Married With Separate Assets

Having represented hundreds of married couples, we have seen plenty of them present to us for a divorce with the proverbial separate bank accounts.  It seems there is a correlation between a separate bank account and a separate heart.

Money, as with sex and religion [and we would hasten to add, children], is one of the primary things that couples argue about and get divorced over.  Money, as the bible tells us, is indeed the root of all evil.

Even so, if evil, money is a necessary evil.  Here are some potential problems with couples that maintain separate bank accounts and assets:

1. Mistakenly separate property.  If a couple gets married and brings their separate accounts to the marriage, even without overly co-mingling the assets by creating a joint account, such property can eventually get co-mingled over time and become part of the marital estate.  An example of this would include where one spouse uses the funds from a separately titled account to pay marital bills.  When you enter into a marriage and desire to keep your separate property separate, you have to be certain to segregate the property.  Even when you do, us lawyers love to find ways to "invade" the separate property of the moneyed spouse and haul it into the marital estate.  If you are getting married but insisting on the maintenance of separate property, then you should consider executing a prenuptial agreement.
2. Separate property has greater exposure to creditors.  When you are sued by creditors or file for bankruptcy, joint assets are unavailable to satisfy the judgment creditor and the bankruptcy trustee.  Now be careful here; you cannot just go plunging your money into a joint account to avoid creditors.  That would be deemed a fraudulent transfer made to avoid creditors and such assets may be used to satisfy the creditors.
3. Administrative complication upon death.  If a married couple maintains separate checking accounts, then some administrative issues will arise in the event that a spouse dies.  For example, the surviving spouse may need to secure a death certificate prior to accessing the funds in the account, assuming that she was named as the power of attorney.  This is not inherently difficult to do but, do you want to be doing it amid the funeral and burial of your loved one.
4. Separate accounts do not encourage financial communication.  Finally, maintaining separate accounts does not foster open communication between spouses about their finances.  The other spouse is left to guess as to the net worth of the individual, the net worth of the marital estate.  One spouse may never know about any savings cushion unless asked.  The overall financial picture of the couple remains hidden from full view.  When it comes to finances, this is usually not a good thing in a marriage.

Maintaining separate assets is a tactic that most often comes from old habits dying hard.  We find that the older a couple is when they get married, the more likely one or both partners will maintain that separate checking account, or keep that one asset in their sole name, almost like a symbolic insurance policy.  But we have to ask, insurance for what.

Going "all in" with joint accounts and jointly titled assets is the better plan for the long term marriage.  This is especially true if the couple executes estate planning documents shortly after their nuptials.

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CEO Divorce: What's in it for the Shareholders?

By: Timothy P. Flynn

There is no doubt that a divorce proceeding affects any professional's work routine; that includes, of course, corporate executives.  The distraction of a divorce in the board room, however, affects others outside the company; it pulls the corporate shareholders within its scope.

We're not just talking about guys like Mad Men's Don Draper, whose divorce temporarily but significantly affected the partners of a successful NYC advertising agency.  A CEO's divorce can affect the bottom-line for the shareholders in the company.

There are several ways that an executive's divorce could affect the company for which he or she manages.  First, if the executive has a significant stake in the company, the divorce could affect the executive's controlling interest.  The divorcing spouse will want a portion of the value owned by the executive and that value could affect control of the company.

Second, the divorcing executive's corporate focus and energy levels will be impacted by the trajectory of his or her divorce proceeding.  It is no surprise that business studies and surveys have shown that well over one-third of companies report a negative productivity impact directly arising from the divorce of an executive.

Third, the divorcing executive's strategic decision making can be influenced by the divorce proceeding.  If, for example, the executive is funding her divorce settlement with personal assets so that she can retain her share of corporate ownership, her outlook toward risk could be impacted: i.e. she may become more risk-adverse in the short term in order to protect her suddenly less-diversified and more concentrated net worth.  Being less risk-adverse may not be good for the company or its shareholders.

All of this affects a shareholder's interest in the company.  In many cases, perhaps because of the above examples, corporate divorces are handled as privately as possible.

The collaborative model we prefer here at Clarkston Legal serves the executive, and thus her company, very well.  The collaborative model is where the divorcing parties, and their team of professionals, meet and negotiate a settlement before a divorce proceeding is officially filed with the family court.

If you or your spouse are considering a divorce and there are corporate implications, you should give serious consideration to the collaborative model.  To learn more, contact us for a free consultation.

