Do You Need a Postnup?

/in , /by

While the term “prenuptial agreement” has made its way into mainstream vocabulary, many still look flummoxed by the term “postnup.” What is it and are you in need of one?

A postnuptial agreement is structured like a prenup and bears similar terms, such as separate and marital property designations, specific maintenance provisions or waivers, estate provisions, and the gaping absence of rights relating to children of the marriage. Akin to a prenup, the agreement is mostly relevant and effective upon a separation at a future date. Both agreements are governed under the identical principles of contract law.  

Postnups are usually not “Oops we forgot to enter into a prenup; let’s quickly patch it up with a postnup” situations. Rather, they are typically carefully calculated events that fall into one of the following categories:

The parties start the process before their wedding and intentionally decide to finalize their agreement after the wedding when the dust has settled.  

When clients first come to me for a prenup, I ask them what their timeline is — if they can’t negotiate the terms they want in time for a pre-scheduled wedding, are they willing to proceed with the wedding, do it as a postnup and continue the negotiations after the wedding.

There are those that vehemently respond NO — come hell or high water, they are not getting married without a prenup; others are more lackadaisical about it and respond that they feel comfortable proceeding with the wedding, as long as they know a postnup will be entered into afterwards.

It is important to advise the latter category that a postnup is easier to challenge, and there are no guarantees that it will be signed within a specific duration once the wedding takes place.

Ironically, there seems to be little correlation between the generosity of people in their negotiations and their decision to either postpone the wedding until a prenup is executed or do it as a postnup. I’ve had clients say they want their spouse to get nothing in the event of a divorce, while others have wanted to give much more to the other person than the law would extend. Both these types of people have told me they could wait until after the wedding to do it as a postnup.

The psychology people have in relation to their money, accumulation, and sharing is not always logical; assumptions cannot be made; it is important to check the party’s temperature on these facets.

The parties are giving the prenuptial agreement a facelift; updating it to make it more current and reflective of their present reality, as opposed to the reality of bygone years when the prenup was entered into.

This is fairly common in a strong, healthy marriage when the parties have entered into a prenup that was more heavily in one party’s favor with the oral promise that they would agree to update it and extend more leaves to the other party as their marriage progressed, their family grew, and they had a proven track record of being happy together.

Case in point is a client who married a high net worth individual whose family carved out the terms of the prenup to protect their vast real estate conglomerate. The groom told the bride that he would agree to update the agreement every few years; true to his promise, he has, with each postnup they enter into being more favorable for her and far exceeding the prenup. At this point, approximately 7 years into their marriage, she is receiving far more under the present postnup than she would receive under the law. Her words verbatim, “He sees I’m normal, not out to spend money, and is now happy to share more.”

This postnup-to-update-a-prenup scenario is not exclusively exercised in smooth sailing waters; there are times when it is the exact opposite dynamic that triggers the postnup. A party unhappy in a marriage, who is starting to check-out, has more leverage when their spouse is dependent on them, still loves them, or wants to remain in the marriage and the unhappy spouse tries to get their spouse to sign a postnup that alters the terms of a prenup.

The parties are entering into a joint venture such as purchasing a marital residence together and wish to explicitly set forth the terms and allocation of ownership.

When parties purchase a big-ticket item such as a marital residence, especially if they got married later in life and have significant separate property funds, they often want a postnup relating to the specific responsibilities and ownership interests of the asset.

This scenario is also common when parties have a prenup with unspecified or overly generalized terms regarding jointly purchased real property.   

One or both of the parties are starting a business either together or separately or assuming debt and wish to set forth the terms and protections as it relates to their marital and separate property rights/entitlements and liabilities.

A physician who had been with her husband for over 15 years recently came to me for a postnup because she was starting her own medical practice, had significant medical school debt, was about to assume more debt towards business loans for her new venture, and her spouse had significant student loan debt as well. While her spouse was willing to have her start her own business with no agreement in place, she strongly felt she needed a postnup to allocate rights to her business and assign the parties’ respective debts. In light of her unease with her situation, I couldn’t have agreed more.

An agreement often works like a charm to settle a party’s nerves when they are about to take bold entrepreneurial steps or feel they are in over their heads in areas largely out of their control; an agreement is a way to take the reins in whatever way they can. 

Another client learned that her spouse was 9 million dollars in debt and wanted an indemnification agreement to protect herself; such an agreement would also fall under the category of a postnuptial agreement.

