Tag: nonmarital property

Equitable Distribution of Human Organs

Posted by Ron Kauffman on

If you promise to love someone with all your heart, can you ask a court for an equitable distribution of your donated human organs back? One very upset New York organ donor spouse is asking the court to be made whole again.

equitable distribution organs

Kidney Pains

Richard Batista, a 49-year-old doctor from Ronkonkoma who graduated from Cornell University Medical School in 1995, married Dawnell Batista on August 31 1990. The couple had three children, then ages 14, 11 and 8.

After Dawnell had two failed kidney transplants, her husband donated one of his kidneys to his wife in an operation that took place at the University of Minnesota Medical Centre on June 18 2001. Richard Batista said his marriage at the time was on the rocks because of the strain of his wife’s medical issues.

“My first priority was to save her life. The second bonus was to turn the marriage around.”

Four years later, Dawnell sued her husband for divorce, alleging domestic violence and infidelity.  One week before the divorce trial was scheduled to begin, Richard announced he was seeking a stay of the case until his retained “expert” could give an opinion to the court estimating how much his kidney was worth.

After Dawnell filed for a divorce, Richard wanted the court to either award him his kidney back as part of his settlement demand, or credit him in the equitable distribution the fair market value of his donated kidney – an estimated cool $1.5m.

Florida Equitable Distribution

I have written about equitable distribution in Florida before. In a proceeding for dissolution of marriage, in addition to all other remedies available to a court to do equity between the parties, a court must set apart to each spouse that spouse’s non-marital assets and liabilities.

However, when distributing the marital assets between spouses, a family court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors.

In Florida, nonmarital assets include things such as assets acquired before the marriage; assets acquired separately by either party by will or by devise, income from nonmarital assets, and assets acquired separately by either party by non-interspousal gift. Importantly for this doctor’s divorce, will the donation of his pre-marital body part be construed as an interspousal gift?

Kidney Failure

In a 10-page decision, the Nassau County Supreme Court rejected the ex-husband’s request that it should consider his donated kidney as an item of property to be valued in the divorce suit, according to Dawnell Batista’s lawyer.

The court said “marital property” covers a lot of things, but human tissues or organs aren’t any of them. It also said that not only was Richard Batista’s attempt to extort money from his wife for the kidney he donated legally unsound:

“The defendant’s effort to pursue and extract monetary compensation therefore not only runs afoul of the statutory prescription, but conceivably may expose the defendant to criminal prosecution.”

Medical ethicists agreed that the case is a non-starter. Asked how likely it would be for the doctor to either get his kidney back or get money for it, Arthur Caplan at the University of Pennsylvania’s Centre for Bioethics, put it as:

“somewhere between impossible and completely impossible”.

What’s more, no reputable surgeon would perform such a transplant and no court could compel a person to undergo an operation, he said.

The NBC New York article is here.

Changing Property Division Law in the UK

Posted by Ron Kauffman on

With the Florida legislative season underway, it is important to keep an eye on what other legislatures are doing for family law. This is especially true with news that the UK is set to explore changing the law of property division during a divorce in England and Wales.

Property Division Law

A spanner in the works

The current property division law in the United Kingdom, the Matrimonial Causes Act 1973, has recently been criticized by people as being uncertain and unpredictable. Many argue spouses are left to turning to costly litigation due to a lack of clear guidance on how wealth should be divided.

The Law Commission, the independent agency which reviews legislation, may examine whether the act needs updating with further announcements expected “very soon”.

London has developed a reputation as a magnet for wealthy couples seeking a divorce in recent decades because of the generosity of financial awards given to ex-wives by the courts in the capital.

The English legal system tends to split the combined wealth of divorcing spouses equally even if one partner is the breadwinner. This is similar to the United States, but is in contrast to many European countries, where financial awards are far less generous and maintenance is only given for a limited number of years.

Under the current law, spouses who go to court can spend thousands on legal fees because legal aid is no longer available for most types of family law, and the drawn-out court battles can be detrimental to children.

Florida Property Division

I’ve written about the subject of property division in Florida many times before. Property division, or equitable distribution as it is called in Florida, is governed by Florida Statutes as interpreted by case law.

Generally, courts set apart to each spouse their nonmarital assets and debts, and then distribute the marital assets and debts between the parties. In dividing the marital assets and debts though, the court must begin with the premise that the distribution should be equal. However, if there is a justification for an unequal distribution, the court has the authority to award an unequal distribution of marital assets.

