Is the Haugan decision functionally obsolete?

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In 1984, the Wisconsin Supreme Court first recognized enhanced earning capacity as a marital “asset” in Haugan v. Haugan, 117 Wis. 2d 200 (1984). In 1997, The Wisconsin Journal of Family Law published an article calling attention to the “most undervalued asset in the marriage,” referring to enhanced earning capacity as a “diamond in the rough.” Grove and Glosser, “Enhanced Earning Capacity: The Most Ignored and Undervalued Asset in the Marriage.”

Today, nearly 25 years after Haugan, few attorneys have embraced the challenge of assigning a value to enhanced earning capacity. There could be several reasons.
Consideration of enhanced earning capacity is mandated under Wis. Stat. sec. 767.61 and sec. 767.56. Although an equal division of marital property is presumed, sec. 767.61 provides for a reasonable deviation after careful consideration of several factors, including contributions to the marriage and earning capacity. Similarly, sec. 767.56 gives the court the authority to grant an order requiring maintenance payments after examining, among other things, contributions to the marriage and earning capacity.

The state Legislature clearly intended to compensate individuals who support their spouses through an educational degree’s acquisition. In Lundberg v. Lundberg, 107 Wis. 2d 1 (1982), the court compensated a spouse who sacrificed her continued education and career in order to maintain the home, while her husband obtained his medical degree.

The Supreme Court established that compensation can be achieved through property division or maintenance payments in order to reach a fair and equitable result. The companion case of Roberto v. Brown, 107 Wis. 2d 17 (1982), echoed Lundberg’s holding.

Two years later in Haugan, the high court not only gave consideration to enhanced earning capacity, but also recognized it as an ‘asset’ and encouraged practitioners to find an appropriate means to estimate value. Recognizing the unique circumstances involved in each case, the court refrained from giving one specific formula. Rather, the court laid out several approaches and welcomed all reasonable methods of quantification.

One suggestion, the Cost Value Approach, would require an expert to review all household records for the duration of the spouse’s education. This could be nearly impossible, particularly if the marriage is lengthy. The accuracy of any estimation would certainly be challenged, resulting in protracted litigation.

Other suggestions, such as the Opportunities Cost and the Present Value Approach, require examining in depth the spouse’s earning capacity without the advanced degree.

Again, imagine the endless debate. With professionals shifting careers more frequently and the roles of spouses shifting throughout marriage, it is difficult to predict what career path a spouse would have chosen under different circumstances.

It is possible that the valuation task is too cumbersome and speculative. Weighing the costs and benefits, practitioners have likely made an affirmative decision to avoid enhanced earning quantification. Further, the evolution of the roles in the marriage also renders Haugan less useful.

While Haugan opened the door to exploration, it may not have provided sufficient predictability to justify the necessary analysis. Haugan concluded that enhanced earning capacity is an “asset” worth valuing, but it does not mean that the asset will be listed as property and subject to division. See DeWitt v. DeWitt, 98 Wis. 2d 44 (Ct. App. 1980).

The overwhelming task of reducing enhanced earning capacity into dollars, to then only apply the numbers to vague factors without a clear result, may not be cost-effective.

Weiler v. Boerner, 280 Wis. 2d 519 (Ct. App 2005), is the only reported case on this topic since Haugan. After lengthy expert testimony, the court ultimately concluded that petitioner’s degree was worth $50,000. Rather than treating the degree as an ‘asset’ subject to division, the court considered its worth, assigned petitioner her outstanding educational debt and imputed additional income to the petitioner for purposes of child support.

On review, the appellate court upheld the debt distribution, but reversed the court’s decision to impute enhanced earnings and hold open child support. Consequently, the time, effort, and cost of litigation in Weiler ultimately resulted in petitioner being held responsible for her $14,000 educational debt.

While Haugan has not been overruled, it can still function. However, with the costs of such analysis potentially high when compared to the unknown outcome, and with the change in the role of spouses in a marriage, Haugan has arguably become functionally obsolete.

Carlton D. Stansbury is a partner, and Kate A. Neugent is an associate, with Burbach & Stansbury S.C. in Milwaukee. They can be reached, respectively, at [email protected] and [email protected].