Asset distribution at divorce

[ML]

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

Her SS is actually a little more than his because 1) he started drawing at age 62 and she at age 64, and 2) some of his earnings were foreign based and not subject to SS system.

Total lifetime earnings for both is unknown.

What do you mean, that 'none is relevant?'

[ML]

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.

Boe, we are on different 'wave length' regarding taxes.

I don't mean tax value for property taxes or some such.

I meant that the money she got from sale of the two businesses was after payment of Federal and State income taxes on the gain from disposition.

So if, for instance, $200,000 of that money  would be compared to $200,000 FMV of a remaining business, or $200,000 of his retirement funds . . . it would be apples and oranges.  The sale of another business for $200,000 or drawing down $200,000 in retirement funds (this was all put into 401K type plans before taxes so is now fully taxed upon  withdrawal) will net about 60 cents on the dollar after Fed and State taxes.

Again, I doubt the average lawyer or the average judge can comprehend this or, in the case of the judge, willing to consider it.

[ML]

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.

Billy, I am appalled at your words . . . even as you may be correct.
They are both 72 years old and retired.  Why is she an 'old lady' who isn't very employable; but he is?

She is actually in better health than he who has had heart surgery and a minor stroke.


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.

As I mentioned above, he merely endorsed his signature on the check issued at close of escrow and sent on to her.

Since they are both receiving SS check (and hers more than his) as primary source of monthly living expenses (both houses, cars are debt free and no other debts); where do you propose the alimony money is to come from?

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.

Why wouldn't the judge tell the wife that she must give the man 50% of the FMV of the remaining businesses and be in contempt if she didn't?  The businesses are owned jointly.

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.

The judge orders her to sell quickly and pay the husband $500,000.

What's with this idea of yours that the burden is on the man??????

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.



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.

[ML]

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.

Pretty sad . . . if true.

But to go further, you specify 'point of discovery in the divorce.'

Earlier, Boe said something about the FMV of assets at time of separation.

Her idea would include the $375,000 and even more as it was around $500,000 FMV before taxes.

So the date that total FMV is calculated 'as of' and split 50/50 would  be a significant input.  That might vary from state to state.

[BillyB]

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.

She may use that endorsed check to say that is money for the lifestyle he provides for her. If she spent it all or hidden it away outside a bank, then it won't factor into the 50/50 split a judge is to make.


Judges are allowed a lot of discretion in family court. That is why people who think this is a simple 50/50 split due to length of marriage are very wrong. Because your friend has 4 more businesses, it clouds everyone's minds to what the value is on a quick sale and it's still a judgement call on what fair market value is. It may take your friend 10+ years to finally sell all 4 businesses for fair market value when the right buyer comes along but now your friend won't have time to wait for the right buyer.


It will also be tough to get this settled in mediation. Let's pretend the businesses are worth 1 million again. Your friend can tell his wife and her attorney the business are worth 30 cents on the dollar if sold within a year and she'll get half which amounts to $150,000. Now your wife and her attorney gets very angry and accuse your friend of trying to rip them off because they believe they're entitled to $500,000. This will now go to court and will get very ugly because your friend started this war by being dishonest. Things could have ended amicably and they could've been friends for life. Now things are most likely to end bitterly and they will be enemies for life.


Your friend should ask his wife what she did with the $375,000 after the sale of 2 of the businesses. If it's all gone, he needs to move his money and sell the businesses quick before a judge freezes his assets and bank accounts. This should be done in the proper way based off advice from an attorney because there will be a paper trail. I would think a bankruptcy attorney would know best on how to protect assets from getting poorly distributed in divorce court.

Since they are both receiving SS check (and hers more than his) as primary source of monthly living expenses (both houses, cars are debt free and no other debts); where do you propose the alimony money is to come from?

