Asset distribution at divorce

[ML]

Note:  No need to tell me that internet forums are not the place to get legal advice or valid information.

A friend of mine is facing divorce after 51 years of marriage.
Man and woman both had good professional career.
All children are adults.
Their earnings were approximately equal in total, but he has maybe $300,000 more in retirement plans because he started saving earlier and he had more invested in risky stocks (compared to her heavy in bonds portfolio) that paid off . . . at least as of this month.

They have been separated a couple of years, but nothing related to court filings, etc.

The house (jointly owned) he is living in is worth about twice what the house (jointly owned) she is living in is worth; but this is due to his labor time put into the house (after the house framed up by a crew, he finished it off nights, weekends, etc.), not joint funds used to purchase or improve.  Both houses jointly owned.

During a stressful time in marriage several years back, he asked her what she wanted in terms of financial settlement following divorce.  She stated she needed a place to live, and a car.  This was when she was living in the house he now lives in alone.  She further stated that they should both keep their retirement monies separately.  At that point his retirement funds were only maybe $100,000 more than hers.  (Remember the big recovery of stock values last couple of years, so now he has the $300,000 more.)  And she stated that when their jointly owned small businesses were sold off, she should get 40% and he get 60% reflecting the work he would have to do in selling them off.  These businesses are run 'day to day' by hired managers.

Over the years, going back maybe 30 years, they both had commented how stupid it was to get lawyers involved in divorce (when they saw with what happened to friends, on drama TV and big screen movies, etc.) because of the substantial money taken by lawyers when substantial estates involved.

Two or so years ago, they jointly bought this second house in another state that she wanted to live in to be near grandchildren.  They never spoke about divorce and there was even some talk that he might move to that house at some point.  She already had a nearly new car that she took with her.

They have been very amicable while living apart, exchanging emails and phone calls, mostly talking about their children, grandchildren, etc.  No hint of divorce from either party.  And no evidence that either party is romantically involved with other persons.

And he has sold two (out of six) small businesses and sent all the proceeds to her.  He was asking me to help figure out how  to split sale of next business as it would put her over the 40% mark.

Then, 'out of the blue,' he is served with divorce papers.  On the same day that she had just sent nice email to him telling of grand children's swimming competition.

She had retained a lawyer in his home state, and based on dates he showed me on the extensive stack of documents involved, she had been working with this lawyer for 4-5 months . . . all the while chatting away cordially with him.

The basic filing says she is seeking:  A) order of divorce, B) equitable distribution of the marital estate, and (unbelievably) C) Alimony.

He (and I) think she really didn't ask for alimony, but the lawyer (or staff person) included it since they are used to just typing it in.

Because she hired lawyer despite fact they had discussed (as noted  above) how stupid it was to do so, compared to just working it out  between the two, he suspects:

That she will disavow her previous statements, and go after his retirement funds that are in excess of hers, ask for additional money to compensate for the lower value of the house she is living in compared to the one he is living in, and even want 50% of the remaining businesses.

He has been working like a dog in selling these businesses for the last two or so years . . . while she is enjoying the good life with the grandchildren.

But he is strongly suspecting he is going to get 'taken' in the court proceedings.

He wrote her expressing his shock at getting served with the divorce papers, reminding her of her previous 'verbal' statements of what she wanted in divorce; and asked her to tell him what she now wants.

She has refused to answer him for about 10 days now . . . probably on advice of her lawyer.

What wisdom do you all have from your experiences and experiences of friends you know?

The divorce filing is in a state (where he lives) that is not a Community Property state.

Is the judge likely to say he/she doesn't give a sheeeet about any verbal agreements they had, and that he/she doesn't give a sheeeet about the labor he put into the home, and he/she doesn't give a sheeeet about the effort the man has been putting into selling off assets (and sending her the money) . . .

And just order a 50/50 split of everything?

Aside from him losing big time, the grandchildren will lose big time, as he was planning to give most all to them in trusts, etc.

But, a forced sale of the remaining businesses, and a forced sale of the house he is living in (he doesn't have cash to buy her out) will cause a 30-60% or more loss in value.

[Slumba]

I would strongly recommend, that if at all possible, they should negotiate or go to mediation (even if non-binding) rather than fight it out in court.  This could easily be a $100K or more legal bill if it got nasty.

EDIT: I mean that he should push for that even though he is already served with divorce papers.  Pushing for it, even if it never happens, will show him to be reasonable and interested in solving the issue, even if it does go to court - this will put him in a better light with the judge.

[BillyB]

What wisdom do you all have from your experiences and experiences of friends you know?