However, the court must base an unequal distribution on certain factors, including: the contribution to the marriage by each spouse; the economic circumstances of the parties, the duration of the marriage, or any interrupting of personal careers or education.

It has been a long-standing rule in Florida that an unequal distribution of marital assets may be justified to compensate for things such as a spouse’s intentional dissipation, waste, depletion or destruction of marital assets.

Parliamentary Chinwag

The status of prenuptial agreements in the UK may also be considered. Prenuptial agreements in the UK are legal documents specifying how assets are to be divided when the marriage ends. Prenuptial agreements are now recognized by UK courts following a seminal 2010 Supreme Court involving a German paper industry heiress.

But legal experts believe prenuptial agreements in the UK should be put on to a more formal, statutory footing and enshrined in law. Others complain the legislation, which has been subsequently developed by judge-made case law, allows judges to use their discretion to assess each case and make different awards, creating uncertainty.

Judges have flexibility when it comes to allocating settlements but the variation in judgment, said lawyers, made it difficult to advise clients about the likely outcome of their case.

Critics of the current property division system believe obscurities in the legislation should be tackled. Lawyers highlighted regional variations in how divorces are settled. Many critics complain that London courts tend to award more generously, while many courts outside the capital prefer to give “time-limited” maintenance to financially weaker spouses.

Some argue that the law also fails to reflect the way British society has changed in the past 50 years — with women more financially independent and with dual earning couples becoming the norm.

The Financial Times article is here.

Divorce and Digital Accounts

Posted by Ron Kauffman on

Many couples are not only tied together in matrimony, but in their digital accounts too. If roughly half of marriages end in divorce, how do courts manage an equitable distribution of digital accounts such as Netflix, Amazon, Apple (and with House of the Dragon underway) HBO?

Digital Divorce

Stranger Things

The Washington Post reports that the average American has upwards of 150 digital accounts, according to password-management company Dashlane. That’s a decades-long record of an autonomous life lived online.

If a breakup is going to be an ugly one, a vindictive ex-spouse can cause a lot of digital damage. For instance, if you share cloud storage, or an Apple ID with your ex-spouse, there is a risk everything – from your photos and documents to your browsing and email history can be revealed.

Moving out of the marital home is already a hard and emotional decision. But, now you are faced with taking precautions when you are about to leave your digital home.

As soon as divorce becomes a reality, you need to decide if it’s time to change all the passwords to the accounts you plan on keeping after separation. This is especially true if you share devices like a computer or tablet. Many sources tell you to remember your passwords and create new ones for each account.

Florida Equitable Distribution

I have written about equitable distribution in Florida before. In a proceeding for dissolution of marriage, in addition to all other remedies available to a court to do equity between the parties, a court must set apart to each spouse that spouse’s non-marital assets and liabilities.

However, when distributing the marital assets between spouses, a family court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors.

In Florida, nonmarital assets include things such as assets acquired separately by either party by will or by devise, income from nonmarital assets, and assets excluded as marital in a valid written agreement.

Importantly for a hi-tech divorce, non-marital assets would include assets acquired and liabilities incurred by either party before the marriage, and assets acquired and liabilities incurred in exchange for such assets and liabilities.

Netflix and Chill?

In some cases, a couple can divide, close, or even trade digital assets and decide which of the two households will keep an account. Sharing a Netflix account within your household, for example, may save money. But after divorce keep in mind that account sharing is only permitted for users within the same household. Netflix has announced it will crack down on illegal account sharing.

Putting aside the streaming services, like Netflix, which can easily be closed or limited, many couples may need to continue to share access to certain online accounts, even after a divorce or separation.

It is not hard to see why some accounts might need to stay active. For example, a couple’s joint checking account and credit card account may need to remain active so that certain bills during the divorce can be timely paid. Electronic access to statements and transactions; automatic bill payment services, medical insurance and cloud storage and document sites for photos and important documents and other files may be necessary too.

The law has not caught up with the digital divorce. There are no specific statutes for sharing accounts or establishing consequences should an ex-spouse or spouse change a password to lock out shared accounts.

Depending on the account, you may need to share a single login, set up separate logins to access the same account, or create a new, separate account in your own name. Anyone considering divorce has to secure their online identity, protect their passwords, protect their privacy, and most likely divide or close the shared streaming services.

The Washington Post article is here.

Equitable Distribution of Google Stock

Posted by Ron Kauffman on

Scott Hassan, known by some as the third Google founder, is finally headed to his divorce trial after nearly seven years battling over the equitable distribution of Google stock, real estate, and other technology stock – estimated to be worth billions of dollars.

