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Pater Law, PC 704 Michigan Ave, Ste A

Holland MI 49423 (in Skip's Pharmacy Building)

(616) 396-8883

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One way to avoid bad debt is to have your attorney review your initial contract with your customers/clients. A properly drafted contract may help avoid later problems and reduce the costs of collection by including entireties language, venue provisions, and procedures for objecting to the alleged inaccuracy of invoices.

This office generally works only on an hourly basis so that you are more likely to turn over files before they are stale and while the chances of collection are still reasonably high. Otherwise you may be tempted to retain the file too long because you are attempting to avoid paying 30 -50% to an attorney or collection agency.

Once we have an ongoing relationship with a client we will develop a good feel for how the client wants its debtors treated. That helps us when speaking to debtors by attempting to resolve the case in a manner our client will be happy with. Except with specific authorization, we will not settle your case. Therefore, we will contact our client before accepting a settlement proposal or payment plan.

Because collections are a major part of our practice, we know collection law and will abide by deadlines. An attorney who does not give prompt attention to your collection accounts may do more harm than good by not aggressively pursuing collection while you have discontinued your collection efforts because you have turned the file over. Additionally, an attorney who is not familiar with the technicalities of the Federal and State laws pertaining to debt collection may expose you to civil liability.

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Feel free to use this image, just link to www.SeniorLiving.Org

Clients sometimes ask: “How are we going to prove all these separate individual purchases when we don’t have any independent recollection of each separate transaction?”

Creditors are helped by a statute that provides that a creditor does not have to prove each separate purchase, only that the debtor was presented with a copy of an account and the debtor failed to object to the account’s inaccuracy thereby creating an account stated. It then becomes an implied agreement, between parties who have had previous transactions of a monetary character, that the account representing such transactions are true and that a balance struck is correct, together with a promise, expressed or implied, for payment of the balance. Leonard Refineries, Inc. v. Gregory, 295 Mich 432 (1940). The essential element is a statement of account, or a striking of a balance between the parties on a settlement.

The theory of an account stated is that the minds of the parties have met when an account has been rendered by one and received and accepted without objection by the other. Love v. Ramsey, 139 Mich. 47 (1905). An account may be stated between any parties who have had previous transactions, or even a single transaction of a monetary character. Thomasma v. Carpenter, 175 Mich. 428 (1913). However, there must have been a prior dealing between the parties that resulted in an antecedent debt or demand between the parties concerning which a balance is struck. Fellows v. Thrall, 85 Mich. 161 (1891). If there has been a balance struck between the parties on the settlement, the nature of the original transaction is generally immaterial. Albrecht v. Gies, 33 Mich. 389 (1876). It may have been for the sale of land or other property or for services. Stevens v. Tuller, 4 Mich. 387 (1857).

An account stated need not be in any particular form, but it is sufficient if there is disclosed some existing antecedent debt or demand between the parties respecting which a balance was struck. Albrecht v. Gies supra. Typically, it is in the form of a statement of account to a debtor, which the debtor endorses as correct.

The items constituting the account need not be shown. A writing is unnecessary, for a transaction may become an account stated by oral settlement, without any written undertaking or acknowledgment, and may be proved by unsigned writings. Watkins v. Ford, 69 Mich. 357 (1888).

Whether the parties have assented to a sum as the correct balance due from one to the other depends upon the circumstances. Kaunitz v. Wheeler, 344 Mich. 181 (1955). Assent may be shown by an expressed understanding, or by words or acts in the necessary improper references to be drawn from it. Consequently, assent is shown by (1) a debtor’s endorsement on a statement of account of its correctness, (2) by giving credit for the amount of the account on a bill rendered by the debtor, or (3) by making payments on the account without objection. Bewick v. Butterfield, 60 Mich. 203 (1886); Corey v. Jaroch, 229 Mich. 313 (1924). It may even arise by failure of a debtor to object within a reasonable time to statements of account rendered to him. Hawley v. Professional Credit Bureau, Inc. 345 Mich. 500 (1956).

An account stated that conforms to the legal requirements may only be impeached for fraud or mistake. The burden of proof is on the one who seeks to impeach an account stated for fraud or mistake.