He needs an attorney to counter his wife's attorney or he will be roasted in court. He will look like a fool if he can afford an attorney but doesn't hire one.


Most likely the judge would split everything 50/50 but the attorneys will drag it out. They will ask for massive amounts of paperwork to read about their assets and businesses. I can imagine an attorney having to read that paperwork. His/her eyes are going to get sore but getting paid $300 an hour will ease the pain.

I would strongly recommend, that if at all possible, they should negotiate or go to mediation (even if non-binding) rather than fight it out in court.  This could easily be a $100K or more legal bill if it got nasty.

Mediation is necessary in most, if not all, states before going to court.

Pushing for it, even if it never happens, will show him to be reasonable and interested in solving the issue, even if it does go to court - this will put him in a better light with the judge.

There are no points for being a nice guy in court. ML's friend can be a nice guy right now and sign over half of everything free and clear outside of marriage and in court the judge will give his wife half of what's remaining in marriage.

[Gator]

ML,
 
Until the divorce is completed a  wife still has spousal rights.  It matters not that they lived separately; they were still married. 
 
Verbal commitments are only admissible if she confirms them.  I doubt she will.  If he asks, she could tell a judge that she felt pressured and said something merely to reduce the personal stress.  However, she did not know her rights , was not unsure about the value of marital assets, and never thought her conversation was definitive.
 
He needs to get an attorney,  something he should have done years ago.  I suggest that he retain a collaborative attorney and seek a negotiated settlement through mediation.  She seemingly has retained a bulldog.  Using his own bulldog to undertake a long fight with another bulldog will generate high legal fees.
 
You wrote "... the grandchildren will lose big time, as he was planning to give most all to them in trusts, etc."  You are missing a point.  I imagine she believes that being more aggressive and using an attorney  is necessary to protect her grandchildren.   Her attorney and her women friends have whispered in her ear that divorced men do not care about the grandkids and instead spend all their money chasing young women, so she must go to court.   However, he can still provide for the grandchildren such as giving them his house in some trust.
 
With 51 years of marriage, she should get half.  Advise him to pay up to close the matter quickly, and then live peacefully.   His feelings about her will diminish.

[Boethius]

Collaborative law/mediation is the best way to go, but if she has already hired a lawyer, it may be too late for that.
 
I don't know if assets acquired since the date of separation would be factored into any settlement.   Where I live, they would not be.  That is a matter of state law.
 
The alimony is probably included as a negotiating tactic.  That is common here.
 
He should hire his own lawyer, one well known in his area, and divide the assets 50/50.  The issue will likely be disclosure, and whether she trusts he is disclosing all assets.
 
 
 

[BillyB]

I suggest that he retain a collaborative attorney and seek a negotiated settlement through mediation. 

It's to the man's benefit to get things done in mediation but not to the woman's. A woman can go to court get her half even with attorneys involved. ML needs to make some things clear with his friend. If it goes all the way to court and based on the length of marriage of his friend, a fair judge would split the assets 50/50 before attorney fees are factored in. Because his friend is working and the wife is not, his friend would have to pay alimony for quite some time especially since she's not very employable and pay for his wife's attorney fees which would be in the tens of thousands if not more. The money he would have to pay comes out of his half. With alimony included she'll get 55% of everything, he'll get 25% and the attorneys get 20%. That is my prediction.

[GQBlues]

ML

IMHO, 51 years of marriage and she'd like an even split...

Is there a problem I'm missing?

[ML]

There are no points for being a nice guy in court. ML's friend can be a nice guy right now and sign over half of everything free and clear outside of marriage and in court the judge will give his wife half of what's remaining in marriage.

Good point.  As I mentioned he has already sent her the net proceeds received from selling 2 small businesses - - - about $375,000.  But she may have spent or given that away - - - and now seeks (likely receives) 50% of remaining 4 small businesses.

[ML]

Until the divorce is completed a  wife still has spousal rights.  It matters not that they lived separately; they were still married. 

I understand this - - - but how does it relate to anything I mentioned?

[ML]

Verbal commitments are only admissible if she confirms them.  I doubt she will.  If he asks, she could tell a judge that she felt pressured and said something merely to reduce the personal stress.  However, she did not know her rights , was not unsure about the value of marital assets, and never thought her conversation was definitive.

He tells me, and I think he is right from my interaction with his wife, that she is very honest and ethical.  If questioned under oath, she would probably admit that what he says she said is true.  But, she is not planning to be in court and will let her attorney handle it.  Her attorney probably will not allow her to answer the question.

And, as I wrote originally, she had a professional  business career just like he did.  She knew just as much about her rights as he did, worked under pressure and stress all the time, etc.  Not a beetch, but not a pushover in negotiations either.