Equitable Distribution Google

“I’m Feeling Lucky”

As the divorces of Bill Gates and Jeff Bezos show, technology billionaires are trying to divorce quietly, behind closed doors. For example, when Google co-founder, Sergey Brin divorced his ex-wife, he hired a private judge to hash out the details.

A quick Google search shows that Hassan and Huynh’s divorce is anything but quiet. Huynh accuses her husband of engaging in “divorce terrorism,” such as creating a negative website called AllisonHuynh.com.

The site contains documents posted of sexual allegations related to Huynh’s wrongful termination suit against her former employer. They claim that Huynh threatened to “kill [her former employer] and then herself” if he ever left her and “kept track of when [her former employer] was out with a new girlfriend,” according to the cross complaint filed by [her former employer] and his attorney in response to Huynh’s suit.

After being accused of creating it, Hassan admitted to launching the site, seeding it with links to articles written about his ex — and links to court documents from three embarrassing lawsuits that involve her.

When confronted, he purportedly admitted to The Post:

“I did, but I have taken it down. It came together in a moment of frustration, when I felt Allison and her attorney were telling one-sided stories to the press. I thought aggregating publicly available information without commenting or editorializing would help … It only ended up making our dispute more public and tense, which was never what I intended.”

According to sources, in 2018, their estate was valued at $1.8 billion and he wants to give her a minuscule fraction.

Florida Equitable Distribution

I have written about equitable distribution in Florida before. In a proceeding for dissolution of marriage, in addition to all other remedies available to a court to do equity between the parties, a court must set apart to each spouse that spouse’s non-marital assets and liabilities.

However, when distributing the marital assets between spouses, a family court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors.

In Florida, nonmarital assets include things such as assets acquired separately by either party by will or by devise, income from nonmarital assets, and assets excluded as marital in a valid written agreement.

Importantly for this hi-tech divorce, non-marital assets would include assets acquired and liabilities incurred by either party before the marriage, and assets acquired and liabilities incurred in exchange for such assets and liabilities.

“I’m Feeling Wonderful”

Mr. Hassan was a research assistant at Stanford’s computer science department when he met Larry Page, then a Ph.D. candidate. When Larry and Sergey Brin founded Google in 1998, Hassan bought 160,000 shares for $800. In 2004, the shares were worth more than $200 million. The shares, now in Google’s parent company, Alphabet, would be valued at more than $13 billion today.

In 2001 they married in Las Vegas and there was no prenuptial agreement, and they barely discussed finances. Ms. Huynh says she supported the family financially in the early years but her husband denies that.

In 2006, during the marriage, the husband formed a limited liability company called Greenheart Investments. Greenheart was valued at more than $1 billion in 2015.

Huynh wants Greenheart to be considered community property because Hassan repeatedly muddied the line between his separate assets and their community property. But Hassan argues that the company should be considered his separate property because it was started with his pre-marital assets.

Hassan acknowledged during court proceedings that he had set up Greenheart as his own company to keep certain assets ‘completely separate’ from Allison.” She insists it is community property — which partners must, typically, divide equally under California law.

Hassan maintains “that the disputed assets are properly characterized as my separate property — this does not necessarily mean that the community, or Allison, will not be compensated,” Hassan said. “I already agreed to provide her with a significant amount of money every month.”

But Huynh purportedly told The New York Post:

“His miserly position is ludicrous. I pray that a Big Tech billionaire will not get away with his attempt to cheat his children and me while he walks away with everything.”

The New York Times article is here.

 

Modern Family Problems Divorce and the Home

Posted by Ron Kauffman on

Divorce and what to do with the home is in the news now that Modern Family actress, Julie Bowen, has listed her home for sale. Although she finalized her divorce from ex-husband Scott Phillips a few years ago, her case raises the issue of housing again.

Home Divorce

Hollywood Hills Home

According to many reports, the couple reached an agreement to split their assets of $25.3 million directly down the middle. In the divorce agreement, Bowen, who first filed for divorce in February, will receive more than $13 million while the real estate investor will receive $12.3 million.

In their marital settlement agreement, Bowen got to keep the Hollywood Hills house, worth $3.1 million at the time. Bowen had purchased the property after the separation.

Phillips, on the other hand, got to keep the couple’s $5.4 million marital home. Details of custody, child support and spousal support were filed in a private settlement agreement.

House and Divorce

I’ve written about the marital house during a divorce before. Generally, the home remains a marital asset, which is subject to equitable distribution, regardless of who lives there during the divorce process.

