Tag: postnuptial agreement

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.

 

New Article: Ambiguous Divorce Agreements

Posted by Ron Kauffman on

Seeing more emojis? Are you confused about their meaning? For some light reading this Memorial Day weekend, my new article dealing with legal ambiguity in divorce agreements, “If it looks like a duck: Emojis, Emoticons and Ambiguity,” in the Spring 2018 Florida Bar Commentator, is now available in print and to download. Here is the abstract:

What are Emojis?

Originating in Japan in 1998, emojis are small digital images used to express an idea or an emotion in electronic communications. The term emoji is Japanese for “picture character.” Picture (pronounced “eh”), and character (pronounced moh-jee).

Today, roughly 70 percent of the public uses some type of social media. Social media has changed many of the ways in which we communicate. For one thing, social media has increased our use of emojis.

One report found that more than 92 percent of people use emojis on social media.

Emojis have spread to the business world, where nearly half of workers add emojis to professional communications, and companies use them to increase sales and brand awareness. You can order your next Domino’s with the “Slice of Pizza” emoji.

Emojis have also spread to family law courts, as parents are frequently using texts, emails and social media in order to communicate their agreements and understandings about their kids.

Ambiguous Divorce Agreements

There are unique issues with emojis, rendering them hard to interpret. This is a subject I have written about frequently. For one thing, there’s no definitive source as to what emojis mean.

That unknown can make agreements between parents about custody, visitation, temporary support in emails, texts or on social media, ambiguous. Divorce agreements are interpreted like any other contract.

Basic interpretation begins with the plain language of the contract, because the contract language is the best evidence of intent.

Courts are not supposed to rewrite terms if they are clear and unambiguous. Anyone seeking to show a court any evidence outside a fully integrated contract, must first establish that a contract is ambiguous.

Emojis and Legal Ambiguity

A contract is ambiguous when its language is reasonably susceptible to more than one interpretation. That’s where emojis come in, they can be very ambiguous. But why?

Emojis are also small, making them hard to read. Interpreting an emoji can depend on what kind of device they appear in. For example, a 24-inch computer monitor displays thing differently than a 4-inch phone screen.

Emojis don’t always mean the same thing universally, so there can be many different meanings depending on which country you are in. For example:

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The “Folded Hands” emoji symbolize “please” and “thank you” in Asia. However, in the U.S. it means: “I’m praying,” and frequently, “high-five”!

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The “Pile of Poo” emoji is a pun on the Japanese word for excrement (unko), which starts with the same “oon” sound as the word for “luck” and is complimentary in Japan. But, in the U.S. the emoji is used to express contempt. Strangely, Canadians use the emoji the most.

You can’t understand an emoji’s meaning just by looking at one. People use emojis in ways that have nothing to do with the physical objects they represent, or even what typographers intended.

There are regional, cultural and slang meanings to consider too. After all, emojis’ inherent ambiguity is one reason why they’re increasingly becoming evidence in court.

The Spring 2018 Family Law Commentator is available here.

 

Challenging Divorce Agreements

Posted by Ron Kauffman on

A recent case in Florida shows that if your prenuptial agreement, divorce agreement, or mediated marital settlement agreement is poorly written, and the terms are ambiguous, you could be back in court fighting over it – as one South Florida couple found.

Prenuptial Agreement Miami

Clear as Mud

After a hearing, a family trial court judge found that a divorce agreement was “clear and unambiguous” and entered a final judgment. On appeal, the appellate court found the same contract to be ambiguous and reversed and remanded to hold more evidentiary hearings.

The confusion? The parties’ mediated settlement agreement required dividing the Former Husband’s pension, which provided:

The wife is entitled to 50% of the marital portion of this plan through the entry of a Qualified Domestic Relations Order. The marital portion is defined as the amount from the date of the marriage through the date of the filing of the Petition for Dissolution of Marriage.

The wife contended that the entire pension is marital because the enhancement was purchased with marital funds; the former husband argued that the purpose of the Agreement provision was to divide the pension 50/50, except for the enhancement portion.

Legal Ambiguity

I recently wrote an article in the Florida Bar Commentator about legal ambiguity and emojis. Divorce contracts are construed in accordance with its terms, so that where the terms are clear and unambiguous, the parties’ intent must be gleaned from the four corners of the document.

When a term is ambiguous or unclear, the trial court may consider extrinsic evidence as well as the parties’ interpretation of the contract to explain or clarify the language.

Ultimately, the appellate court considers whether the contractual provision was actually ambiguous; if not, ‘the language itself is the best evidence of the parties’ intent, and its plain meaning controls.

Determining if a contract is ambiguous may require the court to consider reading the entire agreement to clarify what the parties meant by including the provision.

A provision is ambiguous if it is fairly susceptible to different constructions.

Emojis and Ambiguity

Originating in Japan in 1998, emojis are small digital images used to express an idea or an emotion in electronic communications. Emojis are increasingly becoming evidence in family court, because they create ambiguity in agreements.

Emojis are also small, making them hard to read. Interpreting an emoji can depend on what kind of device they appear in. For example, a 24-inch computer monitor displays thing differently than a 4-inch phone screen.

Emojis don’t always mean the same thing universally, so there can be many different meanings depending on which country you are in. As a result, state and federal courts around the country are increasingly having to interpret emoji meanings.

Back to the Pension

The retirement provision was found to be ambiguous because it was fairly susceptible to different constructions. If the parties intended to split the pension equally, they could easily have said that the pension would be divided 50/50.

Yet, the Agreement refers to the “marital portion” of the FRS plan, a wording that suggested that the parties contemplated that some portion of the plan was non-marital.

The court found that a possible reading of the provision is that the marital portion of the plan is only that portion attributable to the former husband’s time of service with BSO.

Because of the ambiguity, the appellate court remanded the case back to the trial court to hold more hearings.

The appellate case is here.