The parties’ marriage has entered rocky waters; they are not yet ready to throw in the towel; the thought of either a separation or divorce is still too raw and shocking, and they are wading their feet in the waters, one step at a time, and doing “Trysies” on a separation or divorce.

The expression, “Marry in haste, repent at leisure” is on point. Some need to unravel their marriage in baby steps. As opposed to ripping off the band-aid, they need incremental stages to adjust. Often they also feel there is a possibility of reconciliation and a postnup lends itself to such more than a separation agreement (or divorce), which has a greater air of finality to it.

When navigating the waters of a postnuptial agreement, party’s different paths, as described, often lead to the same result.

If you find yourself facing a time-challenge with your prenup or are considering a postnup, feel free to contact me.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Are You an Innocent Spouse?

/in , , /by

One of the benefits of marriage is being able to file joint tax returns with a spouse. However, marriage brings a double-edged sword. On the one hand, spouses reap the benefit of being able to collectively have more money to live on if they’re drawing from the same pool during their marriage and maximizing their tax benefits. The downside, though, is when the spouse with no knowledge of marital finances signs off on tax returns and it later comes to bite them. Often the spouse in control of the finances just tells the other person to sign, because they’ve waited until the 11th hour to file, and have no time for explanations or mincing meat.

Every now and again, a spouse will even sign the other spouse’s signature, which often comes out during the divorce. I’ve had a few clients over the years that said their spouse signed for them, but when I’ve dug deeper, that client has told their spouse to sign for them if they ever needed to.  

In one classic situation, the wife asked for child support and claimed that her husband made $600,000, but the joint tax return showed that collectively they made $180,000. In this case, the husband said that she signed to that amount and should be held to it for child support calculations, thereby imposing a significantly lower child support obligation on him. The wife claimed that she didn’t know what she was signing. She simply believed and acceded to him. Of course, assuming the wife knows basic math, she would know she was living on $600,000, rather than $180,000.

I recently worked on a divorce case, where the wife signed an addendum to the couple’s prenuptial agreement, executed many years ago, that gave the husband carte blanche discretion and authorization with regards to filing their joint tax returns; akin to a power of attorney relating to their taxes. This is an extremely bright and savvy woman — starry eyed in love, in her youth, with who she thought was an incredibly charming millionaire; her romantic notions and desire to be taken care of created thick naïve glasses through which the reality was obscured, and she trusted him wholeheartedly. Years later, his macho charade started to unravel, and IRS letters claiming tax evasion and liabilities exceeding 15 million dollars started to pour in. After her initial shock and numbness, she ran for cover under the safety haven of “innocent spouse relief.” See IRS Publication 971 and IRS Form 8857 (Publication 971;  Form 8857.pdf).

In these case, I’ve looped in accountants, tax lawyers and forensic experts, if needed, to provide the necessary perspective, releases, and maximize the relief to the client. It becomes very interdisciplinary, and a team of professionals who work well together and communicate fluidly, efficiently, and effectively, while also communally keeping an eye on the client’s pocketbook and spending is key.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

How Camera Shy Are You?

/in , /by

Courtrooms are, for the most part, open to the public, and if you spend a day in a Supreme Court matrimonial part or Family Court courtroom, you will probably learn who is (allegedly) abusive, a dead beat, a drug addict or an alcoholic as the cases on the calendar are called one by one.

Many of the divorcing parties come to court dressed in their finest for the formal occasion, but as their case details unfold, they cannot clothe themselves enough to cover their vulnerabilities and deficiencies.

These people are usually in a difficult predicament and need bystanders to know what’s going in their lives like a hole in the head. They are not celebrities, who knew well beforehand what they were signing up for. They are ordinary people who often conduct their life with an expectation of privacy.

A group of seasoned matrimonial lawyers posed this dilemma to a panel comprised of some of the New York County Supreme Court and Family Court judges, and the judges conceded that the courtroom and minute books are open availing little privacy in that regard. However, they stated that they publish few decisions, and while this is primarily due to lack of time and resources, they also do so to protect identifying information from being revealed. They further stated that their concern for maintaining anonymity more heavily revolves around protecting the children involved in divorces.