If a home is marital then both parties have equal rights to buy – out the other’s share. Both may also be on the hook for liabilities.

Until a divorce parenting plan in place, if you are interested in maintaining a meaningful relationship in your child’s life, leaving the home before a timesharing agreement is entered may show a lack of real interest in the child’s daily life.

Moving out can create the appearance of a new ‘primary residential parent’ by default. Worse, if the process takes a long time, it creates a new status quo.

The person leaving during a divorce may still have to contribute for the expenses of the home while also paying for a new home. It can be costly, and prohibitive expensive when you know that the process will take a long time.

Staying in the same home could create an incentive to negotiate a final settlement because living with your soon to be ex-spouse is very uncomfortable. However, if someone moves out, the person remaining in the home is sitting pretty and may be less inclined to settle.

Before moving out, there should be some discussions about maintaining the home and who is paying for which expenses, an inventory should be made of the personal property, artwork, silverware etc., and the boundaries for when the ‘out-spouse’ can use and enjoy the home after vacation

A Modern Family Home

The designer Hollywood Hills pad she purchased in 2017 shortly after splitting from her ex-husband was reportedly worth $3.1 million during the divorce because that was what she paid for it. The mid-century modern time capsule home just off iconic Mulholland Drive is now on the market for $3.85 million.

Designed by architect Thornton Abell, the glass-walled structure is made up of four bedrooms and three baths and spans over 3,200 square feet. Built in 1959 for prominent heart surgeon Augustus Bakos, the home was later acquired by the son of Beach Boys co-founder and guitarist Carl Wilson, who renovated the home and expanded it.

Pegged as “exceedingly private,” the property sits on a long, gated driveway and boasts pastoral canyon and treetop views. Interior features include floor-to-ceiling walls of glass, which are complemented by Palos Verdes stonework, terrazzo floors, custom divider screens and teak cabinetry.

Other interior finishes include a granite and stainless steel kitchen, an expansive master suite with a fireplace, a large walk-in closet and a terrazzo master bath with a glass ceiling.

It also boasts separate guest quarters, a small detached gym in the backyard, a poolside living room and a lush garden atrium. Bowen, 51, had been married to Phillips, a real estate investor, for over 13 years before calling it quits. They share 14-year-old Oliver and 12-year-old twins John and Gustav.

The New York Post article is here.

 

Property Division and Embryos

Posted by Ron Kauffman on

Property division of a couple’s embryos is back in the news again, and will increasingly be an important part of any divorce case, as more couples seek In Vitro fertilization and other assisted reproductive technology.

property division embryo

Modern Family

Many people recall that Modern Family actress Sofia Vergara was in a dispute with her former partner Nick Loeb over frozen embryos. They ended their engagement in May 2014, the year after they underwent in vitro fertilization treatment together, and he tried to gain full custody of the fertilized eggs to have them implanted in a surrogate.

In February a court granted Sofia a permanent injunction which would stop her former partner from being able to use the fertilized eggs to “create a child without the explicit written permission of the other person”.

Do agreements matter? When Peter Goldin, a 44-year-old communications director, and his husband decided to start a family through in vitro fertilization, they faced mounds of paperwork at the fertility clinic deciding what should happen to any remaining embryos in the case of divorce or separation?

The couple, who used one embryo to have a daughter, decided that if they broke up, Mr. Goldin would be the one who decided what to do with their one remaining embryo, since it was created with his sperm and a donor egg.

But Mr. Goldin said that when he and his husband separated last year, his husband no longer wanted him to have sole authority to determine what would happen to the embryo. “He had forgotten what he had signed at the clinic,” said Mr. Goldin, who, with the help of a lawyer, ultimately gained custody after a month of back and forth.

Florida Property Division

I’ve written about the Vergara case and the subject of property division in Florida many times before. Property division, or equitable distribution as it is called in Florida, is governed by statute and case law.

Generally, courts set apart to each spouse their nonmarital assets and debts, and then distribute the marital assets and debts between the parties.

Anyone who has been divorced knows the painful process well: disentangling finances, dividing possessions and mapping out custody arrangements for any children. And in recent years, with the use of artificial reproductive technologies on the rise, more couples have been confronting the even stickier question of what to do with frozen embryos.

In some states, consent agreements signed in fertility clinics, which can provide that embryos would be destroyed if the couple were to divorce have been determined to valid and enforceable contracts.