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PROHIBITED ACTS

Many laws regulating collections do not apply if you are collecting your own debt or if the action is undertaken by a regular employee collecting accounts for one employer if the collection efforts are carried on in the name of the employer. Some of the laws also do not apply to an attorney handling claims and collections on behalf of a client and in the attorney’s own name. “Consumer” or “debtor” may mean a natural person obligated or allegedly obligated to pay a debt or under different laws may generally mean a purchase for personal or household use.

Prohibited Conduct Includes:

a. Communicating with a debtor in a misleading or deceptive manner, such as using the stationery of an attorney or credit bureau unless the regulated person is an attorney or is a credit bureau and it is disclosed that it is the collection department of the credit bureau.

b. Making an inaccurate, misleading, untrue, or deceptive statement or claim in a communication to collect a debt or concealing or not revealing the purpose of a communication when it is made in connection with collecting a debt.

c. Misrepresenting the legal status of a legal action being taken or threatened or the legal rights of the creditor or debtor.

d. Alleging that accounts have been turned over to innocent purchasers for value.

e. Communicating with a debtor without accurately disclosing the caller’s identity or cause expenses to the debtor for a long distance telephone call, telegram, or other charge.

f. Communicating with a debtor, except through billing procedure when the debtor is actively represented by an attorney, the attorney’s name and address are known, and the attorney has been contacted in writing by the credit grantor or the credit grantor’s representative or agent, unless the attorney representing the debtor fails to answer written communication or fails to discuss the claim on its merits within 30 days after receipt of the written communication.

g. Communicating information relating to a debtor’s indebtedness to an employer or an employer’s agent unless the communication is specifically authorized in writing by the debtor subsequent to the forwarding of the claim for collection, the communication is in response to an inquiry initiated by the debtor’s employer or the employer’s agent, or the communication is for the purpose of acquiring location information about the debtor.

h. Using or employing, in connection with collection of a claim, a person acting as a peace or law enforcement officer or any other officer authorized to serve legal papers.

i. Using harassing, oppressive, or abusive method to collect a debt, including causing a telephone to ring or engaging a person in telephone conversation repeatedly, continuously, or at unusual times or places which are known to be inconvenient to the debtor. All communications shall be made from 8 a.m. to 9 p.m. unless the debtor expressly agrees in writing to communications at another time. All telephone communications made from 9 p.m. to 8 a.m. shall be presumed to be made at an inconvenient time in the absence of facts to the contrary.

j. Using profane or obscene language.

k. Communicating with a consumer regarding a debt by post card.

l. Communication with third parties without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a post judgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

m. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except to advise the consumer that the debt collector’s further efforts are being terminated; to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy. If such notice from the consumer is made by mail, notification shall be complete upon receipt.

A debt collector should accept a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector’s intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.

It is prohibited to solicit any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution or depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.

A regulated person must within five days after the initial communication with a consumer in connection with the collection of any debt provide written notice of,

(1) The amount of the debt;

(2) The name of the creditor to whom the debt is owed;

(3) A statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) A statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) A statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

Legal actions by debt collectors:

(a) Venue. Any debt collector who brings any legal action on a debt against any consumer shall-

(1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or
(2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity-
(A) in which such consumer signed the contract sued upon; or
(B) in which such consumer resides at the commencement of the action.

CREDITOR’S REMEDIES

Obtaining a judgment is often the easy part. Collecting it may be another matter. State Court judgment creditors have various remedies. Those remedies may include:

a. Periodic garnishments
b. Non-periodic garnishments
c. Creditor’s examinations
d. Writs of execution
e. Other less frequent remedies

Periodic garnishments
Michigan law allows a garnishment to be in force for 91 days after it is issued. Thus, instead of securing weekly garnishments against wages or salary, one garnishment will be good for approximately three months.

Non-periodic garnishments
One time (non-periodic) garnishments are used against banks or others holding property of a judgment debtor.

Creditor’s examinations
A creditor has the right to secure a judgment debtor discovery subpoena directing the judgment debtor to appear in court with certain documents and testify under oath concerning the debtor’s assets. This is often used when the creditor doesn’t know the debtor’s place of employment, his banking sources, or other assets.

