Tag: Marital Settlement Agreements

Prenuptial Agreements in Jeopardy

Posted by Ron Kauffman on

Many people are starting to notice that the new tax law could wreak havoc on their prenuptial agreement. If you are planning on getting married this summer, here’s a few things to consider before signing that prenup.

Prenuptial Agreements

I’ve written about prenuptial agreements before. Prenuptial agreements, or prenups, are agreements you sign with your fiancé before marriage that outline how you two would end up in case of divorce or death.

A prenup can resolve things like alimony, ownership of businesses, title of properties, and even each spouse’s financial responsibilities during the marriage.

There are many other concerns that can be addressed in the prenup:

  • Caring for a parent
  • Going back to school
  • Shopping habits
  • Credit card debt;
  • Tax liabilities;
  • Alimony and child support from previous relationships; and
  • Death or disability.

A few of the points of a prenup, is that you get to decide on the amount of alimony, the terms of alimony or whether you will pay any alimony at all, and how to divide movie royalties and other assets.

And because prenuptial agreements can impact how much alimony you agreed to pay or received, the new tax overhaul comes into play heavily in your agreement.

Tax Law Overhaul and Alimony

The new tax law offers an avenue for challenge because courts will likely have to consider how the law has changed since the contracts were created.

For example, beginning in 2019, people paying alimony will be no longer be able to deduct their alimony payments. That little change in the law could mean they effectively pay double in post-tax costs compared to what they had previously agreed to in their prenups.

President Trump, who pushed the new tax law, told New York Magazine in 2006 that his prenup with Melania Trump made his marriage stronger despite being a “hard, painful, ugly tool,” he didn’t disclose any details of the agreement.

More than 60% of divorce attorneys said they had seen a rise in the number of clients seeking prenups in the previous three years, while just 1% reported a drop.

There aren’t hard numbers, but it’s fair to say that prenups have become more popular in recent years as younger Americans delay marriage, and the divorce rate has skyrocketed for people over 50 who often use prenups if they remarry.

Prenups and New Tax Changes

If prenuptial agreements aren’t amended to factor in the tax changes, it will be up to divorce attorneys to settle — or judges to decide — whether the amounts or formulas still stand for couples who divorce starting in 2019.

Even if both parties agree to an adjustment in alimony, they’ll need to agree on exactly how much to cut the payers’ obligations. Divorcing couples could end up hiring rival accountants as expert witnesses to sway judges.

For those in the top income-tax bracket — the likeliest to have a prenup — being able to deduct the payout from taxable income had been a big saving because every dollar in alimony reduces the payer’s taxable income by the same amount.

Top earners in high-tax areas like California and New York City can face marginal tax rates close to 50 percent. Without the deduction, a spouse who agreed to write a $10,000 check each month could be on the hook for what is effectively almost $20,000 in pre-tax income.

Lawmakers said they eliminated the alimony deduction to end what they called a “divorce subsidy” under the old law.

The change, which raises an estimated $6.9 billion over the next decade, doesn’t affect divorces and separation agreements finalized before the end of 2018.

However, next year the newly divorced won’t be able to deduct alimony payments, but recipients will get the money tax-free (previously, the payments had to be reported as part of their taxable income).

Ultimately, the change could hurt alimony recipients. Payers could plead with judges to revise their obligations given the new law — a valid legal argument given that many prenups specifically mention that the payments are intended be deductible.

Those potentially reduced payments are likely to overpower the benefit recipients get from being able to receive the payments tax-free because they tend to be in lower tax brackets than the payers.

The Bloomberg article is here.

 

Daredevil without a Prenup

Posted by Ron Kauffman on

Ben Affleck and Jennifer Garner have not resolved their jointly filed divorce one year after filing. Reports suggest they never had a prenuptial agreement, which may be the reason the divorce is taking so long after they filed.

Gone Girl

The actors filed to end their 10-year marriage on April 13, 2016, nearly two years after they originally announced their split, but there are no reports of a prenuptial agreement filed.

The divorce isn’t finalized and the two have been in mediation to settle privately. The actors are seeking joint physical and legal custody of their three children.