In New York, after a husband requested sole custody of the one remaining cryopreserved embryo and revoked his consent to use any of his genetic material, a court has narrowly read consent provisions and found such agreements permitted either party to withdraw consent to participation in the entire IVF process, and that the husband’s broadly worded revocation of consent was effective to revoke his consent to the continuation of the IVF process. The court awarded the remaining embryo to the husband, but only for the purpose of ensuring that NHF disposes of the embryo as provided in the Consent Agreement.

Divorce and Embryos

In the event of divorce, couples are not together anymore, probably don’t like each other, and if one person is going to use the embryo and have the child, that leaves the other person in an awkward spot.

For those who fail to plan for the worst, the results can be devastating. Couples who produce healthy embryos and freeze them for when they would be ready to have children face a problem years later when they want to divorce.

In many cases, judges have upheld agreements couples have signed at the fertility clinic, which say that the embryos could be brought to term only with the consent of both partners.

But as the New York Times reports:

“My state of mind at the time was complicated by cancer, being a newlywed and just this hope and opportunity to have children. It was unfathomable that that’s what would eventually determine that my last chance of having biological children would be taken away from me.”

Laws governing the disposition of frozen embryos vary from state to state. Judges have generally ruled in favor of the person who does not want to develop the embryo, but in Arizona, for example, the custody of disputed embryos goes to the party who wants to bring them to term.

Kathleen Pratt, 36, said that the process of poring over sheafs of legal documents to finalize the use of a surrogate led to several discussions with her husband, William, about what they would do with any remaining embryos if they divorced.

Ms. Pratt said her husband initially told her it made more sense to give her custody of remaining embryos — made with a donor egg and her husband’s sperm — because she was unable to have biological children. Then, Ms. Pratt said, she felt he should get to keep the embryos because they contained his genetic material, not hers.

Eventually they came to a decision: Neither should keep the embryos. Ms. Pratt, who lives in Charleston, S.C., remembers she and her husband saying to each other, “Why would we raise these babies outside of our family? If things go sour, let’s just call it a day.”

They ended up using both embryos to have a daughter in 2019 and a son last year. “I wouldn’t recommend anyone go through this with someone unless your relationship is solid,” she said.

The New York Times article is here.

Coronavirus Divorce Spike and Property Prices

Posted by Ron Kauffman on

The coronavirus divorce spike is having an impact on property prices. Many have heard that the financial impact of shutting down the economy, coupled with the stress of being in quarantine for months, is causing a surge in divorce rates. That increase is also impacting property values.

divorce property

House Hunters

In Great Britain, there has been a 42% rise in divorce inquiries between mid-March and mid-May, compared with the same period in 2019, according to the figures from Co-op Legal Services.

Based on the latest divorce data from the Office for National Statistics (ONS), this could mean an extra 38,346 couples could be calling it a day in 2020.

Some are speculating that therefore; the property market could see a boost of 38,346 homes entering the market if these additional divorces lead to the sale of the family home.

With the current average UK house price at £243,809, the addition of divorce properties hitting the market could total over £9.34bn ($11.85bn) in transactions for the property market, according to research from estate agent Barrows and Forrester.

Florida Divorce

I have written on the topic of divorce and coronavirus issues in the past. For many couples simply putting a shared home up for sale may seem like the simplest solution, but remember, that step won’t automatically erase all mortgage headaches or end the need to co-operate with your former spouse.

You will still need to agree on a realtor and asking price as well as determine how the continuing mortgage payments will be made. Will you be splitting the expense 50/50? Will the spouse who continues living there make the full payment?

If your home sells for more than the outstanding balance on the mortgage, how will the remaining proceeds be divided between you both after settling the joint debt? Worse, if you end up underwater on the mortgage, you’ll have to decide if you can even afford to sell it and how you’ll pay off the remaining debt if you do.

There are also the taxes. You can each exclude the first $250,000 in capital gains — the amount your home has appreciated in value since you bought it — from your taxable income, if the home was your primary residence and you owned it for more than two years.

If you opt to file a joint tax return, you can exclude up to $500,000. Earnings above that exclusion or on the sale of, say, a vacation property, could stick you with a tax bill.

Miami Divorce Spike and Property Prices

The surge in divorce filings and the impact on property owners, it is thought, could provide a much needed boost to the industry which saw market activity slow to a trickle for much of the lockdown as the UK government urged against house moves, with many estate agents shutting their doors with physical viewings and valuations off the cards.

The coronavirus sparked the biggest monthly fall in UK house prices since 2009, according to lender Nationwide’s closely followed house price index.