Writs of execution
If the debtor has assets worth executing upon, a judgment creditor may obtain a Writ of Execution that directs the Sheriff or court officer to seize the defendant’s assets. The Court normally requires a bond before issuing the Writ.

Other less frequent remedies
Other less frequent remedies include the filing of an involuntary bankruptcy, asking the Court to appoint a receiver over the debtor or the debtor’s business.

CHOOSING A COLLECTION ATTORNEY

Many judgments are obtained by default. If a defendant fails to answers the Summons and Complaint a default and default judgment may 21 days after the defendant is served. Thus a legal battle as to whether the debt is owed never takes place.

If statements of account were sent to the debtor on a regular basis and the debtor failed to object to the accuracy of those statements, an account stated is created with a presumption that in the absence of mistake or fraud the statements were accurate. Thus, the debtor has a heavy burden in prevailing in any alleged defense.

Having an established relationship with a collection attorney can assist you in deciding what files to proceed on and which to write off.

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(This was slightly revised from a publication drafted by the State Court Administrative Office. Although is drafted for collecting a small claims judgment, it generally applies to any money judgment).

If you sued someone for money and received a judgment against a Michigan resident, you have the right to collect the money.

How Much Can I Collect?

You can collect the amount stated in your small claims judgment (form DC 85) plus any interest (and recoverable costs) that accumulate during the time the other party pays off the judgment.

How Can I Collect My Money?

There are several ways you can collect your money.

1. If the other party (defendant) has the money and is present at the trial, s/he can pay you right then.

2. If s/he does not have the money at that time and you both agree at the trial, the judge can set up a payment schedule. If the defendant is not present at the trial, the court will send a copy of the small claims judgment to the defendant. The judgment will order the defendant to pay you in full within 21 days or tell you and the court where s/he works and the location of his/her bank accounts on form DC 87, Affidavit of Judgment Debtor.

3. If the defendant doesn’t pay the judgment as ordered, you will have to collect your money through a seizure of property or a garnishment.

What Is Seizure of Property?

Seizure of Property is a court procedure allowing a court officer to seize property belonging to the defendant which can be sold to pay for your judgment. If you want to file a request to seize property, you may use form MC 19, Request and Order to Seize Property.

What Is Garnishment?

Garnishment is a court procedure allowing you to collect your judgment directly from the defendant’s wages, bank account, or other source such as income tax refunds. If you want to file a garnishment, see the court clerk for the proper forms. Instructions are included with the forms.

How Do I Get An Order to Seize Property Or A Garnishment?

To get an order to seize property or for garnishment, you will first need to know where the defendant lives and works, what assets s/he has and where these assets are located, and any other information which identifies the defendant and his/her property.

• If you have the information described above, you can start the process for an order to seize property or for garnishment.

• If you don’t have the information described above, you will need to order the defendant to appear in court for questioning through a process called discovery. You can start this process by filing a discovery subpoena.

Filing a Discovery Subpoena

You must wait 21 days after your small claims judgment was signed before you can file a discovery subpoena. Form MC 11, Subpoena (Order to Appear) can be used.

Contact the court for an appearance date before putting the date and location on the form. Complete both the front of the Subpoena and the Affidavit for Judgment Debtor Examination on the back. The judge must sign the Subpoena before it’s effective.

Once the Subpoena is signed you must serve it on the defendant. The fee for filing the Subpoena with the court varies. The cost of serving it also varies.

You may include a copy of form DC 87, Affidavit of Judgment Debtor, with the Subpoena for the defendant to fill out.

Filing a Request to Seize Property You must wait 21 days after your small claims judgment was signed before you can get an order for seizure of property. Form MC 19, Request and Order to Seize Property, is used to start the process. Complete the Request portion of form MC 19 and file it with the court. The filing fee varies.

The court will issue the order by signing the form, and it will be executed by a sheriff or court officer.

When do I get my money from a seizure of property?

Any property that is seized will be sold and the money given to you. The sheriff or court officer is entitled to fees which will be deducted from the sale of the property and added to the amount of the Judgment balance.