Affleck and Garner, costarred in 2003’s “Daredevil” and wed in 2005. They announced their intention to divorce in June 2015, after 10 years of marriage, but did not file documents until now.

“After much thought and careful consideration, we have made the difficult decision to divorce,” the couple said in a joint statement in 2015.

According to TMZ, Affleck and Garner do not have a prenuptial agreement, meaning everything is on the table for negotiation and possibly trial.

Prenuptial Agreements

I’ve written about prenuptial agreements before.

Many people think prenuptial agreements are for actors such as Affleck and Gardner. That is just fiction out of Hollywoodland. Even if you don’t enter a marriage with Affleck’s wealth, it might not be a bad idea to have a prenup.

The lack of a prenuptial agreement for Affleck has probably means that a lot of issues they could have resolved at the beginning of the marriage, may have to be fought over the past year since they’ve filed..

Prenuptial agreements, or “prenups,” are contracts entered into before marriage that outline the division of assets in case of divorce or death.

A prenup can resolve things like alimony, ownership of businesses, title of properties, and even each spouse’s financial responsibilities during the marriage.

There are many other concerns that can be addressed in the prenup:

  • Caring for a parent
  • Going back to school
  • Shopping habits
  • Credit card debt;
  • Tax liabilities;
  • Alimony and child support from previous relationships; and
  • Death or disability.

A few of the points of a prenup, is that you get to decide on the amount of alimony, the terms of alimony or whether you will pay any alimony at all, and how to divide movie royalties and other assets.

Chasing Amy

Putting aside the lack of a prenuptial agreement, Affleck and Gardner seem to be doing well by their children. The whole Affleck Gardner family recently made a group trip to Sea Life Park in Oahu. “During the trip, Garner stayed at a resort while Affleck stayed at a nearby house. Additionally, there are reports that Affleck is looking to buy a home near Garner in Los Angeles.

“Ben is looking to buy a family friendly house,” a source previously told PEOPLE in October 2017. “Lindsay shared her opinions, but it was clear that they are not buying a house together.”

Affleck had been living in a rental since he moved out of the family estate he used to share with Garner. Prior to their divorce filing last April, he was living in the family’s guesthouse.

The Los Angeles Times article is here.

 

Viva Las Agreements

Posted by Ron Kauffman on

Some lucky hound dog is going to buy Elvis Presley’s marital settlement agreement. It is now or never if you want to bid on the King’s agreement with Priscilla Presley too, because it’s going up for auction.

Return to Sender

As People magazine reports, one of rock-n-roll’s most famous marital settlement agreements will soon be a very expensive keepsake for any fan with a burning love of Elvis.

The document marks that period when Elvis checked into the Heartbreak Hotel, signifying the end of the Elvis and Priscilla Presley marriage, and is dated Aug. 15, 1972.

Fans may be all shook up, because each of the 12 pages contains fascinating details and offers the reader a snapshot into the details, and struggles involved between both parties that only legal documents can give.

Priscilla may have told the King don’t be cruel to her, because the agreement states that the former couple agreed to divide up their property via to avoid “emotional stress.”

Florida Marital Settlement Agreements

Many people don’t realize it, but most family law cases are resolved by agreement, not by trial. A Marital Settlement Agreement is the method to resolving all of the issues, and is the final product of the negotiations.

A marital settlement agreement puts in writing all the aspects of the divorcing parties’ settlement. Topics covered in the Marital Settlement Agreement include the parenting plan, the division of assets and liabilities, alimony, child support, attorney’s fees, and any other items agreed to.

A marital settlement agreement entered into by the parties, and ratified by a final judgment, is a contract, subject to the laws of contract. Because they are contracts, they are subject to being set aside.

I have written about marital settlement agreements before. You can set aside an agreement in Florida by establishing that it was reached under fraud, deceit, duress, coercion, misrepresentation, or overreaching.

There is another ground to vacate a marital settlement agreement in Florida, and it has a few elements. First, you have to show that the agreement makes unfair or unreasonable provision, given the circumstances of the parties.

Once you have shown the agreement is unreasonable, a presumption arises that there was either concealment by the defending spouse or a presumed lack of knowledge of the finances at the time the agreement was reached.

The burden then shifts to the spouse defending the agreement, who may rebut these presumptions.