What does Social Security have to do with this? It's pennies compared to the amount of money we're talking about. Our government is not required to maintain people standards of living when they retire or divorce. Because your friend runs the businesses, which generates ongoing income, he is required to maintain his wife's high standard of living through alimony which could run years or in some states, a lifetime. Although she may have had the ability to be a corporate officer at one time, she's too old and her mind may be failing. I doubt a judge is going to order her back to work to maintain her standards of living.


You've made it sound as if the businesses isn't generating income, they are living off the little amount from SS, and a judge isn't going to believe it. The judge may not order your friend to sell the businesses but give her half the value and alimony within 6 months. He'd have to use his business for collateral to get a bank loan instead of selling it. The judge doesn't care how it's done but it will get done.

Why wouldn't the judge tell the wife that she must give the man 50% of the FMV of the remaining businesses and be in contempt if she didn't? The businesses are jointly owned.

Wishful thinking. A judge by law has to take care of certain things in a divorce case and one of the issues is to have the main provider to provide for the same standards of living to the other spouse for a certain amount of time to life after divorce. Sorry but I see your friend as the main provider and in control of things. Although both names are on the businesses, he's in control of operations and sales. Just like a house that has both spouses names on it, almost every time the man is responsible for the sale of it.

some of his earnings were foreign based and not subject to SS system.

His wife's attorney may accuse him of illegal activity and the judge may think he has more foreign based assets he's not disclosing. If he admits to any wrong doing in court, no matter how small like cheating on tax returns by buying paint for his business when it was used in his home, the judge will stop the the divorce proceedings, she will win, and he will be facing criminal charges. Hope he's got a clean record because they will use everything against him to win.

What's this idea of yours that the burden is on the man?

It's not my idea. Your friend will be considered the main provider and in control of things while his wife will be portrayed as the innocent, helpless wife who watched from the sidelines. Many of the things I've told you including the ridiculous ways judges split assets based off fair market value and expect one to get that value in a matter of months happened in my divorce and in other mens. Don't take things lightly. Even your friend's attorney can't make promises. It's possible your friend can come out of this divorce penniless or even in debt. He needs to protect himself in every legal way possible.

[ML]

Billy, you may be right in the outcome, but you are using the wrong assumptions.

Husband and wife own the businesses equally.  And they have been getting zero income from the businesses.  Neither work in the businesses nor are executives there.

Long story that I will try to keep as short as possible.
He got involved with business students at a university (not same town or university where my Ochka attends) 15 or so years ago.
They had competitions with submitted business plans, etc.  Sort of like the national TV show now running, but on a smaller scale.
He put in seed money for 6 of these plans over the years and all 6 businesses are successful but small.  He and wife never had a hand in day to day operations and never took a cent in salary.  Now he is working to help the 60% former business students finance a buyout of  he and the wife's 40%.  This involves a lot of headaches dealing with banks, government small business financing operations, finding other private  investors, etc.  It has been a full time job of his for a couple of years . . . but not a cent taken for his efforts.

[ML]

She may use that endorsed check to say that is money for the lifestyle he provides for her. If she spent it all or hidden it away outside a bank, then it won't factor into the 50/50 split a judge is to make.


Judges are allowed a lot of discretion in family court. That is why people who think this is a simple 50/50 split due to length of marriage are very wrong. Because your friend has 4 more businesses (he and wife jointly own 40% interest in 4 more businesses), it clouds everyone's minds to what the value is on a quick sale and it's still a judgement call on what fair market value is. It may take your friend 10+ years to finally sell (why must he sell the businesses, why won't judge tell her to take the burden of selling these jointly owned partial shares?) all 4 businesses for fair market value when the right buyer comes along but now your friend won't have time to wait for the right buyer.


It will also be tough to get this settled in mediation. Let's pretend the businesses are worth 1 million again. Your friend can tell his wife and her attorney the business are worth 30 cents on the dollar if sold within a year and she'll get half which amounts to $150,000. Now your wife and her attorney gets very angry and accuse your friend of trying to rip them off because they believe they're entitled to $500,000. This will now go to court and will get very ugly because your friend started this war by being dishonest (how is it dishonest to merely state the well known fact that quick forced sales always bring much less money). Things could have ended amicably (yes, that is what he was working toward by following the plan that SHE HAD ORIGINALLY SUGGESTED) and they could've been friends for life. Now things are most likely to end bitterly and they will be enemies for life.