Filing a Request for Garnishment

You must wait 21 days after your small claims judgment was signed before you can get a garnishment. Form MC 12, MC 13, or MC 52, Request and Writ of Garnishment, is used to start the garnishment process.

There are three types of garnishment: 1) periodic, 2) non-periodic, and 3) income tax intercept.

A periodic writ of garnishment (MC 12) is used to garnish the defendant’s wages, rent payments, land contract payments, or other debt which is paid to the defendant on a periodic basis. A periodic garnishment is valid for up to 91 days or until the judgment, interest, and costs are paid off, whichever occurs first.

A non-periodic writ of garnishment (MC 13) is used to garnish the defendant’s bank account or other property. Once money has been garnished under the nonperiodic writ, the writ is no longer valid.

If there is a remaining balance on the judgment, you must get another writ to collect more money.

An income tax writ of garnishment (MC52) is used to intercept the defendant’s income tax refund. Once the tax refund has been intercepted by the Department of Treasury, the writ is no longer valid. If there is a remaining balance on the judgment, you must get another writ to collect more money.

Fill in the names and addresses of both the defendant and the garnishee on the Request part of the form. The garnishee is the person or business who has control or possession of the defendant’s money. Once you complete the Request, you must file it with the district court that entered your small claims judgment. The filing fee is $15.00.

The court will issue the Writ (order) by signing the form. The Request and Writ must be served on the garnishee along with the Disclosure, form MC 14. There is a $6.00 disclosure fee with a garnishment for periodic payments and income tax refund. The cost of serving the Writ varies.

When do I get my money from the garnishment?

The garnishee has 14 days after the Writ is served to let you, the court, and the defendant know if any money is available for garnishment. This information will be provided on form MC 14, Garnishee Disclosure. If you are trying to garnish wages, you will only receive part of the wages based on a federal formula. If money is available, it will be withheld from the defendant right away. However, this money will be held for 28 days to allow the defendant time for objections. If there are no objections, the withheld money will be automatically sent to you after 28 days.

If the garnishment is for periodic payments, money will continue to be sent to you as payments become due to the defendant until the writ expires.

What Else Can I Do?

If your case against the defendant involved a traffic accident, you can ask the court for an abstract of judgment which suspends the defendant’s Michigan driver license until s/he pays the judgment. You must wait 30 days after the judgment date before you can get an abstract of judgment. You need to provide the defendant’s full name, date of birth, and Michigan driver license number. There is no filing fee. The court clerk should have the necessary forms. MCL 600.8409(2).

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The Child Custody Act governs child custody dispute and its goal is to minimize unwarranted and disruptive changes of custody orders, except under the most compelling circumstances. A trial court may modify a custody award only if the moving party first establishes proper cause or a change in circumstances. If the parent seeking to change custody fails to establish a proper cause or change of circumstances, a trial court is precluded from holding a hearing to revisit a previous custody determination.

In order to establish a change of circumstances, one must prove that, since the entry of the last custody order, the conditions surrounding custody of the child, which have or could have a significant effect on the child’s well-being, have materially changed.

The existence of an established custodial environment is a question of fact that a trial court is required to address before determining whether changing a previous custody order would be in a child’s best interest. If modifying a custody arrangement alters an established custodial environment, then the party seeking to change custody must demonstrate by clear and convincing evidence that such a change in the custodial environment would serve the best interest of the child. But, if modifying a custody order does not change an established custodial environment, the proponent is required to show only by a preponderance of the evidence (and not by clear and convincing evidence) that a change would be in the child’s best interests.

An established custodial environment is deemed to exist when a parent provides the care, discipline, love, guidance, and attention a child requires, thereby creating a permanent and secure environment for the child. The age of the child, the physical environment, and the inclination of the custodian and the child as to permanency of the relationship shall also be considered. The reasons why an established custodial environment exists are not important. Custody orders, by themselves, do not establish a custodial environment. Such an environment depends instead upon a custodial relationship of significant duration in which the child was provided the parental care, discipline, love, guidance and attention appropriate to his age and individual needs; an environment in both the physical and psychological sense in which relationship between the custodian and the child is marked by qualities of security, stability and permanence.

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If the parties have joint legal custody, a custodial parent must file a Motion for Change of Domicile if the custodial parent wants to move more than 100 miles from the child’s current residence and if the non-custodial parent does not consent.

