Asset Division in a Deathbed Divorce

By Doug Chalgian on August 15, 2021

 

After 30 years of marriage, Judy and Robert called it quits.

Throughout the divorce trial, Judy was near death and was represented by a guardian/conservator.

After the conclusion of the trial, a Judgement of Divorce was entered.  Judy died fourteen days later.

The Personal Representative of Judy’s Estate appeals the Judgment of Divorce based on the proposition that the division of the assets was inequitable, and specifically, that the trial judge erred by considering Judy’s terminal condition as a factor in the division of the marital assets.

Although the Court of Appeals affirms the division, in doing so it criticizes the trial court, which criticisms go to questions about how trial courts should address property divisions when one party to the divorce is not expected to live much longer.

On the question of whether the near-death status of Judy should have been taken into consideration, the COA says:

The trial court’s division of the marital estate was essentially fashioned around providing Judy with just enough assets to keep her afloat and in good care until her soon-to-be-expected death, instead of simply dividing the marital estate as if Judy were like any other litigant. Her terminal illness should not have played such a significant role in the distribution of the parties’ property.

The Court goes on to criticize the award of a life insurance policy on the Judy’s life, which had no cash value, but which was awarded to Judy at the value of its death benefit.  On this point, the COA says:

The first mistake the trial court made was to factor into the property-division equation the $100,000 life insurance policy. There was no evidence that the policy had a cash value, and the court clearly viewed the award of the policy to Judy as being comparable to a $100,000 distribution to her as far as balancing the equities for purposes of dividing the marital estate. But this was not a distribution to Judy; it was effectively a distribution to her heirs or any named beneficiaries. MCL 552.19 and MCL 552.401 authorize a court to make a distribution of property to a “party” in divorce actions. “Michigan divorce statutes do not permit the courts to order conveyance of property or interests in property to third parties.” Smela v Smela, 141 Mich App 602, 605; 367 NW2d 426 (1985); see also Cassidy v Cassidy, 318 Mich App 463, 495; 899 NW2d 65 (2017). Of course, any funds paid out under the life insurance policy would not go to Judy.  Indeed, her death was the necessary trigger for the distribution of the life insurance proceeds to beneficiaries or plaintiff. This is akin to a conveyance of property to a third party.

In the division of real AND personal property, the COA takes exception to the trial court awarding Judy a life estate.  It says:

Furthermore, awarding life estate interests in real and personal property because Judy had a terminal disease was, at a minimum, questionable. Placing a value on a life estate interest and a remainder interest introduces a high level of speculation in attempting to fairly and equitably divide a marital estate, even with expert testimony on the matter, which was not introduced in this case, and even though there are accepted formulas to calculate such values. We also note that awarding life estate and remainder interests to the parties in a divorce action is the antithesis of finality, leaving one ex-spouse waiting on the death of another to obtain fee ownership. Additionally, while a life estate interest is freely transferable and alienable, Wengel v Wengel, 270 Mich App 86, 100; 714 NW2d 371 (2006), being able to actually do so is highly unlikely given the limited nature of the interest. While our ruling is not to be interpreted as prohibiting an award of a life estate interest, it should be done sparingly in the context of divorce judgments.

In light of all this, one might wonder why the Judgment was affirmed? And yet, it was.

Zilka v Zilka is unpublished.  Click here to read the case.

mm By: Doug Chalgian
Doug Chalgian

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