Your friend should ask his wife what she did with the $375,000 after the sale of 2 of the businesses. If it's all gone, he needs to move his money and sell the businesses quick (she and he jointly own the shares of the business; neither can sell without other signing) before a judge freezes his assets and bank accounts. This should be done in the proper way based off advice from an attorney because there will be a paper trail. I would think a bankruptcy attorney would know best on how to protect assets from getting poorly distributed in divorce court.



What does Social Security have to do with this? (Since you keep bringing up alimony, I was pointing  out  that SS is his [and her] only source of current income.  So I was asking you where you think the alimony money would come from) It's pennies compared to the amount of money we're talking about. Our government is not required to maintain people standards of living when they retire or divorce. Because your friend runs the businesses (no he does not), which generates ongoing income (no it does not . . . for he and wife), he is required to maintain his wife's high standard of living (why won't she have to maintain his 'high' standard of living) through alimony which could run years or in some states, a lifetime. Although she may have had the ability to be a corporate officer at one time, she's too old and her mind may be failing  (they are the same age, same business career and his health [and probably mind after this got started] is worse than hers.). I doubt a judge is going to order her back to work to maintain her standards of living.  But he will order the man back to work??


You've made it sound as if the businesses isn't generating income (they aren't . . . for the husband and wife), they are living off the little amount from SS (they both are), and a judge isn't going to believe it. The judge may not order your friend to sell the businesses but give her half the value and alimony within 6 months (why won't judge order her to sell the businesses and pay him alimony?). He'd have to use his business for collateral to get a bank loan instead of selling it. The judge doesn't care how it's done but it will get done.



Wishful thinking. A judge by law has to take care of certain things in a divorce case and one of the issues is to have the main provider to provide for the same standards of living to the other spouse for a certain amount of time to life after divorce. Sorry but I see your friend as the main provider and in control of things (no he is not the main provider, and as we see he is NOT in control of things.). Although both names are on the businesses, he's in control of operations and sales (no, neither he or she are involved in any operations and sales). Just like a house that has both spouses names on it, almost every time the man is responsible for the sale of it.

[BillyB]

It has been a full time job of his for a couple of years . . . but not a cent taken for his efforts.

Nice story but the bottom line is what kind of lifestyle does his wife live and how did she get it? Living off SS is enough for them to rent a trailer home and pay for utilities. If she drives an expensive late model car, lives in a very nice home, wears fashionable clothing and expensive jewelry, a judge isn't going to believe it all comes from SS. A judge is going to determine what kind of lifestyle she lives and figure out a way to maintain it. I'm sure a judge will see your friend currently does most of the work and is more capable of earning money which may not be the case with his wife. You may have a judge that simply orders everything to be split  50/50 and everybody go their own way but if your friend's wife and her attorney is seeking alimony, he needs to believe that alimony can happen...maybe for life.


I've been giving you some worst case scenarios that have happened in real life. It's a real possibility that your friend can end up penniless or in debt. He may have a decent judge that may let his wife to sell the businesses if she thinks she can get more but judges don't like to do that because a wife or husband can sell something worth $100,000 for $100 to burn their spouse. Most likely a judge will rule on the value of the business and tell your friend he has a certain amount of time to get his wife her half. Your friend may have the option to sell it or get a bank loan. Let your friend know that if he has to sell his businesses at 30 cents to the dollar, he will be in debt after he gives his wife her 50%.



