Are you putting off your divorce because you don’t know which way Congress is going to go on health care?  Some couples are according to divorce attorneys and financial planners.

Some spouses are entering into post-nuptial agreements while continuing to live together.  Others are delaying filing their papers with the court until there is clarity from Washington, D.C.

The Affordable Care Act prohibited insurers from charging more for people with pre-existing conditions.  Some of the various bills under consideration by Congress would end those restrictions.  Divorcing spouses who were in therapy or taking medication for depression might not be able to obtain health insurance.

 

 

When we were boys, my pal, Jerry, and I built a motorcycle one night. Somehow Jerry had gotten his hands on a motorcycle.  But it was in pieces scattered on the floor of his room. There were no instructions. Only a frame, a motor, gears, cables and hundreds of nuts and bolts. We had screwdrivers and wrenches. And we were young and insane with the possibilities of where that motorcycle could take us if we got it working.

We worked all night on that machine. We built it wrong, tore it down, bolt by bolt, and started over many times that night. We probably built a dozen motorcycles before we got it right.

By morning, we had a motorcycle. It didn’t look like much, but to us it was worth its weight in gold. We took it out for a test drive. That’s when we discovered a major design flaw. At the first stop sign, you had to disengage the clutch with one foot, and press the brake with the other foot at the same time, so there was no foot to put on the ground and hold the contraption upright.

That motorcycle taught me a lot about problem solving.  You have to keep working on it, all night long, if necessary.  This requires patience and persistence, focus and concentration.  You may have to tear down the solution and rebuild it several times to get it right.  Even then you may have to go back to the drawing board in the morning.  I’ve lost many night’s sleep solving chemical engineering problems, briefing cases in law school, and studying tax law. And now I’m solving problems in marriages, divorces and separations.  It’s as complicated as building a motorcycle.

by James J. Gross

Ryan Giggs will ask an English divorce court for more than 50% of millions that he has acquired during his marriage due to his special skills in football, or soccer as we call it in America.  The argument failed last week in Randy Work’s “genius” claim.

We have something similar in Maryland which you can argue if you have made special contributions in your marriage.

In Maryland,when distributing marital property: the court must consider, among other factors;

— the contributions, monetary and nonmonetary, of each party to the well-being of the family.  Section 8-205 (b)(1) of the Family Law Article of the Md. Code

and

— how and when specific marital property or interest in property was acquired, including the effort expended by each party in accumulating the marital property or the interest in property.  Section 8-205 (b)(8) of the Family Law Article of the Md. Code

by James J. Gross

Randy Work, an American financier, is appealing an award that the English Courts made to his wife, Mandy Gray, last year of 140 million pounds, which was half the martial estate.  He claims that he should get two thirds because it was his financial genius that created the wealth.

Under English law, a court can make less than an equal division if it would be unfair to disregard the conduct of one party to the marriage.

In Maryland, the court can adjust the equities of property distribution by making a marital award based on certain factors that must be considered.  One of the factors includes the efforts of each party in accumulating marital property.

But another factor is the contributions of each party, either monetary or non-monetary, to the well-being of the family.  If one spouse took care of the home and children while the other spouse advanced his or her career, who is to say those contributions are not equal?  How would you divide this estate?

 

by Michael F. Callahan

The Maryland Court of Appeals has issued its ruling in Milton E. Jackson v Gayle S. Jackson., the case we have been discussing in this last series of articles.

Mr. Jackson was a federal employee with retirement funds under the CSRS system – a large pension, and no social security.  Ms. Jackson was a state government employee – covered by social security and a smaller pension.

Mr. Jackson’s argued that a part of his pension should be treated as social security benefits and not counted when equalizing the pensions of each party.

The Court of Appeals ruled that:

(a)  a state court could not divide social security benefits of a spouse in divorce because federal law establishing social security preempts that.

(b)  The trial court may not calculate and offset the value of a spouse’s future social security benefits from the other spouse’s pension benefits before division of that pension between the spouses in a divorce.

(c)  However, the trial court must consider the spouses’ respective entitlements to social security benefits in determining a martial award as an “other factor” under Maryland divorce law.

So in the end, the Court left a way around the prohibition against dividing or offsetting social security benefits.  It left it to the judge’s discretion to determine a marital award based on “other factors” including social security.  And the judge doesn’t even have to show how the marital award is calculated.   The judge just needs to say that all factors were considered.