When considering a Motion for change of Domicile, the Court must consider each of the following factors (MCL 722.31), with the child as the primary focus in the court’s deliberations:

(a) Whether the legal residence change has the capacity to improve the quality of life for both the child and the relocating parent.

(b) The degree to which each parent has complied with, and utilized his or her time under, a court order governing parenting time with the child, and whether the parent’s plan to change the child’s legal residence is inspired by that parent’s desire to defeat or frustrate the parenting time schedule.

(c) The degree to which the court is satisfied that, if the court permits the legal residence change, it is possible to order a modification of the parenting time schedule and other arrangements governing the child’s schedule in a manner that can provide an adequate basis for preserving and fostering the parental relationship between the child and each parent; and whether each parent is likely to comply with the modification.

(d) The extent to which the parent opposing the legal residence change is motivated by a desire to secure a financial advantage with respect to a support obligation.

(e) Domestic violence, regardless of whether the violence was directed against or witnessed by the child. If a parent seeking to change the legal residence needs to seek a safe location from the threat of domestic violence, the parent may move to such a location with the child until the court makes a determination under this section.

Some cases have held that the Court must consider whether granting the motion for a change of domicile would result in a change of an established custodial environment. If so, the trial court must also address and analyze the best interest factors in MCL 722.23. If there is a proposed change to an established custodial environment, then the party must prove by clear and convincing evidence that the proposed change is in the minor child’s best interest.

The Statute requires that each order determining or modifying custody or parenting time of a child shall include a provision stating the parent’s agreement as to how a change in either of the child’s legal residences will be handled. If such a provision is included in the order and a child’s legal residence change is done in compliance with that provision, no Motion need be filed. If the parents do not agree on such a provision, the court shall include in the order the following provision: “A parent whose custody or parenting time of a child is governed by this order shall not change the legal residence of the child except in compliance with section 11 of the “Child Custody Act of 1970″, 1970 PA 91, MCL 722.31.”

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Where there is a battle between the parents and a third party, most think that the parents should win. The statute provides:

MCL 722.25 (1) If a child custody dispute is between the parents, between agencies, or between third persons, the best interests of the child control. If the child custody dispute is between the parent or parents and an agency or a third person, the court shall presume that the best interests of the child are served by awarding custody to the parent or parents, unless the contrary is established by clear and convincing evidence.

It would seem that the parent wins in the absence of clear and convincing evidence to the contrary. But although there is a presumption in favor of a parent, there is also a presumption in favor of an established custodial environment.

“MCL 722.27 The court shall not modify or amend its previous judgments or orders or issue a new order so as to change the established custodial environment of a child unless there is presented clear and convincing evidence that it is in the best interest of the child. The custodial environment of a child is established if over an appreciable time the child naturally looks to the custodian in that environment for guidance, discipline, the necessities of life, and parental comfort.”

Previously, Courts ruled that the presumption in favor of the parents was overcome by the presumption in favor of the established custodial environment and that burden of persuasion was on the parent challenging the established custodial environment in the home of the third party.

But those series of cases were overruled by the holding that in a custody dispute between a parent and a third party with whom there is an established custodial environment, Michigan’s statutory parental presumption, MCL 722.25(1), must be given priority over the established custodial environment presumption, MCL 722.27(1)(c), and the third person must prove by clear and convincing evidence that all relevant factors, taken together, demonstrate that the child’s best interests require placement with the third person. That burden changes if the parent is not fit or has neglected or abandoned the child, when the the parental preference does not apply.

A party is best represented in a custody case by an attorney that knows the law and works to aggressively protect your legal interest.

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One cannot prevent a divorce in Michigan by saying that he or she doesn’t want to get divorced and that the other party should be forced to undergo marriage counseling. The desire to divorce need only exist in one party to a marriage for that party to obtain a divorce.