Can’t Help Falling in Love

“The parties were married on May 1, 1967 in Las Vegas, Nevada,” the agreement states:

Unfortunate circumstances and unhappy differences have arisen between the parties by reason of which they have lived separate and apart since February 23, 1972, and by reason of which they intend to dissolve their marriage.

For suspicious minds wondering what’s in the settlement signed by both Elvis and Priscilla: the music legend signed over his famous 1971 Mercedes Benz, his 1969 Cadillac Eldorado, a 1971 Harley Davidson motorcycle and $100,00.

Priscilla was definitely not moving into the Ghetto. She also received half the income from their three homes located in Beverly Hills, Los Angeles and Palm Springs, California.

A pre-sale estimate of the settlement is between $26,318 to $32,898. The last time the settlement documents came up for sale in 2011 they sold for just under $8,000.

The former couple married on May 1, 1967. Elvis was 32, while Priscilla was 21. The had daughter Lisa Marie less than a year later in February 1, 1968.

The People magazine article is here.

 

Voiding a Marital Settlement Agreement

Posted by Ron Kauffman on

Empire star, Terrence Howard, claimed he was forced into signing his marital settlement agreement, and got a trial judge to throw it out. His wife, Michelle Ghent, appealed and the appeals court reversed! When can you get out of a marital settlement agreement?

Divorce Empire

The ruling by the California appeals court, which reinstated the marital settlement agreement, could allow Michelle Ghent to claim some of Howard’s lucrative earnings from the hit Fox television series “Empire.”

The marital settlement agreement called for Howard to pay Ghent monthly support of $5,800, and as much as $4 million a year, depending on his earnings, including potential income from his role in the Fox series “Empire”.

Terrence claimed that Michelle blackmailed him, and threatened to publicly release private recordings of a sensitive, intimate and sexual nature that would be embarrassing and could damage his career.

As a result, Terrence claims he agreed, under duress, to a marital settlement agreement that obligated him to pay spousal support far in excess of what he would otherwise have been required to pay based on the parties’ year–long marriage.

The trial court found that Terrence presented credible evidence that Terrence felt frightened and forced into signing the marital settlement agreement, which he would not have signed but for Michelle’s threatening and coercive behavior.

Michelle appealed.

Florida Marital Settlement Agreements

I’ve written about marital settlement agreements before. You can set aside an agreement in Florida in a similar way as in the Howard case, by establishing that it was reached under fraud, deceit, duress, coercion, misrepresentation, or overreaching.

There is another ground to vacate a marital settlement agreement in Florida, and it has a few elements. First, you have to show that the agreement makes unfair or unreasonable provision, given the circumstances of the parties.

Once you have shown the agreement is unreasonable, a presumption arises that there was either concealment by the defending spouse or a presumed lack of knowledge of the finances at the time the agreement was reached.

The burden then shifts to the spouse defending the agreement, who may rebut these presumptions.

The Empire Strikes Back

The appellate court in California deferred to the trial judge’s factual findings, but nevertheless conclude that the facts did not prove duress as a matter of law. The three-justice panel of the 2nd District Court of Appeal in Los Angeles ruled unanimously to reinstate the judgment.

The court found three reasons for reversing the trial judge. First, and importantly, Terrence failed to show that Michelle’s threats and coercion utterly destroyed his free will.

Second, Terrence and Michelle had a tumultuous relationship, which included such significant physical abuse by Terrence that Michelle had to obtain multiple protective orders against him.

Third, too much time elapsed between the threat and the contract’s signing. The threats made by Michelle were in September 2011, but he executed the final settlement agreement in September 2012, an agreement virtually identical to one he had signed four months before.

The California 2nd DCA opinion is available here.

 

Religious Upbringing and Divorce

Posted by Ron Kauffman on

Divorce agreements can dictate the religious upbringing of a child: which church to attend, or how strict a religious education should be. What happens after divorce if an ultra-orthodox mother concludes she is a lesbian and wants to live a normal life?

The New York Case

In last week’s New York case involving the Weisbergers, the parents agreed to give the children a Hasidic Jewish upbringing in all details, in the home or outside of home, including which school the children attend.