The same is true in Miami, where home sales in South Florida plummeted in April. Sales of both condos and single-family homes dropped nearly 40% in Miami-Dade and Broward from the same month in 2019.

Incredibly, median prices continued to increase. Median prices rose for both single-family homes and condos, despite the pandemic and drop in sales. Sales under contract in February and March, closed in April, reflecting a strong first quarter.

The median price for single-family homes grew by 7.3%, from $356,000 to $382,000. The median condo price increased by 6.9%, from $248,000 to $265,000.

More than 90% of median-priced single-family homes and condos sold for at or near the asking price. Cash transactions comprised 22.1% of all transactions, down from 34.8% in April 2019. That’s still more than the national percentage of 15%.

However, some think divorce property on the market could lift property stock and keep prices up amid a considerable increase in buyer demand since the industry lockdown was lifted in May.

Unfortunately, divorce is an inevitable aspect of modern-day life and one that has been exacerbated as a result of a lengthy lockdown at home with our significant other. It’s also one of three influences that regularly see properties come to market, along with death and debt, as couples look to divvy up their existing assets in order to move on in life.

The one positive of this is there has been a huge uplift in buyer demand since the property industry reopened last month but a continued hesitance by some sellers to list and this stock boost should help meet this demand while helping keep house prices buoyant.”

The UK Yahoo article is here.

 

Property Division and the Family Castle

Posted by Ron Kauffman on

For many American families, their home is their castle. When divorce is on the horizon, your castle may fall under attack. Florida’s property division statute requires an equitable distribution of all marital property, but it is not a how-to guide. Money magazine has an article looking at some of your options.

Property Division Castle2

The Coronavirus Crash

Before the silent enemy Covid-19 hit us, the median value of a home in the U.S. was $247,084, and the average amount of mortgage debt a person topped $202,000.

With many experts predicting the coronavirus siege will lead to a surge in divorce, deciding how to deal with your marital home – and its accompanying debt – can be a dangerous financial burden in every case. Below are some strategies to defend your castle.

Selling the Castle

For many couples simply putting a shared home up for sale may seem like the simplest solution, but remember, that step won’t automatically erase all mortgage headaches or end the need to co-operate with your former spouse.

You will still need to agree on a realtor and asking price as well as determine how the continuing mortgage payments will be made. Will you be splitting the expense 50/50? Will the spouse who continues living there make the full payment?

If your home sells for more than the outstanding balance on the mortgage, how will the remaining proceeds be divided between you both after settling the joint debt? Worse, if you end up underwater on the mortgage, you’ll have to decide if you can even afford to sell it and how you’ll pay off the remaining debt if you do.

There are also the taxes. You can each exclude the first $250,000  in capital gains — the amount your home has appreciated in value since you bought it — from your taxable income, if the home was your primary residence and you owned it for more than two years.

If you opt to file a joint tax return, you can exclude up to $500,000. Earnings above that exclusion or on the sale of, say, a vacation property, could stick you with a tax bill.

Keeping the Home

Divorce upends life, and it makes sense that a majority of the time at least one spouse isn’t ready to leave the marital home and add the stress of moving to their to-do list.

The idea of remaining in a familiar, comfortable home can seem even more compelling when there are children who might have to change schools or leave behind friends.

But many financial advisors and divorce attorneys caution against keeping your old home after a divorce, calling it one of the biggest mistakes you can make during the process.

If you want to remain living in the home you once shared with your ex-spouse, you need to carefully review your budget and weigh whether you can individually afford it.

Refinancing the Mortgage

If you have $50,000 in equity in your current home and you’ve agreed to a 50-50 split of its value, you’ll need to come up with $25,000 to buy out your former spouse. In return, your ex-spouse should remove their name from the property title, typically using a quitclaim deed.

If you don’t have the cash, you might need to give up other assets in the divorce negotiations equal to the home’s equity, such as your investment account, 401(k) or IRA.

However, qualifying as a single person can be challenging as lenders will examine your individual earnings, credit history, and savings to see if they believe you’re capable of repaying the loan.

Staying Co-owners of the Manor

If you are unable to refinance or payoff the mortgage, you may be able to keep the status quo. This is not recommended, as it requires a high degree of trust in your former spouse.

Since both your names will remain on the home and on the mortgage, you’ll both be liable for making payments. Should your ex-spouse stop contributing their share, you could face more debt, foreclosure, bankruptcy or poor credit.

Florida Property Division

I’ve written about houses and property divisions before. In Florida, every divorce proceeding the court has to set apart nonmarital property, and distribute the marital property.