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Minor's Guardian Cannot Prevent Grandparent Visitation

The Michigan Court of Appeals ruled earlier this month that a court-appointed guardian of a minor child cannot prevent contact between the child and his Grandmother.  Thus, this case holds that a minor's guardian is not the equivalent of a parent.

This case, Book-Gilbert v Greenleaf, is one of first impression in Michigan as no prior decisions directly touched on this issue.  The published and thus binding decision will have a significant impact on minor guardianships.

The facts in the case are sad, as are so many of the cases from our family and probate courts.  The minor's mother is deceased and his father, once homeless, is in prison on a sex abuse conviction.

After nearly a year of not being allowed to see her grandson, the paternal grandmother sought visitation under the grandparent visitation statute.  She filed a motion in the Genesee County Family Court hoping to go over-the-head of her grandson's guardian, who repeatedly refused the grandmother's requests for visitation.

Family Court Judge Kay Behm ruled after 4-days of evidentiary hearings that a guardian could step into the shoes of a parent and deny contact with the grandmother.  In ruling in the Grandmother's favor, the Court of Appeals reversed Judge Behm holding that: the grandparenting statute was not properly followed; that the Legislature elected not to equate a guardian with a parent in the context of the grandparenting statute; and that the minor guardianship and the grandparenting statutes cover different subject matter.

The next step is reunification between grandmother and grandson.  For this young boy's sake, hopefully this will go well; he already has a very troubled past.

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Same-Sex Divorce

With all the attention that same-sex marriage has garnered over the past few years, could the focus on same-sex divorce be far behind?  The divorce cases, with their attendant issues, are just beginning to manifest.

The problem for many same-sex married couples that hit the skids is that, when they move to states that do not recognize their same-sex marriage, they cannot get divorced in that state.  At that point, they face a series of undesirable options: moving to one of the 14 states that recognize same-sex marriage to secure a divorce, staying in an emotionally unhealthy relationship, or informally deconstructing their marital estate and family.

Recently, we spotted an article in the NYT featuring just this problem for a couple in Mississippi.  The couple was married in California -a state that, through much blood and sweat, recognizes same-sex marriage post-Hollingsworth.  While the Sunshine State allows non-residents to prosecute a divorce by waiving the six-month residency requirement, the couple would not likely have the important issues of custody and property division resolved in their judgment of divorce; they wind-up with a piece of paper but not any peace of mind.

One option they apparently missed was the preparation and execution of a prenuptial agreement.  These agreements operate as binding contracts which can then be enforced in many states.  Whether such a contract would have been enforceable in Mississippi, however, remains to be seen.

These and similar issues can be expected to surface more frequently as same-sex marriages become more common and, as such marriages inevitably fail.

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High Conflict Divorce Brings Down State Treasurer

Former Mich Treasurer Andy Dillon

This was certainly in the works since last summer.  Michigan Treasurer Andy Dillon resigned yesterday in the wake of continuing media scrutiny of his high-conflict divorce.

Dillon, a Democrat, was appointed as our state treasurer in 2011 by Republican Governor Rick Snyder. The appointment won Governor Snyder high praise for crossing party lines in the spirit of collaboration.

Too bad Dillon could not apply the same spirit of collaboration to his divorce dispute.  In August, after an alleged alcohol-fueled argument with his ex-wife at their former marital home in Redford, MI, the family court litigants filed competing petitions for personal protection orders.

The affidavits attached to those petitions do not paint a pretty picture of Dillon as a family man.  In the end, the Dillons' competing petitions wound-up in the lap of the Wayne County family court judge assigned to their divorce proceeding; the judge denied both petitions, opting for a mutual restraining order.

We here at the electronic divorce attorney prefer to handle divorce via the collaborative model.  This is where both parties consult their lawyers, a family therapist or counselor, and perhaps a financial advisor prior to filing a divorce proceeding.  The idea is to agree on all the issues after a thorough out-of-court vetting with professional input, sign an agreement that memorializes the understanding of the parties, and then file for divorce only when the entire matter is wrapped-up.

Unfortunately, the collaborative model does not work for all couples.  Had Andy Dillon been able to deploy this model, he may still be our state treasurer instead of resigning in disgrace.

If you or a family member would like to learn more about the collaborative divorce method, contact our law office for a free initial consultation.