Three years after the divorce, the mother came out as a lesbian, disparaged the basic tenets of Hasidic Judaism, allowed the children to wear non-Hasidic clothes, permitted them to violate the Sabbath and kosher dietary laws, and referred to them by names that were not traditionally used in the Hasidic community.

The trial judge ruled in favor of the father, circumstances had changed so much that he should have sole custody because of the mother’s transition from an ultra-Orthodox Hasidic lifestyle to a “more progressive, albeit Jewish, secular world.”

The court noted that the mother’s conduct was in conflict with the parties’ agreement, which “forbade living a secular way of life in front of the children or while at their schools.” The court posited that had there been no agreement it might have considered the parties’ arguments differently.

Florida Religious Upbringing

In Florida, there is no provision in our laws purporting to authorize such judicial enforcement in married parents. Religion and divorce is a matter I’ve written on before.

In a divorce action, the court’s powers over custody of children are found in the Florida Statutes. When a court is required to decide an issue as to the custody or support of minor children, the sine qua non of the exercise of those powers is the best interests of the child.

There is absolutely nothing in the statutory listing that expressly makes the religious training of the child a factor that the court should consider.

The Florida Statutes command all parents to confer on all major decisions affecting the welfare of their child, and to reach an agreement as to any required decision.

When the matter involves the religious training and beliefs of the child, courts cannot make a decision in favor of a specific religion over the objection of the other parent. Generally, a child’s religion is no proper business of judges.

New York Law Changes

The appeals court in New York reversed the father having sole custody of the children, and final decision-making authority over medical, mental health issues, with supervised therapeutic visitation to the mother.

When presented as an issue, religion may be considered as one of the factors in determining the best interest of a child, although it alone may not be the determinative factor.

Clauses in custody agreements that provide for a specific religious upbringing for the children will only be enforced so long as the agreement is in the best interests of the children.

Importantly, no agreement of the parties can bind the court to a disposition other than that which a weighing of all of the factors involved shows to be in the children’s best interest.

The Washington Post article is here.

 

Marital Settlement Agreements

Posted by Ron Kauffman on

“Shahs of Sunset” star Golnesa “GG” Gharachedaghi is having an interesting divorce problem. Her pending divorce from her husband, Shalom Yeroushalmi, has run into a serious roadblock: her husband refuses to sign the divorce papers.

According to a Page Six report:

“There are no issues about spousal support, assets or those typical divorce things at all,” the source said. “He is not asking for anything. What he’s basically doing is tormenting her. He’s not signing just to give her a hard time.”

“He just keeps saying he’s going to sign, then he doesn’t sign,” the source added. “He’s trying to drag it out and prevent her from moving on.”

Marital Settlement Agreements

Most family law cases are resolved by agreement, not by trial. A Marital Settlement Agreement is the method to resolving all of the issues, and is the final product of the negotiations.

A marital settlement agreement puts in writing all the aspects of the divorcing parties’ settlement. Topics covered in the Marital Settlement Agreement include the parenting plan and timesharing schedule, the division of the parties’ assets and liabilities (called “equitable distribution”), alimony, child support, payment of attorney’s fees and costs, and any other items to which the parties have agreed.

A marital settlement agreement entered into by the parties and ratified by a final judgment is a contract, subject to the laws of contract. The enforceability of contracts in Florida is a matter of importance in Florida public policy.

Accordingly, because a marital settlement agreement is treated like any other contract, and is subject to interpretation like any other contract, they can be enforced by the court.

Conclusion

If Yeroushalmi signs the marital settlement agreement, the divorce petition can make its way through the system, allowing the former couple to sever all formal ties. However, if he doesn’t, a judge may grant GG a default divorce after a considerable amount of time of inactivity on Yeroushalmi’s behalf.

GG and Yeroushalmi had a whirlwind romance. They secretly tied the knot at the end of January 2017, though GG realized within days she had made a terrible mistake.

“I wanted to throw up, “she said. “I was just thinking, ‘My dad’s going to kill me right now. And my mom is going to wake me up and then kill me again.’”

She filed for a divorce after one month of marriage.

The Page Six article is here.