Florida judges always begin with the premise that the property distribution should be equal, unless there is a reason for an unequal distribution based on several factors.

One of the factors the court has to consider is the desirability of keeping the home for the kids or a spouse, if it’s equitable to do so, if it’s in the best interest of the child, and financially feasible.

However, whether keeping the home for yourself or the kids is financially feasible requires you to have an honest look at what you can and can’t afford. Some strategies to keep the home include:

Raiding Savings

While not the best solution, pulling from savings can help you keep hold of the home. By obtaining a court ordered qualified domestic relations order or QDRO, you can gain access to a portion of your ex-spouse’s employee retirement plan assets.

Such funds may not be subject to the 10% early withdrawal penalty for people under age 59.5, meaning you’ll save more on taxes by using this money to secure your home than you would by tapping other accounts you may have.

Alternatively, if you have Roth IRA savings, you could pull an amount equal to what you’ve contributed tax and penalty free, again making it a smarter way to meet your mortgage payment needs.

Raising Rents

If you’re really determined to keep the home, but cannot pull from savings or refinance, it might be worth brainstorming ways you can earn income from it to help cover the mortgage and upkeep costs.

Renting out the whole home while you’re on vacation – or even just a bedroom or two when in town – could make you hundreds a night. Airbnb hosts, for instance, can make over $900 a month according to research.

If you can’t refinance the mortgage in your own name, keeping the home isn’t a wise decision. It is better to restructure your life in a way that makes sense in the long run, rather than pillage your other financial accounts.

The Money article is here.

 

The Ultrawealthy Divorce Differently and there’s more Good News on Coronavirus

Posted by Ron Kauffman on

Locked out of your $88 million Manhattan condo? The rich are different when it comes to equitable distribution. As the Wall Street Journal reports, how ultrawealthy couples divorce is becoming much harder as financial portfolios become more complex. There’s also good news on the coronavirus.

Ultrawealthy Divorce

Enter the Badlands

Many ultrawealthy people in a divorce are having trouble finding assets, like the front door keys to their $22 million Hawaii home. A big reason for the complexity is the widespread use of trusts. Trusts can play a big role in divorce depending on your circumstances.

Setting up a trust may allow you to safely transfer ownership of your non-marital property into a separate trust. If you divorce, a trust like this may make the entire property, and its appreciation, out of equitable distribution.

South Dakota is becoming a hotspot for trusts, holding almost a trillion dollars in trust assets because state laws have made South Dakota more favorable for trusts. Generally, trust assets are managed by a Trustee for the benefit of beneficiaries.

A trust can be drafted with a variety of different provisions in order to accomplish a variety of different goals. In every trust, the Trustee must account to the beneficiaries about its actions, and it must be fair and prudent in dealing with the trust and beneficiaries.

So, what happens if one spouse is named as the beneficiary of a trust, and that spouse benefits from the trust during the marriage? The answer to questions like this is not always straightforward in every state.

Florida Equitable Distribution

I have written about Florida equitable distribution during divorce before. In Florida, the legislature has created a statutory scheme to guide family courts in the equitable distribution of assets upon dissolution of a marriage.

Under Florida’s equitable distribution statute, marital assets include assets acquired during the marriage, individually by either spouse or jointly by them. Nonmarital assets include assets acquired by either party prior to the marriage, and assets acquired in exchange for such assets.

The equitable distribution statute also creates a rebuttable presumption that assets acquired by either spouse during the marriage are presumed to be marital assets: “All assets acquired … by either spouse subsequent to the date of the marriage and not specifically established as nonmarital assets … are presumed to be marital assets …. Such presumption is overcome by a showing that the assets … are nonmarital assets ….”

That’s where trusts come in. Although your home became a marital asset when you purchased the home and jointly titled it in you and your spouse’s names, the home can cease in character to be a marital asset upon its transfer into a trust.

At that point, the home can become part of the assets of the Trust, an entity distinct from either a Husband and Wife. Transferring a home into a Trust has the possibility to place the home beyond a family court’s reach for purposes of equitable distribution in a divorce.

In South Dakota We Trust?

As the Wall Street Journal reports, Texas financier Wilbur Bosarge and his wife of 22 years, Marie Bosarge, conducted business affairs through various trusts. For instance, they used a trust to buy a $45 million dollar flat in London’s “Billionaire Square.”

After Marie flew back and forth between Texas and London decorating and hand selecting furnishings for the new London flat, she never got to see it finished.

By the time it was complete, her husband left her for a 20-something Russian mistress who moved into the flat instead.

