Aug / Sept 2015 : Comments on Equitable Awards for the Non-Degreed Spouse Pursuant to POSTEMA

Michigan Family Law Journal : TAX TRENDS AND DEVELOPMENTS Feature

by Joseph W. Cunningham, JD, CPA


Background on Postema

In 1990, the Court of Appeals set forth the divorce settlement remedy for a non-degreed spouse who made “sacrifices, efforts, and contributions” to enable the other spouse to attain an advanced degree and, often, professional training. Postema v. Postema, 189 Mich App 89 (1990) (“Postema”).

Prior to the Postema decision, there was a split among different Court of Appeals panels on the proper remedy for such a non-degreed spouse in cases in which a divorce prevents such spouse from sharing in the “fruits of the degree” after its attainment.

Some panels had decided that the non-degreed spouse is entitled to part of the “value of the degree” – that is, the present value of the difference between (1) projected earnings of the degreed spouse over his her work life expectancy with the advanced degree and (2) projected earnings of such spouse without the advanced degree.

Other panels ruled that the non-degreed spouse was en- titled to be reimbursed for sacrifices, efforts, and contributions made, but not to a share of the value of the degree.

To resolve the split, the Supreme Court ordered that the next case on the issue would become binding precedent on the appropriate remedy. That case was Postema.

The Court ruled in Postema that the purpose of an equitable award is to reimburse the “non-degreed” spouse for “sacrifices, efforts, and contributions” made to enable the other spouse to attain a professional degree. However, this does include a share of future incremental earnings attributable to the professional degree.
e Court stated an equitable award applies in situations in which “the degree was the product of a concerted family effort.”

Components of a Postema Award

Under Postema, there are generally four components to be considered in calculating a equitable award.

  1. Lost or Forgone Earnings – The non-degreed spouse’s 50% marital share the difference between (1) what the degreed spouse could have earned, after-tax, during years of education and training and (2) his or her actual after-tax earnings during those years.
  2. Cost of Education – The non-degreed spouse’s 50% share the out-of-pocket costs of the education and training paid with marital funds
  3. Subordination of Career Aspirations – Compensation to the non-degreed spouse for the cost of either (1) not pursuing career aspirations or (2) delaying such pursuit solely due to allowing the degreed spouse to do so. e non-degreed spouse’s share of such “make-up” compensation is 50% for years during the marriage and, possibly, the present value of lost future earnings.
  4. Intangible Sacrifices, Efforts, and Contributions – Compensation to a non-degreed spouse for intangible sacrifices, efforts, and contributions such as loss of companionship, and additional time devoted to household/parenting responsibilities in excess of normal time doing so, occasioned solely by the degreed spouse’s time constraints due to pursuit of the advanced degree and training.

The Court also stated that the equitable award should be reduced by the non-degreed spouse’s 50% share of the degreed spouse’s incremental earnings after attaining the degree and training.

All amounts are converted to the value of current dollars, since the award will be paid in current dollars.

Mistakes Periodically Made in Calculating Postema Awards

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