Silicon Valley Prenups

Posted by Ron Kauffman on

The billionaire founder of Farmville has found himself in Divorceville. If divorces are tough, Silicon Valley divorces – with sophisticated spouses, high value assets, and hard-to-value assets – can be tougher. There is a reason more people insist on prenuptial agreements.

What are Prenups

I’ve written about prenuptial agreements before. Prenuptial agreements, or “prenups,” are contracts entered into before marriage that outline the division of assets in case of divorce or death.

Prenups, and Post-nups (agreements entered after a marriage) resolve things like alimony, ownership of businesses, title of properties, and even each spouse’s financial responsibilities during the marriage. As the UK Guardian reports, in Silicon Valley, divorces and prenup agreements go hand in hand.

Voiding Prenuptial Agreements

Farmville founder Mark Pincus, who was an early investor in Facebook and Twitter, is worth around $1.28b. Mark is separated from his wife, Alison Gelb Pincus, the co-founder of home decor business One Kings Lane. She also may be trying to get out of her prenup.

The couple married in 2008, a year after his company grew into a $1b company. Mark has a prenup. Unfortunately for him, in filing for divorce, his wife Alison has asked the court to set aside the agreement. Why? Because the value of his company increased so much after the marriage.

Prenuptial agreements are often used in high tech industries, and in Silicon Valley in particular, to protect ideas and future income – not just current salaries and property. This makes perfect sense in an age when intellectual property is so highly valued.

Because of Florida’s policy of enforcing agreements, prenups can be difficult to void – but not impossible. Florida has both case law and a statute to help lawyers, judges and the parties determine if a prenuptial agreement, for example, is enforceable.

In Florida, to test the validity of a prenuptial agreement, courts must consider things such as fraud, duress, coercion, in addition to the unfairness of the agreement, and whether there was any financial disclosure.

The Farmville case is a tough one. The spouse challenging the agreement, Alison, is herself very well off. She is the co-founder of One King’s Lane, which she sold to Bed Bath and Beyond for $30m. She is not exactly a stay-at-home mother who cannot work or lacks assets of her own.

Difficult to Value Assets

In divorce, determining the value of certain assets – businesses, stock options and restricted stock – is more complicated than it seems. As the shareholders of Snap Inc. have learned, startups may see their values skyrocket for their IPO, but later fizzle once earning reports become public.

Generally, anything you own before marriage counts as your separate or non-marital property. However, asset or debts acquired after the marriage is generally considered as marital or community property. In the event of a divorce, the law requires it to be distributed equitably, which usually presumes and equal split between partners.

A couple of weeks ago, tech analysts were hailing the IPO of Snap Inc. as a triumph. But a day after Snap posted a $2.2bn loss and decelerating user growth in its first earnings report as a public company, the stock’s value crashed.

Messy divorces don’t come cheap. When Elon Musk divorced his first wife Justine the two sides racked up $4m in legal and accounting bills in two years – around $170,000 per month. A prenuptial agreement can limit the costs of a divorce.

The Guardian article is here.

 

International Prenups

Posted by Ron Kauffman on

Welsh actress, Catherine Zeta-Jones married American actor, Michael Douglas. They reportedly have a prenuptial agreement that states she gets $2.8 million for each year of marriage, and a $5 million bonus if Michael has an affair.

While there are many benefits to prenuptial agreements in American marriages, the benefits of international prenups are multiplied when the spouses are from different countries, or hold foreign assets, or who contemplate living in other countries.

Prenuptial Agreements

A prenuptial agreement, sometimes called an “antenuptial agreement”, and/or “premarital agreement”, are commonly called “prenups.”  A prenup is a legal contract, much like any other legal contract, and it is entered into before a marriage by the couple intending to marry.

The contents of prenuptial agreements can vary widely. However, prenups commonly include clauses that spell out how to divide property accumulated before and after the marriage, and support or alimony in the event of divorce or death.

I’ve written on some of the more extreme clauses people insist be put in the prenups before. For example, prenups can include provisions to cover you in the event your spouse engages in excessive drug use, has extra-marital affairs, becomes an excessive spender, or begins a gambling habit.