Mediation is more of a foolproof solution toward maintaining the divorcing family’s privacy. In the mediation process, the parties meet with a mediator often in a private comfortable office meant to elicit a more relaxed vibe, and take the edge off (a very different ambience than the often imposing, sterile and cold courtrooms). Many of these offices are discreet and the conversations themselves are between three people – the mediator and the two parties – with no observers. The parties sign a confidentiality agreement to further boost their confidence in the confidentiality of the process (although, arguably, an agreement is only as good as the paper it’s written on, and once signed, requires that the parties respect and maintain its integrity by following its terms). However, mediation is not always a viable option and can only be exercised when both parties are willing participants, so there are inherent limitations.

There is a cost benefit analysis to maintaining open courtrooms and revealing details. The bystanders are most typically attorneys sitting next to their client — other litigants waiting for their cases to be called. While waiting, they often learn how a specific judge navigates and reacts to different case scenarios. This sort of educational process and exposure may often be faster and more efficient, accurate and compelling, than spending hours pouring over case law and general legal research for other litigants and their attorneys to determine how their assigned judge will lean in their case.

Regarding case law research, case law reference and citation is a large part of motion practice. With published cases, surnames are often used (and some of the names are very unusual and uncommon). To add a layer of protection, initials are sometimes used.

It is a very attractive concept to be learning from the details of other cases. The question is, do you want your case to be used as such a platform. While you may appreciate it, in theory, you may want it to be other people’s cases who you and your attorney are learning from to bolster your case and not your case that is being used as an example for others.

So, the question remains and is open-ended: Are there further steps that can or should be taken to better maintain a litigant’s privacy while still maintaining the valuable educational benefits that often flow from the open courtroom and revealing case law.

Feel free to contact The Law & Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

When Love and Marriage Don’t Go Together like a Horse and Carriage….What’s Left?

/in , /by

Marriage is inherently deemed an economic partnership, according to the law, and upon its dissolution, the accumulated assets and interests are to be distributed on the basis of the economic needs and circumstances of the parties.

Equitable distribution in New York is fact specific, and not a 50/50 split, like it is in the community property states, such as California, Arizona, Nevada, and Alaska. (There are 9 community property states in total.) Much is left to judicial discretion in this neck of the woods. Both parties contributions as spouse, parent, wage earner or homemaker are accounted for. The court possesses flexibility and elasticity to mold an appropriate decree, because what is fair and just in one circumstance may not be so in another.

With regards to equitable distribution, we look closely at that economic partnership, splitting interests when there are both direct and indirect contributions made to the titled spouse by the non-titled spouse. These details will oftentimes determine how much is allocated between the parties. If there were many direct or indirect contributions made by the non-titled spouse, that could give a lot of weight to how much is paid to the non-titled spouse in the equitable distribution payout.

Marriage is like being on the clock. It is “marriage time,” like punching in and out of work, with the punch-in time being the date of marriage and the punch-out time being the date of commencement of a divorce action for active assets, and date of trial for passive assets. When you sign up for marriage, your financial actions are accounted for, and there is to be a reckoning with your spouse. A large part of the marriage (contract) is a financial contract with your spouse, and whether or not you understand the provisions and their ramifications when you take those marriage vows, you are bound by them. All time you spend during the marriage may be accounted for and “billed,” so to speak, in the final pay-out equitable distribution awards.

Arguably, this result may be inherently unfair from the get-go if you consider that most people don’t read the Domestic Relations Law, Family Court Act, General Obligations Laws, enter into a prenuptial agreement, or consult with a matrimonial attorney prior to marriage, so they are clueless as to the full breadth of the financial picture and often make erroneous presumptions. For example, many people presume that money they put in their separate titled accounts during marriage is separate property, which is incorrect. All income earned during marriage is marital income, so if spouses put their incomes into separate titled accounts, rather than keeping that money separate, they are commingling their separate account and presumptively turning everything in that account into marital property – the exact opposite result they intended.

Another counterintuitive consequence and irony is that many people’s performance tanks during a bad marriage. A non-titled spouse may be requesting and entitled to equitable distribution for their contributions when the titled spouse may feel that all their spouse did during the phases of a distant or rocky marriage is hamper their performance and growth, and that their growth would have been exponentially greater without their spouse and his/her claimed contributions.

The hoi polloi are entering into marriage contracts without understanding the basic principles of the contract, and later claiming that they did not understand the contract is not a valid defense. If you are old enough to get married, you are supposedly mature and responsible enough to avail yourself of this information and plan your finances accordingly.