[ML]

   However, he can still provide for the grandchildren such as giving them his house in some trust.

But, as I mentioned, the forced sale of the businesses will bring in 10 - 30 cents on the dollar. Surely most readers here know this.   And perhaps there will be a forced sale of the house he is living in.  This will diminish substantially what could go to heirs.

[ML]

With 51 years of marriage, she should get half.  Advise him to pay up to close the matter quickly, and then live peacefully.   His feelings about her will diminish.

Yes, but the question is . . . half of what.  Remember he has already sent her substantial money with the belief that this was what she wanted.  But if that money is already spent or given away . . . then how will it factor in; will that count toward her half.

And, what if judge counts that as her part of her half, and then sets aside an equal amount as his half from his retirement balances or the estimated value of some business.  But this is comparing apples and oranges because the retirement money is before taxes and the business value is before taxes, whereas the money she already received from sale of two businesses was after tax.

I am just getting started on some of the numbers for him . . . and I see it is going  to be a nightmare.  And to think that two lawyers and a judge who know virtually nothing about finance and taxes will decide this.

[ML]

I don't know if assets acquired since the date of separation would be factored into any settlement.   Where I live, they would not be.  That is a matter of state law.

There is nothing in this category for either party.  They are both retired.  If anything were purchased, it would be from using prior assets.

[ML]

The alimony is probably included as a negotiating tactic.  That is common here.

But he is not earning any salary.  The only steady inflow of money for both is social security and it's pretty close to the same for both.   They both have tons of money in retirement funds, houses, cars, etc., but not much spendable cash, except for the money he sent her from sale of the two businesses.  They have no mortgages, no loans, no credit card debts and fairly frugal spending habits, so they can both easily live on the SS income alone.

I think the asking for alimony in these circumstances is ludicrous and hope a judge would see it as a bad faith claim.  Again, he doesn't think the wife asked for it; but rather that her attorney just threw it in.

[ML]

He should hire his own lawyer, one well known in his area, and divide the assets 50/50.  The issue will likely be disclosure, and whether she trusts he is disclosing all assets.

But again, the question is 50/50 of what, and how to mix before tax and after tax values, and how will the money he already sent her for the two businesses sold be counted, and why would he be under any more questioning as to hiding assets as her?

[ML]

Because his friend is working and the wife is not, his friend would have to pay alimony for quite some time especially since she's not very employable and pay for his wife's attorney fees which would be in the tens of thousands if not more. The money he would have to pay comes out of his half. With alimony included she'll get 55% of everything, he'll get 25% and the attorneys get 20%. That is my prediction.

He is working like a dog to sell off the small businesses, but he isn't earning a dime of salary.  You still think he will have to pay alimony?

She had an executive business career similar in success to his.

Why will he have to pay her attorney fees?

[ML]

IMHO, 51 years of marriage and she'd like an even split...

Is there a problem I'm missing?

I already  covered this in my answers to Boe and others above.  The question is 50% of what, how  will money he already  sent her be factored in, how will before tax assets and after tax assets be counted . . . and not even mentioned yet is capital gains taxes vs ordinary taxes and fact one party lives in a state without income taxes while  the other lives in a state with income taxes.

This whole thing is fascinating to me like a mystery 'who done it' book or movie; while at the same time it is making me sick in my stomach for my friend.

[ML]

Note:  As you can probably surmise, both parties are financially fairly well off, so there would be no real hardship for either party if one were to be given virtually 100% of everything.

It just comes down to a situation of fairness to the man since he has been proceeding under assumption she would abide by what she suggested and agreed to.

If he had thought she were going to do this, he would have kept 50% of proceeds from sale of the first two businesses.

And for me, as a third party with substantial knowledge of finance and accounting, I am appalled thinking that the decision will be made by a judge who knows zilch about the finer aspects of finance.

And, I am also appalled by the general tendency (even displayed here) that the wife should be getting alimony, her attorney fees paid for, etc.  Why this feeling by lay persons, and probably even tendency for judges, in cases where wife is just as well off and professionally capable as the man???????

[Misha]

The lesson to be learned methinks is that even if you think a divorce is going to be amicable, best to get it in writing.

[Slumba]

He has to get everything documented.  Possibly emails or records of phone calls, at the least, bank statements showing the money going from his account to her (copies of checks she cashed, etc.).

But there is no substitute for him retaining good counsel. He MUST search for the very best counsel he can find, someone older and well respected by the court that he is going to appear in front of.  It will cost him money.