Owning the flat through a complex network of trusts and limited liability companies, the husband is using the ownership structure to eliminate her stake in the property. The wife may be stuck, because a family court may not be able to decide property rights of a nonparty to a divorce, like a trust or limited liability company.

Good News on Coronavirus

Let’s face it, the media has a tendency to give extra coverage to bad news, because readers find negative stories more eye-catching.

But, from lower toxic fumes to more time spent with family, there is always good news to report during the high point of the novel coronavirus pandemic.

  • First, there are tentative signs of infection curves flattening. Concentrate on statistics about the tendency of curve flattening – not the rising death rates – as an early harbinger of the turning point.
  • Second, a major model has lowered its prediction for the death toll in the United States. The model predicts that some states will start to see fewer deaths from COVID-19 each day and some states may have even passed their peak.
  • Third, pharmaceutical firm Abbott Labs said it was launching a test for the SARS-COV-2 virus that could take as little as five minutes and “be run on a portable machine the size of a toaster”. German technology company Bosch says it has done the same. Johnson & Johnson said it had identified a vaccine candidate and the US government was investing $1 billion in its development.
  • Fourth, other groups are investigating ways to start human trials for vaccine candidates early, and are using brave and willing volunteers, who haven’t been at all hard to find.

The Wall Street Journal article is here.

 

Divorce and Business Property Division

Posted by Ron Kauffman on

When one of Zach Hendrix’s three business partners said he was getting divorced, sympathy turned into shock as everyone realized that a soon-to-be ex-wife could become a co-owner. Understanding the law around business and property division in a divorce is the first step to protecting yourself.

business property divisions

Open for Business

When a small business owner divorces, the company can become part of a property fight; the battle can end with owners losing all or part of their businesses. Or, they or the company may be forced to take on debt to prevent an ex from sharing ownership.

Even when ownership isn’t at stake, the rancor and uncertainty around a divorce can take a toll on a company — owners may be distracted and unable to focus on what the business needs.

Hendrix and two of his co-owners had to borrow a combined $250,000 to buy out their partner in 2017 after he announced his divorce plans. A startup, and not in a position to get that much credit, the three had to personally guarantee the loans. They were able to repay the debt in a year and a half out of their profits.

The divorce was a learning experience for the partners. When they started, they hadn’t written what’s known as a buy-sell agreement that creates a process and sets a price for buying out a partner.

Florida Business Property Division

I have written about property division recently. Florida is an equitable distribution state when it comes to dividing businesses in divorce.

In a proceeding for dissolution of marriage, in addition to all other remedies available to a court to do equity between the parties, a court must set apart to each spouse that spouse’s non-marital assets and liabilities.

There are several factors to know whether a business interest is marital. First, you will need to look at the date of marriage and the date the business interest was acquired.

Additionally, you should look to the source of funds used to start the business, and also if there were money and labor contributions to the business given by either spouse during the marriage. In distributing the marital assets and liabilities between the parties, the court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution.

Whenever an agreement cannot be made between the spouses, the court’s distribution of marital assets or marital liabilities must be supported by factual findings and be based on competent evidence.

Once you have determined whether an interest in a business is marital, how do you actually determine what that interest is worth?

There are three approaches to value a business interest: (1) the asset approach; (2) the income approach; and (3) the market approach.  Each approach has inherent strengths and weaknesses.

Any valuation expert should consider all three approaches; however, it is often the case that all three approaches cannot be applied.

Back in business

The emotional fallout from a divorce can affect co-owners and employees. In his settlement with his wife, Jeffrey Deckman agreed to pay her $100,000 over four years; that amount was half what his telecommunications business was valued at.

Deckman borrowed money to make the payments, but having that debt hanging over him created stress that spilled over to his company.

“I started getting edgy, short-tempered, pushing hard for (sales) numbers that I never pushed so hard for before.”

He began fighting with his two business partners, and the discord affected everyone who worked there. It took six months for Deckman to realize what he was doing. “It showed me on a certain level that I hadn’t accepted responsibility for the deal I made,” he says.

But by the time Deckman understood that “I was making people pay,” he had damaged his relationship with his partners and staffers. In 2005, two years after the divorce, he realized that he needed to withdraw from working in the company, and in 2008 he sold his stake. Deckman, who now does consulting for small and mid-sized companies, believes despite losing his share of the business that he did the right thing in his divorce settlement.

He says of his ex-wife: “Today, years later, we are great friends and our children benefit greatly because of it.”

The Detroit News story is here.