 

 

An appellant who wants the trial court’s judgment suspended while the case is being appealed, must request a stay and post a bond to ensure that, if the trial court’s judgment is affirmed, there are funds to pay whatever is required.

For example, in the District of Columbia, Rule 8 of the Rules of the DC Court of Appeals governs.  To obtain a stay pending appeal the appellant must first file a motion in the Superior Court (the trial court) within thirty days of entry of judgment.  That court decides whether to grant a stay and on what terms.  The Superior Court’s decision on the stay is also appealable.

Prior to 2002, the law in DC had been that an appeal automatically stayed the final judgment of divorce.  Many interesting and potentially disastrous consequences flow from a stay of the judgment of divorce.  Except where noted below, these consequences are essentially the same in all three jurisdictions.  If the divorce judgment is stayed:

  1. You’re still married so you cannot remarry.
  2. If you die, your spouse is your widow or widower and has important rights with respect to your pension, 401(k) account, intestate estate (if you have no Will) and the right to elect against your Will if you have disinherited him or her.  In Virginia your spouse is entitled to a share of your augmented estate which includes non-probate assets and certain property transferred during your lifetime.
  3. If you and your spouse own the former marital residence (or other real property) as tenants by the entirety and the divorce judgment is stayed then you still own it in that peculiar old common law tenancy.  If you die, he or she takes the whole property, you cannot leave your interest in the home to the kids, you cannot borrow against or assign your interest, etc.
  4. In Maryland and DC you’re still earning marital property and increasing the marital portion of your pension and retirement accounts every day when you go to work.  If the case is remanded for a new hearing your further accumulation of money, property, pension credits, etc. may be on the table for equitable distribution at that future trial.

It’s definitely a case of “be careful what you wish for” when you seek to stay of a judgment of divorce.

Sometimes a party to a lawsuit is not satisfied with the trial judge’s decision. When that happens that person might want to file an appeal. Generally, and in all divorce cases in all three local jurisdictions, you can appeal “as of right.” You may not win but you can appeal.

The party who appeals is called the appellant. The other party is called the appellee. Often the appellee will appeal the portions of the trial judge’s decision that he or she is not satisfied with and become the appellee/cross-appellant.
In due course, if the appellant and, if applicable, the cross-appellant, do all the required filing correctly and on time, the appellate court judges will review the contested portions of the trial judge’s decision. The appellate judges give deference to the trial judge’s findings of fact because he or she saw and heard the witnesses and the appellate judges did not. Findings of fact are not disturbed unless they are “clearly erroneous.”

The appellate court judges do not give deference to the trial judge’s rulings regarding the law. If they conclude the trial judge was wrong, they reverse. Usually though, that means they remand the case back to the trial judge to conduct a further hearing, if necessary, and generally preside over the remainder of case consistently with appellate court’s ruling.

Here is a comparison applying the child support guidelines of each local jurisdiction to a typical case: two children, sole custody, $0 health insurance and $0 child care costs and combined monthly income of $10,000, non-custodial parent’s income is $7,500 and custodial parent’s income is $2,500:
District
total support $25,174/12 = $2,098
custodial % of income .75
recommended support order $1,573

Maryland
total support $1,811
custodial % of income .75
recommended support order $1,358

Virginia
total support – $1,567
custodial % of income .75
recommended support order $1,175

Again, applying the child support guidelines to a case with the same facts except combined monthly income of $15,000, non-custodial parent’s income is $11,250 and custodial parent’s income is $3,750:
District of Columbia recommended support order – $2,197

Maryland recommended support order – $2,135

Virginia recommended support order – $1,541

And the same facts except combined monthly income of $20,000, non-custodial parent’s income is $15,000 and custodial parent’s income is $5,000
District of Columbia: recommended support order – $2,714

Maryland recommended support order (extrapolated)- $2,847

Virginia recommended support order – $1,765

And now with combined monthly income of $30,000, non-custodial parent’s income is $22,500 and custodial parent’s income is $7,500
District of Columbia: recommended support order – $2,714

Maryland recommended support order (extrapolated)- $4,271

Virginia recommended support order – $2,144

As you can see, at higher incomes, child support is much lower in Virginia than in Maryland or the District, just as it was in 2011. At incomes over $20,000, recommended support in Maryland using extrapolation is much higher than in DC or Virginia.

