I was sitting in my office one day typing a letter when my paralegal Leona came in with a question. She was proofreading a separation agreement I had just drafted and couldn't believe our client's wife was planning to sign it. No alimony; no car; very little personal property; no share of her husband's retirement; plus a sweetheart deal on joint custody. She would be signing away just about every marital right she had! Leona asked me a perfectly reasonable question: "Isn't she entitled to something more?"
The answer to this question is a matter of perspective. For instance, did I mention the wife had just been caught cheating on her husband? Legally, this only means the wife is barred from claiming alimony. She can still get half the marital property, including half the equity in the house, half of my client's retirement, half of the household furnishings, her car, etc. And, unless her adultery directly affected her son, the affair should not prejudice her standing for custody.
I think what Leona was really asking me was, "Aren't we taking advantage of her guilt over her affair to get our client things he couldn't get in court?" The answer? Heck yes!
I'm being tongue-in-cheek here, but in fact this is a tricky case that must be handled delicately to protect my client. I represent my client's interests, and my client's interests alone, so ethically I have no problems drafting a separation agreement like the one Leona asked about. However, if you find yourself in my client's situation (betrayed by your spouse), there are some significant risks to pushing for a totally one-sided agreement like the one I drafted.
Just how much is your cheating spouse's cooperative demeanor owing to his or her guilt, and how much are they just trying to make a graceful exit so they go off to pursue their new romantic interests? Not a fun question to ponder, I know, but it makes a real difference when assessing how likely your spouse is to seek her own legal advise. In the case above, if my client's wife had taken the time to have her own attorney review the agreement, she would know my client was making demands for things he couldn't win in court. If she then refused to sign, that's anywhere from $1000-1500 my client just flushed down the drain. Now, he has to start all over again with a new, bigger fee to have me gear up for a prolonged court fight.
I make sure my clients understand the risks in a case like this up front. Sometimes, it leads the client to take a more even-handed approach. Other times, the client decides to take a calculated risk and push forward with a heavy-handed bargaining posture. There is no right or wrong answer here. Just remember, if you find yourself in this situation, you are probably acting under just a much emotional stress, if not more, than your spouse. Remember to take a step back to look at how the terms of your proposed settlement are likely to affect you, your spouse, and your children over the long term. As long as you can do that, I'll be in your corner all the way, whatever you decide.
Saturday, January 23, 2010
Saturday, January 9, 2010
"It's where you've been living this whole time."
If you're married and own a home, a business, or a favorite coffee mug, this post is addressed to you!
The title to today's post is taken from an episode of NBC's "The West Wing" that aired in June 2001. Whether you loved or hated the politics of that show, you cannot deny its penchant for giving viewers great Trivial Pursuit knowledge. In this episode, two members of the White House staff are cajoled into meeting with representatives of "The Organization of Cartographers for Social Equality."
At first, the staffers are visibly annoyed by having to take the meeting, but the map-makers quickly get their attention when they unveil a copy of the "Peters Projection World Map," which corrects centuries-old distortions in the familiar world map we all remember from grade school. For example, Greenland looks almost equal in size to Africa on most U.S. maps. In truth, Africa is 14 times larger. "What the hell is that?!" the White House press secretary exclaims when she sees the map. The cartographer smiles and replies, "It's where you've been living this whole time." (If you want to watch the scene, here's a link I found online - www.odtmaps.com/what_they_are_saying/west-wing.asp)
The press secretary in this scene feels a lot like many of my clients feel when I explain the principles of Equitable Distribution, or "ED."
ED is the statutory framework that tells courts how to identify and distribute marital property during a divorce case. The central idea is that all property you acquire while married, with a few important exceptions, is considered "marital" and is split 50/50 between the parties, unless good cause exists to make an unequal division.
Here are a few frequently asked questions that I answer in the majority of my consultations about Equitable Distribution:
1. Can my spouse touch my retirement? - Yes, indeed. Retirement benefits accrued during marriage, whether in a 401(k), IRA, or a traditional pension are marital property and are routinely divided in divorce cases. I am surprised by how many clients express shock at this answer. Couples save on the assumption they will be together when they retire, so why shouldn't those benefits be divisible upon divorce? Benefits are usually divided by using a special court order called a Qualified Domestic Relations Order. These orders are very technical and generally cost more to prepare, so I try to avoid using them if the opposing party can be compensated elsewhere for his or her interest in my client's retirement.