I can't easily quote everything you wrote in red in your last post but even if your friend is not in control of the businesses, he's in more control of finances than his wife within their marriage. I doubt a judge is going to request a husband and wife who's fighting to team up to sell the businesses together or ask the less capable one to sell the businesses alone. Your friend will have to sell or get a loan to pay wife her half. One thing your friend could consider is in mediation or in court that he request the judge to sign over 2 businesses to her while he keeps 2. The values won't be exactly 50/50 but one of the parties can make up the difference or he could give her a pair of business that's worth more than his pair to end this fight.

[Brianinaz]

Pretty sad . . . if true.

But to go further, you specify 'point of discovery in the divorce.'

I agree with Faux in most states what happened in the past as far as distribution of assets is irrelevant. The dividing line is usually the filing of documents of either legal separation or divorce papers. The joint assets are what there was at the time of filing. Anything that occurred before as in your friend's giving his wife the proceeds of the sale of their businesses is not going to be considered unless there was something in writing stating that it would be. She will get half of what they had on the date she filed for divorce. As far as alimony if neither of them have current income and they are dividing substantive assets equally I doubt she will be granted alimony. If on the other hand he has a source of income and she does not then he's probably on the hook. As others have mentioned what he really needs is a good attorney.

[BillyB]

ML, I just read your initial post again and learned she retained an attorney in his state. If the businesses are in his state too, his location and convenience is another reason a judge would order him to make the sale alone and give half to his wife.


He can take half the retirement money that the judge will split,  mortgage his house and pay her half if needed to wait for the right buyer on the businesses to get fair market value.


If her attorney is unethical or ethical in the manner he/she fights hard for the client, he/she will be recommending to the judge to split assets in a way that benefits the wife the most and punishes your friend. Your friend should do his homework and get the best divorce attorney possible. Although your friend may be living a modest life on SS, he just signed over a $375,000 check. He will be viewed as a man rolling in the dough providing his wife a high standard of living. If she's honest, she will tell the judge that money should be applied to her half. How honest can she be? She said she'd take 40% of assets and never get attorneys involved.

[Hammer2722]

The dividing line is usually the filing of documents of either legal separation or divorce papers

Not necessarily. It will depend on the state. Here in Washington, if the couple physically separate then that is when separation is considered as far as the courts are concerned. I agree that ML's friend is going to need the best attorney possible. She has already gotten a head start on him and he needs all the advice a lawyer gave give him.

[Gator]

Again, I doubt the average lawyer or the average judge can comprehend this or, in the case of the judge, willing to consider it.

You are correct.  That is why each attorney in disputed divorces usually retains a forensic accountant in the discovery stage.  The forensic accountant establishes FMV of all assets.  The forensic accountant also looks for hidden assets (e. g., the expensive boat he purchased and put in his brother's name). 
 
It is helpful if the wife has a reasonable understanding of the many businesses that he owns.  This would help in a negotiated settlement.  The degree of trust is important.  If not, this could become contentious and expensive.  [Hint:  play nice, do not piss off the wife until the judge signs the divorce decree.]
 
Eventually a balance sheet will be prepared showing his, her and joint  assets and liabilities,   FMV will be determined for each asset, and the guidelines are fairly standard.   Typically, a FMV will be determined based on a historic cash flow analysis after the accountants study the ledgers.  Potential future value based on somebody's ship coming in is not considered usually.
 
If the distribution of property is negotiated, she may agree to let him retain the promising businesses if he somehow compensates her, e. g., sells the better performing and hence more marketable assets.   
 
If the court makes the decision, states have regulations for dividing marital property.  And a fair distribution (not necessary equitable) will be made using the asset balance sheet and the regulations. A percentage distribution will be decided (presumably 50% each).  Then  assets, debt and personal property are assigned to each person such the balance equals their percentage.
 
As Misha said, he should have done this earlier and got it documented.

[Gator]

The concept of "legal separation" has been mentioned by some posters.  That would be good if in your state the court recognizes the date of their separation as the point for placing values on property and assets, assuming his assets have appreciated more since then.  However, that begs the question of what legally must have occurred to constitute legal separation.   