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Triple Marriage & Double Divorce With Same Husband Confuses Paternity

Rare is the couple that marries, divorces, re-marries, gets divorced a second time, then re-marries for the third time.  Add a bouncing baby boy born somewhere between the second and third marriage, possibly sired by another man, and what do you have: a rare hot mess.

Rarer still is an appeal decided by a 3-judge panel of the Michigan Court of Appeals, with each judge writing separately.  In Sprenger v Bickle, the dismissal of a putative father's paternity and custody claim was affirmed through a lead opinion authored by the presiding judge, a concurring opinion bringing up alternative rationale, and a 14-page dissenting opinion.

The triple opinions demonstrate how judges hold significantly different views on the standing of a putative father to bring an action under the Paternity Act or under the new Revocation of Paternity Act.  The three opinions also demonstrate how courts struggle mightily with the factual curve-balls pitched to them by creative paternity litigants.

In this case, John Sprenger impregnated a married woman and, after the birth of his son, sued for paternity under the paternity act just prior to its legislative revocation.  Sprenger's on-again-off-again relationship with the boy's married mother, Emily Bickle, took place during a bizarre period in the mother's life when she twice divorced, then twice remarried her husband; the child was born in the woman's most recent married stint.

The majority upheld the family court ruling that the biological father lacked standing solely on the basis of mother's marital status and on grounds that neither the mother nor her husband challenged the boy's paternity to rebut the presumption of his legitimate birth.

In his dissenting opinion, Judge Mark Boonstra focused on the unusual marital and relationship statuses of the three parties, and conducts a tour-de-force on the legal concepts of standing and paternity.  Judge Boonstra correctly concludes that dismissal of Sprenger's claim should not be affirmed but rather, the case should be remanded to the family court for further discovery and an evidentiary hearing on:

• the precise date of conception; 
• whether Mother was "incapable of procreation" at that time; 
• what representations were made by the Bickles to the family court during their second divorce proceeding; and perhaps most significantly, 
• DNA paternity testing.

Since his first case was filed in the Benzie County Family Court under the old Paternity Act, Mr. Sprenger has re-filed the case under the new law, i.e. the Revocation of Paternity Act.  This case too was dismissed, much on the same grounds as his first case.  Not surprisingly, Sprenger has appealed that case too; he's not taking this sitting down.

A decision from the Court of Appeals on Sprenger's second case could come early next year.  Meanwhile, Sprenger has yet to parent his son.

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Student Loans and Divorce

There are two ways we have seen student loan debt affect divorce proceedings.  One scenario is where the divorcing spouse, usually a newly-minted professional, has accrued a significant debt balance well into the six-figures; as much as $200,000 in the case of a medical degree.

The other is where the student children of a divorcing couple have accrued the debt and one or both of the parents has co-signed on the loan.  These days, there are no job guarantees whatsoever for the graduates, regardless of their GPA or skill set.

When an engaged couple with student loan debt begins to plan for marriage, those plans often include addressing one or both partners' student loan debt.  If either spouse has significant debt, a prenuptial agreement should be considered.

A prenuptial agreement is a contract entered into by both partners, each with independent legal counsel and review, following a full-disclosure of all assets and liabilities.  This agreement is triggered by the death of either party or a divorce.

One of the primary considerations in a situation featuring significant student loan balances, is whether marital funds will be expended to pay back a student loan.  Another important factor for consideration is whether one spouse supports the other while a professional degree is earned during the marriage but also where that degree is financed through student loans.

A prenuptial agreement can address these issues.  Both existing and inchoate debts can be covered within the scope of the agreement.

In the other scenario arising with some frequency these days, a spouse co-signs a student loan for one of the couple's children.  If the student is unable to begin making payments after the grace period expires, the co-signing spouse becomes liable and it is a marital debt issue in the divorce.

Generally, the student loan debts of a couple's emancipated children are not marital debts within a divorce proceeding.  Only when a parent co-signs does this become problematic, especially when the co-signing parent is not the primary bread-winner.  Who pays back that debt if the student cannot?

Before a parent co-signs on a student loan, some thought should be given to the overall health of the marriage and whether it is wise to complicate the marital estate with such contingent liabilities.

If you are struggling with such issues, our law firm offers a free consultation that can provide you with some guidance with these tough decisions.

Side Note:  Here is a link to a post from the Law Blogger from last summer on a related student loan issue.

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