The term an uncontested divorce is often used to mean that there are no disagreements regarding the terms of a divorce judgment. Unfortunately, that determination is often premature; made before the many terms of a divorce judgment are explicitly agreed upon. Thus, there may have been general agreement initially, but when working out the specific terms of a Judgment, disagreement may develop. “The devil is in the details” as when working out the specific details regarding who will have the minor children on Christmas Eve, or exactly what the level of child support is supposed to be. Unless an agreement is reduced to a signed Divorce Judgment, the possibility exists that a simple “uncontested divorce” may become complex and costly. Sometimes, emotional needs may surface that make settlement more difficult as when one spouse finds that the other now has a new love interest. Suddenly, the possibility exists that what seemed like a simple uncontested divorce becomes difficult and potentially expensive.

One should retain an experienced divorce attorney whose demeanor does not unnecessarily create conflict. Hiring a bulldog for an attorney may seem like a good idea, but when you receive the monthly legal bills, you may have second thoughts. It is a bad idea to retain an attorney who stokes unnecessary conflict with the general approach of “the two of you should fight and I will bill you monthly.” Of course, it is not only the choice of attorneys, but the parties’ behavior, that may unnecessarily create conflict. Remember that both parties are undergoing conflict and emotional stress causing someone to say or do something that he or she regrets. A little forgiveness or even a strategically deaf ear may prevent a lot of conflict and reduce stress, tension, and unnecessary attorneys fees. Retain an attorney who is experienced in divorce and respects the role emotions have in this difficult time. Having an experienced, dignified, and respectful attorney during the divorce process may serve everyone’s best interest.

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In a divorce case, Michigan Courts have the discretion to treat inherited property acquired during the marriage as either marital or separate property. When inherited property has been commingled with marital property or used jointly by the parties, or if the spouse of the one who received the inheritance has contributed to the acquisition, improvement, or accumulation, the courts will generally view the property as marital property and thus subject to division. Ross v Ross, 24 Mich App 19 (1970). Zimmers v Zimmers, 346 Mich 28 (1956).

However, if the inheritance received by a married party is kept separate from the marital property, the courts generally deem it to be separate property not subject to division. Lee vs. Lee, 191 MichApp 73 (1991). Generally, Courts hold that the longer the marriage, the more likely the property will be considered to be joint and thus subject to division. Ross v Ross, 24 Mich App 19 (1970).

Inherited property that is held separately from marital property is generally considered separate property and generally should not be invaded. Dart v Dart, 460 Mich 573, 584-585 (1997). However, this general rule is subject to certain exceptions, including circumstances in which marital assets are insufficient for suitable support and maintenance, MCL 552.23(1), and when the non-inheriting spouse made a contribution to the acquisition, improvement, or accumulation of property, MCL 552.401. The court may also award one of the parties part of an inheritance if both parties reasonably anticipated that an inheritance would be available for retirement purposes and it was necessary to sustain the other’s standard of living during retirement and if the anticipation that the inheritance would fund a retirement caused one to not create a nest egg for retirement. Lowrie vs. Lowrie (Mich App, 2008).

There are no mathematical rules for determining how an inheritance is to be divided or if it is to be treated as marital property. The Michigan Supreme Court has approved a trial court decision that took the $10,000 net value of the home, stated that the husband should have 1/2 of it, then charged against his half the value of his car, some stock and a $1,200 inheritance the wife had received three years earlier and that she has partly spent on the home and partly on living expenses. Johnson vs. Johnson, 346 Mich. 418 (1956).

Property that is inherited or gifted after a divorce case has been filed is unusually not deemed to be subject to division as it is hard for the spouse to argue that they contributed to the acquisition, improvement or accumulation of the inheritance as it was acquired after the divorce proceedings. Davey v Davey, 106 Mich App 579 (1981). A post-divorce inheritance of gift may, however, be found significant to the beneficiary spouse’s ability to pay support.

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Prenuptial agreements are contracts between two persons contemplating marriage that sets forth their property rights in the event of death or divorce. Typically these agreements focus on property owned by the wealthier of the two spouses. Antenuptial or post-nuptial agreements are similar but are made after the parties marry. All such agreements must be in writing.

Prenuptial agreements were previously invalid because they were thought to encourage divorce. That changed with a 1991 Michigan case) that held that such agreements can be enforceable (1). Previously another statute specifically allowed such agreements in Probate (2).