[BillyB]

 Here in Washington, if the couple physically separate then that is when separation is considered as far as the courts are concerned.

That is correct. My ex wife tried to get more credit for marriage after separation and before divorce papers were filed but she did get more credit for us living together before marriage which entitled her to the only piece of property we bought while we were together although it was bought by me outside of marriage.


The way my judge split up that property 50/50 ended up giving my ex $150,000 and me getting $1500. Fortunately the judge could not split up my business and other property using the same formula which can happen to ALL of ML friend's property. Quick sales don't fetch real market value, that's why I never got my 50%.


ML's friend has been married so long and the businesses were created during their marriage so it's both theirs evenly but...... they had a verbal agreement that he did most of the work and he would get 60% and she 40%. That does not follow state guidelines of a 50/50 split based off length of marriage and if I were the wife's attorney, I would portray ML's friend as the bad guy swindling his wife by trying to get 50% more assets than her. 60/40 amounts to 50% more for one party. ML friend's claim he was trying to pay his wife $375,000 to live up to their agreement doesn't help. It could be interpreted as him trying to pressure her to quickly settle for something that is not fair. 60/40 is not fair according to state guidelines and I'm sure by now someone has educated the wife on that and how bad her husband is. It doesn't matter if the husband worked 6 days a week for 50 years, created 6 businesses, bought 4 houses in his own name and his wife stayed in the house for the 50 years they were married, they each own half. That is the law.

that begs the question of what legally must have occurred to constitute legal separation.
 

Living in separate homes and not sharing finances. Living together in separate bedrooms is not enough to constitute legal separation.

[ML]

An interesting bit of serendipity today.

Ochka and I were at a 4th of July party on the 6th of July.
Yeah, that's a story in itself.

But anyway, who should I happen to meet for the first time, but a retired Family Court Judge for this state.

We hit it off great.  When my  friend and I can get together some financial documents, and my friend gets someone to type up his version of the story, this retired judge agreed to look it over and give his decision if he were hearing the case.  He is also going to check around and recommend an attorney who is in the county of my friend.

What a bit of good luck!!

I really appreciate the feedback given thus far, so keep it up if you have relevant experience.

Much of it was rather shocking to me, but maybe I needed the shock treatment to help prepare my friend for any shocks.

Maybe the judge will provide even more shock . . . but I hope less.

I am really taking this much too personal; it is starting to worry Ochka as I guess I have been a little bit 'distant' the past few days.

[BillyB]

But anyway, who should I happen to meet for the first time, but a retired Family Court Judge for this state.

 this retired judge agreed to look it over and give his decision if he were hearing the case.  He is also going to check around and recommend an attorney who is in the county of my friend.

What a bit of good luck!!

That is good luck. If he can recommend a good attorney and give you insight on what to expect, that is an advantage to getting as close to half the assets and retirement savings your friend deserves.

When my  friend and I can get together some financial documents, and my friend gets someone to type up his version of the story, this retired judge agreed to look it over and give his decision if he were hearing the case. 

To me there's not much to the story. The judge may feel the same way. Both parties get 50%. What your friend needs to be concerned about is how a judge will get each party the 50%. If the judge forces a quick sale with your friend responsible for getting his wife 50%, your friend loses big. How will the judge rule on alimony? Play devils advocate and argue for his wife's side. Ask for alimony for life. Accuse your friend of greed by wanting 50% more assets than the wife in a 60/40 deal.


If the judge you met is good, he'll tell you he can't give you a true ruling on a one sided story and that every judge may use their discretion differently.

[Wayne]

Are either the husband or wife Russian, Ukrainian, etc.?

After being married for so many years, why split up now?

Do they live in a no fault divorce state?

It seems like she should have filed the divorce in the state where she lives. Most states have a certain minimum period of time that you must live in that state before you can file for a divorce. He should have an attorney see if this filing can be thrown out.

He can find out what his wife is likely to say in court by taking her deposition as soon as it can be scheduled.