In Divorce, No Do-Overs Allowed

When it comes to the division of assets, you must get it right the first time

by Jeffrey A. Landers • Divorce Financial Strategistâ„¢ and the founder of Bedrock Divorce Advisors, LLC
Photograph: Photo courtesy originalpunkt/Shutterstock

Here’s an upside for women when it comes to divorce: Once your divorce settlement agreement is finalized and you have divided your assets, you are no longer subject to your ex-husband’s bad financial decisions. You’ll have to learn how to handle your own money, but at least those choices will be yours.

By way of example, let’s look at one victim of the ever-confounding fraud perpetrated by Bernie Madoff.

Steven Simkin is a partner at one of the country’s most prominent and powerful law firms. When he and his wife, Laura Blank, divorced in 2006, the couple split a fortune in excess of $13 million. Almost half of that fortune, a cool $5.4 million, was invested with Bernard Madoff. After the divorce, Simkin continued to keep a sizeable amount of money in Madoff investments. But Blank didn’t. Instead, she opted to receive her divorce settlement proceeds in cash (some $6.25 million) and real estate.

Fast-forward to 2008 when the Madoff Ponzi scheme was exposed, and you’ll realize Simkin’s predicament. He lost millions because of the Madoff fraud, and he felt his divorce settlement should be revised. Essentially, he wanted Blank to compensate him for the losses he sustained.

Now wait just one minute! Surely, Simkin, an esteemed attorney, knows what I have been telling my clients for years:

There are no do-overs in divorce.

Every divorce settlement involves the valuation of assets --and the divorce of Steven Simkin and Laura Blank is no different. Terms were set. Compromises were made. Divisions were agreed to.

In any divorce, there’s an implicit understanding that the value of these assets may change over time, but once a couple separates, their financial futures are unlinked. If Simkin had invested in Apple instead of with Bernie Madoff, Blank would be no more deserving of his profits than she is of his losses.

Still, Simkin tried to change the rules of the game. When Launa Blank rejected his bid to renegotiate assets, her ex-husband took her to court in what The New York Times described as “one of the most unusual lawsuits resulting from the Madoff fraud — and one that riveted the matrimonial bar.”

Initially, a trial judge dismissed Simkin’s suit, but shortly thereafter a New York appellate court ruled it could go forward. Just recently, the New York Court of Appeals rejected Simkin’s argument once and for all.

“This situation, however sympathetic, is more akin to a martial asset that unexpectedly loses value after dissolution of a marriage. The asset had value at the time of the settlement but the purported value did not remain consistent,” wrote Judge Victoria A. Graffeo, according to Bloomberg Businessweek.

I couldn’t agree more. As divorce attorney Caroline Krauss-Browne, partner at Blank Rome, points out, there is an overriding public policy which supports finality both in negotiated settlements (preferred by courts) and, if the parties are unable to agree, decisions after trial.

“Especially in the current environment of slashed budgets and resulting staff cuts, courts do not have the man-power to handle the opening flood-gates of claims made by disgruntled former spouses who, in hindsight, think the assets they got are less valuable or more valuable than those retained by their ex,” she explains. “Additionally, not only do litigants rely on the end result in living their post-divorce lives, but changing one term could upend other terms which made up the overall package.  For example, the issues of child support and spousal support are inextricably intertwined with asset allocation.  If a wife is walking away with millions of dollars of assets, she is unlikely to receive a large or lengthy award of spousal support and she is more likely to make some contribution toward the support of the children.  And vice versa.   It’s like a house of cards — you can’t pull one out one card without the entire house coming down.  And what a mess that would make.”

So, if you’re a woman who’s contemplating divorce, please understand this: In divorce, there are no do-overs when it comes to the division of assets . . . and quite simply, that means you must get it right the first time. (In rare instances, there can be an exception to this rule. For example, if it is discovered after a divorce is finalized that there were previously undisclosed hidden assets, a judge might rule to revise a settlement agreement.)

Alimony and child support are different

You must also keep in mind that alimony and child support can be treated differently than the division of assets. Alimony and child support can be modified (either up or down) under certain conditions. (Perhaps you recall the ex-NFL wives who worried about reduction in their alimony payments when NFL players were in labor contract dispute last year?)

So as I see it, your course of action is clear. First, assemble a qualified divorce team. Then, have a comprehensive lifestyle analysis and prepare your financial affidavits. This lifestyle analysis will help you: 1) verify the net worth and income and expense statements your husband submits, 2) form an accurate picture of what funds are required to maintain your standard of living, and 3) possibly uncover any assets your husband may be hiding.

Next, carefully consider your options with regard to alimony. At Bedrock Divorce Advisors, it is our belief that an upfront, lump sum payment in lieu of alimony is, in the vast majority of cases, the preferred option if the woman is to be the recipient of alimony. By taking a lump sum, you are completely removing yourself from your husband’s sphere of influence. In many cases, the investment decisions he made were not subject to your approval, and in families with significant assets, the rational behind those investments may not be obvious. Far better to request a lump sum payment that you can then invest with only one goal in mind: your own financial future. When properly managed, a lump sum payment can lead to long-term benefits that remove your assets from speculative investments.

Ultimately, your goals are to receive the most equitable distribution of assets possible and to emerge from divorce with a stable financial future. With the right strategy, you can meet both of those goals –provided you steer clear of the likes of Bernie Madoff.

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Jeffrey A. Landers, CDFA™ is a Divorce Financial Strategist™ and the founder of Bedrock Divorce Advisors, LLC (http://www.BedrockDivorce.com) a firm which exclusively advises affluent women throughout the United States before, during and after divorce.  He assists women and their divorce attorneys with deciding on the most advantageous way to divide marital assets and enable them to negotiate more favorable settlements, especially when there are complicated financial and tax issues. Jeff also advises happily married women who have seen their friends blindsided by a divorce initiated by their husbands and wonder (wisely) how financially vulnerable they’d be in that situation. Jeff developed the nation’s first Just in Case(TM): Secure Your Financial Future,a one-hour program, which quickly shows married women how to be prepared in the event of a future divorce with immediate, practical steps. He can be reached at Landers@BedrockDivorce.com.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

Follow Jeffrey A. Landers on Twitter: http://www.twitter.com/Bedrock_Divorce

First Published Tue, 2012-07-17 13:16

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