International Prenuptial Agreements

A prenuptial agreement for international couples is generally a good idea, but international prenups have their own set of unique problems. For example, a prenup that is valid in Florida, may not be valid in another American state, let alone a different country.

When people live in different countries, hold foreign assets, or are planning to either marry overseas, or live in other countries, they should try to consider the law of all jurisdictions where they contemplate living.

There are many advantages and disadvantages to having an international prenup which states that the law of one country governs your divorce.

Issues with International Prenups

International prenups can involve couples from different countries, or couples from one country who live in different countries, or couples who have assets located overseas.

Since the law of each country can be very different, the choice of law clause in international prenups can take on great importance. Additionally, the language used in prenups can be extremely important for two reasons.

First, legal terms in the United States may have different legal meanings in other countries, or may not be terms recognized under foreign law.

Second, the enforceability of international prenups may just depend on whether it was understood by the signors, and they may not speak the language the agreement was written in sufficiently.

Whether in the United States, or in another county, make the effort to disclose all of the finances, even if financial disclosure may be waived in your country.

Additionally, any prenup should be signed well in advance of the wedding. In an ideal situation, the agreement should be fully signed before the wedding invitations even go out.

The Suggest article on the Zeta-Jones prenup is here.

 

Divorce, Paternity & Mediation

Posted by Ron Kauffman on

A judge has agreed to halt a contested divorce between former Vice President Joe Biden’s son and his estranged wife, ordering them to try at least four hours of mediation.

As the New York Daily News reports, Thursday’s ruling came after lawyers for both Hunter Biden and Kathleen Buhle Biden filed court papers saying they want to end their marriage without continued litigation.

The Bidens recognize the benefit in finalizing their divorce “amicably and privately.”

Last week’s request to put the case on hold came after Kathleen Biden accused Hunter Biden in court documents of squandering their money on drugs, alcohol and prostitutes. Kathleen Biden filed for divorce in December.

I’ve written about mediation and settlement in the past. In Florida, every case of divorce and paternity must attempt to resolve their difference through mediation before their case can proceed to trial, but you don’t have to wait for a court order.

Pre-Suit Mediation

For many clients, especially for high profile clients such as the Bidens, discretion and privacy is very important. Athletes and celebrities, in addition to politicians, have big stake in keeping their divorces out of the news as the New York Daily News article proves.

Why? Often, people are concerned that their financial disclosure, net worth, and details regarding their income will become available to the public through the court files. For businesses, this could even include having sensitive business information available to business competitors.

Also, many people are often concerned about their private affairs being played out in the news or newspapers or elsewhere in public, which could potentially jeopardize careers and social status.

There is also a big cost saving to mediating before filing a family law or divorce action. If both parties can agree to deadlines to exchange their financial documents, and cooperate with children’s issues, thousands of dollars can be saved in a pre-suit settlement.

What is Mediation

In a mediation, the parties and their attorneys meet with a neutral mediator – sometimes together, sometimes separately – to try to negotiate a settlement agreement.

Ideally, both the mediator and the attorneys should have enough experience to anticipate what will happen if the case goes to trial. Drawing on that experience, they can help the parties negotiate an agreement without any need to have a judge decide the issues for them.

At mediation, you will discuss issues that are highly personal and emotional. Accordingly, there are many factors to think about when choosing the right family mediator. Below are a few to think about:

Choosing a Mediator

Trust is the most important consideration in choosing a family law mediator. Your mediator should be someone you feel comfortable with as a person and as a professional.

Specialization is another important criterion. Ask your attorney if the mediator in your case has a practice area dedicated to divorce and family mediation. Family is not an area to dabble in. To be effective in family mediations requires patience as well as skills. Ideally, you want the percentage to be 100%.

Cost is always an important consideration. While it can be expensive to spend the day in mediation, if you’re successful, you are likely to save thousands on your total legal fees.

When comparing mediation fees, base your decision on selecting a mediator with a high success rate for settlements. $200 per hour sounds better than $400 per hour, but not if your $200 mediator spends 8 hours without a resolution, you have not saved anything.

Final Thoughts

Mediation is a great way to resolve your divorce without paying for a full trial. Choosing a mediator is the first step, and may be the most important decision you can reach in your divorce.

The New York Daily News article is here.