Unless a prenuptial agreement is ambiguous, it controls in the absence of fraud, lack of knowledge or consent, mental incapacity, or undue influence (3). A claim of lack of consideration or that the agreement is contrary to public policy fails because in addition to the actual benefits that a party derives from such an agreement, marriage alone is a sufficient consideration for an antenuptial agreement (4).

To determine if a prenuptial agreement is valid, it is best to initially consider three questions:
1. Was the agreement obtained through fraud, duress or mistake, or misrepresentation or nondisclosure of material fact?
2. Was the agreement unconscionable when executed?
3. Have the facts and circumstances changed since the agreement was executed, so as to make its enforcement unfair and unreasonable?

The party challenging a prenuptial agreement has the burden of proof that the agreement is not enforceable. But, there are some circumstances that give rise to a rebuttable presumption of non disclosure. Failure to adequately provide for a spouse, secrecy, failure to fully disclose assets, and failure to have each party represented by independent counsel, are all factors that may give rise to a rebuttable presumption of non disclosure (5).

Full disclosure of assets is essential. When a prenuptial agreement is made in secrecy and fails to provide for a spouse, it will be set aside. The agreement must be free of duress. Therefore, it is good practice to allow the other party to consult with his/her independent attorney and extend adequate time for complete review. An agreement pulled out of one’s pocket under trying conditions such as on the morning of the planned wedding or on the steps of the church or courthouse will likely be held unenforceable.

The agreement must be fair. Giving one spouse all of his/her property and one-half of the other’s property may not be considered fair. If the agreement clearly spells out what property each has and allows each party to retain that property and then makes a fair division of assets and property that are accumulated during the marriage, the agreements will likely be upheld.

The agreement should be either drafted so that it takes into account the length of marriage or the agreement is periodically revised (6) : “Have the facts and circumstances changed since the agreement was executed, so as to make its enforcement unfair and unreasonable?” Agreement that might be fair after a two-year marriage may no longer be fair after a twenty-year marriage, particularly when one spouse limits employment opportunities in order to benefit the other spouse. This would take place if one spouse remained at home and hosted frequent business parties while the other spouse developed business opportunities. The stay-at-home spouse would then have a good claim for alimony or spousal support, unless the prenuptial agreement treated him/her fairly.

The agreement must be made after full disclosure. When a party fails to disclose the full extent of his/her premarital assets, the other spouse may later successfully challenge the prenuptial agreement (7). The disclosure should not only be of the assets and liabilities that each of the parties have before the marriage, but should also disclose the rights that each party is giving up in entering into the agreement.

A long marriage or significant growth of assets do not necessarily invalidate a prenuptial agreement (8).

There are certain things that a prenuptial agreement will not and cannot effect such as the obligation to pay child support for a child is born of the relationship or the issue of custody of minor children.

There are normally several topics covered in the typical prenuptial agreement:

a) Name and address of each party
b) Description and value of real and personal property owned by each party
c) Definition of ownership of after-acquired property
d) Property to be held separately, jointly, or in common.
e) The effect of death of a spouse on the terms of the agreement.
f) That each party has had an opportunity to consult their own attorney.
g) Effect of the agreement upon divorce or separation.
h) Provisions relating to life insurance and pension benefits
i) Provisions for making of a will.
j) Who will be responsible for what debts.
k) Severability clause.
l) Revocation, termination, or modification provisions.
m) A listing of rights that each spouse is waiving.
n) Other general provisions, including the right to seek an independent appraisal of the value of property before signing the agreement.

Prenuptial agreements are different than standard contracts. Because of their special requirements, it is recommended that you seek an attorney who has expertise in family law and in drafting prenuptial agreements. In some situations it may make sense to consider additional estate planning tools to effectuate the parties’ wishes.

Footnotes:
(1) Rinvelt vs. Rinvelt,(1991
(2) MCL 700.291, MSA 27.5291
(3) Kennett vs. Mc Kay (1953).
(4) Hockenberry v. Donovan (1912).
(5) In re Benker Estate, (1982); Rinvelt vs. Rinvelt (1991).\
(6) Rinvelt quoting Brooks v Brooks (Alaska 1987):
(7) Estate of Halmaghi (1990).
(8) Reed vs. Reed (2005)

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