals affirmed in a 2-1 unpublished decision.
On appeal, the Supreme Court determined the trial court did not abuse its discretion in taking into account the income-earning potential of the wife’s property award, but has an obligation to also consider the tax consequences that would be incurred to reallocate the assets to increase the income. (By inference apparently a trial court can require a reallocation of assets to maximize income if tax consequences are considered.) The court noted the tax consequences could impact the property division as the wife is not required to invade the principal assets she was awarded. The Supreme Court remanded the matter to the trial court for further proceedings consistent with its decision.
This decision reaffirms a trial court must consider all potential income a spouse may generate from the property received in the divorce. It also makes it clear it is essential to have financial experts to perform analysis of potential income property awards and a tax expert to determine what if any tax consequences will be incurred to maximize the potential income that is claimed to be available for a spouse to meet their respective needs.
In all divorces with spousal maintenance issues or large marital property estates it is important to retain an experienced divorce lawyer to assist in resolving the matter, whether through mediation or litigation.