[Boethius]

But he is not earning any salary.  The only steady inflow of money for both is social security and it's pretty close to the same for both.   They both have tons of money in retirement funds, houses, cars, etc., but not much spendable cash, except for the money he sent her from sale of the two businesses.  They have no mortgages, no loans, no credit card debts and fairly frugal spending habits, so they can both easily live on the SS income alone.

I think the asking for alimony in these circumstances is ludicrous and hope a judge would see it as a bad faith claim.  Again, he doesn't think the wife asked for it; but rather that her attorney just threw it in.

From a negotiation perspective, none of that is relevant.  Did she earn less during the marriage?  Is her social security payment less than his?

[Boethius]

But again, the question is 50/50 of what, and how to mix before tax and after tax values, and how will the money he already sent her for the two businesses sold be counted, and why would he be under any more questioning as to hiding assets as her?

I think he needs a lawyer in his state to answer those questions.  Where I live, the date of separation is the date on which assets are joint property.  50/50 would be all assets owned by either of them separately, or jointly, unless inherited, as at that date.  Again, where I live, the money sent would be deducted from what she is entitled to.  Tax values are not particularly relevant in disputes here, unless the asset is owned solely by one spouse.  What is more important is fair market value.  If they are both retired and someone else is running the businesses, I don't see why they couldn't each take a half interest, with him taking monetary compensation from the business for his services.




She could be questioned as well on hiding assets.  That depends on his lawyer.  I suppose it is added as "defensive practice" by the lawyer.

[BillyB]

He is working like a dog to sell off the small businesses, but he isn't earning a dime of salary.  You still think he will have to pay alimony?

She had an executive business career similar in success to his.

Why will he have to pay her attorney fees?

He is working and although earning nothing but the possible sale of some businesses, he is capable of working. She is officially retired and at 70 yo, she isn't very employable. I can't imagine a judge refusing alimony and ordering the old lady to work. It would make him/her look silly in the news and hurt his/her chances in elections if he/she has future ambitions in politics.


Earlier you mentioned he sent her $375,000 from 2 businesses he sold. That could be interpreted by the judge as allowance he gives his wife to live in a certain style and the judge could force him to pay alimony to maintain that style for a long time or for life due to length of marriage. The fact that he has money to give while she gave nothing back proves he's more capable of paying for both his and his wife's attorneys.


Although you mentioned he could get 30 cents or less to the dollar if he's forced by the judge to sell the businesses early instead of waiting for fair market value he will get much less than the 25% if this goes to court as I predicted he'd get earlier. The judge will value the businesses based off fair market value. Your friend can argue that the wife should get 50% in a forced sale but the judge won't buy it because many men purposely sold assets so low with this method to burn their wives. The judge will simply tell your friend he must give 50% of fair market value within a certain time or be in contempt of court. Read the next paragraph carefully because this is where it gets scary for your friend.


Lets say the 4 remaining businesses are worth $1,000,000. The judge orders him to sell quick and pay his wife $500,000 and he gets to keep the other $500,000. He can't get fair market value and time is running out so he's forced to sell at 30 cents to the dollar which amounts to $300,000. Your friend is then forced to come up with another $200,000 to give to the ex. She will get her 50% and he will be in the hole $200,000. That is why I now predict your friend will get less than 25% of the total assets if this goes to court. If your friend is ordered to sell his property for a 50/50 split too, he will get burned if he has to sell that quick.


If your friend has a decent buyer for the businesses right now, he needs to sell quick before her attorney gets a judge to order a halt to the moving of any assets. It seems this is at the point of every man for themselves. Your friend needs to protect himself since his wife and/or her attorney will make it ugly.

The lesson to be learned methinks is that even if you think a divorce is going to be amicable, best to get it in writing.

Even that can be overturned in court. One can claim they signed the paperwork under duress and/or didn't know their rights to what is a fair distribution of assets according to state law.

[Faux Pas]

He is working like a dog to sell off the small businesses, but he isn't earning a dime of salary.  You still think he will have to pay alimony?

She had an executive business career similar in success to his.

Why will he have to pay her attorney fees?

It is likely much more simplistic than you are projecting. In essence, the disbursement of assets prior to the divorce and what he gave her in "good faith" will mean exactly dick. All that is going to matter is the assets at the point of discovery in the divorce. She will be entitled to 50% of that. If she has hidden  or given away that other $375K then, he is SOL. Even though 50% of that belongs to him.

[ML]

He has to get everything documented.  Possibly emails or records of phone calls, at the least, bank statements showing the money going from his account to her (copies of checks she cashed, etc.).

One check was issued at close of escrow for each of the two business sales that had both of their names on it.  He endorsed and sent on to her; so nothing from his account.