2. Can the judge make me sell the house? Not directly, but yes. The ED statute instructs the judge to make an in-kind division of all the marital property, if possible. In other words, once the judge decides what percentage of the total marital estate each spouse will get, she is supposed to divide the assets to achieve that percentage without forcing either side to cut a check for the difference. In many cases, the math simply won't allow this, so the judge has to make what's called a "distributive award" to one party. If you are separating and the equity in your house is your single biggest asset, then look out. The judge won't say you must sell the house, but he'll order you to pay the other side a cash sum so large your only choice is to sell it.
3. I built my business from scratch while my spouse stayed at home; I can keep it, right? Sure, but go ahead and pull out your checkbook. Business interests, whether held in stock, membership in an LLC, or just assets in the name of an unincorporated "d/b/a" are marital property like anything else. Businesses are amongst the hardest assets to value, especially small businesses or professional practices where the continuing involvement of one spouse is vital to the business's continued survival. I strongly encourage clients to be reasonable when deciding how to value businesses for purposes of settlement in ED cases. It can take tens of thousands of dollars in fees to outside accounting firms to properly value a business. That money is usually tapped from the marital estate itself, so nobody wins! Don't get me wrong, expert valuations are unavoidable in some cases, but make your decision based on dollars and cents, not emotion.
I chose the questions above because they elicit some of the strongest emotional responses from new clients. When a husband or wife looks at me in astonishment and asks, "How the hell can this be the way it is?" sometimes I just smile sympathetically and say, "It's where you've been living this whole time."
The press secretary in this scene feels a lot like many of my clients feel when I explain the principles of Equitable Distribution, or "ED."
ED is the statutory framework that tells courts how to identify and distribute marital property during a divorce case. The central idea is that all property you acquire while married, with a few important exceptions, is considered "marital" and is split 50/50 between the parties, unless good cause exists to make an unequal division.
Here are a few frequently asked questions that I answer in the majority of my consultations about Equitable Distribution:
1. Can my spouse touch my retirement? - Yes, indeed. Retirement benefits accrued during marriage, whether in a 401(k), IRA, or a traditional pension are marital property and are routinely divided in divorce cases. I am surprised by how many clients express shock at this answer. Couples save on the assumption they will be together when they retire, so why shouldn't those benefits be divisible upon divorce? Benefits are usually divided by using a special court order called a Qualified Domestic Relations Order. These orders are very technical and generally cost more to prepare, so I try to avoid using them if the opposing party can be compensated elsewhere for his or her interest in my client's retirement.
2. Can the judge make me sell the house? Not directly, but yes. The ED statute instructs the judge to make an in-kind division of all the marital property, if possible. In other words, once the judge decides what percentage of the total marital estate each spouse will get, she is supposed to divide the assets to achieve that percentage without forcing either side to cut a check for the difference. In many cases, the math simply won't allow this, so the judge has to make what's called a "distributive award" to one party. If you are separating and the equity in your house is your single biggest asset, then look out. The judge won't say you must sell the house, but he'll order you to pay the other side a cash sum so large your only choice is to sell it.
3. I built my business from scratch while my spouse stayed at home; I can keep it, right? Sure, but go ahead and pull out your checkbook. Business interests, whether held in stock, membership in an LLC, or just assets in the name of an unincorporated "d/b/a" are marital property like anything else. Businesses are amongst the hardest assets to value, especially small businesses or professional practices where the continuing involvement of one spouse is vital to the business's continued survival. I strongly encourage clients to be reasonable when deciding how to value businesses for purposes of settlement in ED cases. It can take tens of thousands of dollars in fees to outside accounting firms to properly value a business. That money is usually tapped from the marital estate itself, so nobody wins! Don't get me wrong, expert valuations are unavoidable in some cases, but make your decision based on dollars and cents, not emotion.
I chose the questions above because they elicit some of the strongest emotional responses from new clients. When a husband or wife looks at me in astonishment and asks, "How the hell can this be the way it is?" sometimes I just smile sympathetically and say, "It's where you've been living this whole time."
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