A 2013 Virginia case, Wright v Wright, 61 Va. App. 432; 737 S.E. 2d 519; 2013 Va. App. LEXIS 53 prompted me to observe that a high earning spouse can increase what he, or she, gets to keep by paying expenses out of marital property and banking the post –separation earnings because in Virginia those earnings are not marital property. Conversely, if you are the lower earning spouse you want prompt filings, quick hearings and, if the stakes justify it, an injunction on expenditure of marital property. See The “Wright” Strategy for Increasing What You Keep in Your Divorce, April 2014.

In Maryland, a spouse’s earnings after separation are marital property in the absence of an agreement to the contrary. So there is no advantage to paying expenses with accumulated marital property and banking post-separation earnings in Maryland. What then is the proper strategy for a high earning spouse in Maryland in a case with a relatively long separation?

First, if there is any existing non-marital property, don’t spend that. And remember that from separation to divorce you are earning marital property, increasing the marital proportion of retirement accounts, and adding to the duration of marriage, which is a factor in determining both alimony and marital property distribution. So it pays to settle early because a Separation and Property Settlement Agreement will exclude subsequent earnings from marital property.
Getting to settlement usually requires making a good offer. Getting to settlement early may require making a good offer early. This runs directly contrary to many negotiator’s instinct to make a low ball offer and move up in baby steps to wear down the adversary and get a “good deal”.
For high earners the good deal achieved by extended negotiations may be at the cost of hundreds of thousands of extra dollars added to the marital estate, and then divided. Sometimes it makes sense to make a really good offer early.
What about the Maryland financially dependent spouse? Certainly this spouse wants to settle temporary support and custody, visitation and access early, if possible. But what about the final settlement distributing marital property? It may pay to delay. But the advantage of dividing a bigger pie later must be balanced against the obligation to negotiate in good faith. Also, the additional costs and stress of getting-to-yes later rather than earlier are big negatives. Perhaps a bigger issue is that if the moment for settlement passes, it may not come again.

In a post titled “Determining Marital Property in Maryland, Virginia and the District Of Columbia” (June 17, 2011), I said:

“This article is about when the accumulation of marital property ends. It starts at the time of the marriage. When you return from the honeymoon and go to work the next Monday morning you are earning marital property – the stuff the divorce judge divides. When is the first day you can go to work and earn separate non-marital property? It depends on the jurisdiction.”

And after reviewing the applicable statutes, I said:

“When you and your spouse have separated, intending to remain separated, and do not have a property settlement agreement, in Maryland and the District of Columbia the property you acquire from the date of separation until the date of divorce is marital property. In Virginia such property is not presumptively marital, and in general is determined to be separate property, unless special facts and circumstances are established to overcome the presumption.”

In a recent case, Wright v Wright, 61 Va. App. 432; 737 S.E. 2d 519; 2013 Va. App. LEXIS 53, the Court of Appeals of Virginia considered whether Mr. Wright’s strategy in the two plus years between the date of separation and date of the divorce hearing required a finding to bring post-separation expenditures of marital property back into the marital pot to be divided with Mrs. Wright.

Husband had certain marital accounts totaling about $2,800,000. Husband earned approximately $1,500,000 per year; Wife was a homemaker. During the post-separation period, the marital accounts declined to about $1,415,000 on account of Husband’s payment of joint income taxes, real estate taxes on the marital home, tuition and school expenses for a child of the parties, spousal support to Wife and his own attorney’s fees and expert witness fees. Husband deposited the money he did not spend on these expenses to his separate accounts which, of course, were not marital.

The Court of Appeals said none of those expenditure were improper so they did not amount to “marital waste.” They explained that there are only two categories of expenditures of marital funds “proper” and “waste.” If your spending of marital funds falls into the “proper” categories it’s okay even if that permits a big decline in marital assets to be divided and a big increase in the separate funds of the party following the strategy.

The result in Wright provides a road map for the higher earning spouse to skew the division of marital property in his or her favor in some Virginia cases. If you are the lower earning spouse you want prompt filings, quick hearings and, if the stakes justify it, an injunction on expenditure of marital property.

Also, for multi-state or potentially multi-state cases, Wright is another reason that in a case with a relatively long separation, all other things being equal, the higher earning spouse probably wants the divorce case to be heard in Virginia. As I’ve said here before, a little planning and a little audacity can get you into the Court you want to be in. And a little more planning during separation can increase the property you get to keep.

Some of the facts here are from an article by one of the lawyers involved in the case. What’s wrong with Wright, Ronald R. Tweel (Virginia Family Law Quarterly, Spring 2014)