It would be a leap to evoke the phrase “The Follies of the Masses,” but as matrimonial attorneys and mediators, we urge people to educate themselves about managing their finances prior to marriage, and if that time has passed, much may still be salvaged. I have married people asking for consultations all the time to realign their finances and understand the financial blueprint, for example, prior to one spouse opening a business, assuming a large debt, receiving an inheritance or personal injury award or liquidating untainted premarital property towards purchasing a jointly titled home, all of which are opportune times.

Feel free to contact The Law & Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
745 Fifth Avenue, Suite 500
New York, NY 10151
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

Help! Is My Attorney in Bed With My Ex’s Attorney?!

/in , , /by

On several occasions, I have been the incoming attorney where the client did not trust the attorney they initially retained, because they felt that attorney was in bed with their ex’s attorney, so to speak.

They had observed the two attorneys — opposing counsel to one another on the given case — engage in overly friendly behavior and banter in the court hallways and overheard their attorney cutting deals and verbally committing to settlement agreements to the opposing counsel that they had not spoken about with them (their own client) previously. In one particular case, the client overheard her attorney agreeing to have her pay a sizable amount in maintenance without first discussing it with her (this was before the new maintenance legislation was passed); in another case, the client overheard his attorney agreeing to give the wife full custody with limited visitation to him (the father) where the client was a very hands-on and involved father and wanted a 50/50 custody split.

These observations breed distrust, as the client feels that their attorney is not advocating for them. They feel their attorney is in cahoots with opposing counsel and is more interested in their relationship with opposing counsel than with them, the client, thereby selling them down the river in the process.

It is important for attorneys to have a positive rapport with one another, but there is a fine professional balance.

The relatively small pond of attorneys specializing in matrimonial and divorce law can often feel confined and incestuous. The attorneys tend to see each other frequently (for example, in court, at continuing legal education programs, and they are often repeat opposing counsel to one another). They are familiar with and often respect each other’s work.

A friendly professional relationship between your lawyer and opposing counsel can benefit you, because it can help the case proceed more smoothly and quickly. For example, if your lawyer is friendly with opposing counsel, opposing counsel will be more likely to extend professional courtesies when they are requested and less likely to argue over points of minutiae that are vacuous holes of time and money. A friendly professional relationship generally also involves mutual respect for the other person’s skills and professionalism. A lawyer who is respected by his/her colleagues can be a more effective advocate for you.

There are best practices attorneys should follow to foster the client’s security and confidence in them and the progress of the case. Foremost are the needs for transparency and honest, clear, open communication.

Before agreeing to a deal on your behalf, your lawyer should discuss with you the goals of the representation, the scope of his/her authority to reach an agreement on your behalf, and the specific details and ramifications of any particular piecemeal or global settlement.

While your lawyer should advocate zealously on your behalf — both in negotiations and when arguing to the court — keep in mind that it’s also part of his/her job to advise you about the realistic chances of achieving your goals in light of the governing law. Although clients do not always welcome this kind of information, if your objectives are realistic, your lawyer may be able to help you resolve the case more quickly than if your objectives are unrealistic. Having realistic goals can also help minimize the emotional turmoil that can accompany divorce.

To ensure transparency, your lawyer should regularly update you and accurately report to you about what is going on in your case. You should be copied on all written communications.

Sometimes, the assigned judge will ask the lawyers to come up to the bench or into the judge’s chambers without their clients. Because transparency is extremely important, your lawyer should ask the judge if you can be present. If your lawyer can’t say something in front of you, he/she shouldn’t say it at all.

Feel free to contact The Law and Mediation Offices of Cheryl Stein with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

There’s No Such Thing as a Gentlemen’s Agreement…and Then Some!

/in , , /by

Often when couples first begin talking about divorce, they come up with their own agreement: “I’ll take this, and you’ll take that…I’ll be responsible for this, and you’ll be responsible for that.” Sometimes, they recruit a mutual friend to play makeshift mediator, and then somewhat live under the terms of the agreement they contrive. However, this agreement is unenforceable, as it is usually either a gentleman’s agreement or one written, but not signed, notarized, and acknowledged in the manner required by the courts to deem an agreement enforceable. Ironically, divorcing parties are often “stuck on” this initial “home-baked” agreement. Fast forward a bit to one of the parties becoming disgruntled enough to commence a litigation action. Within the litigation context, they often keep referring to that initial agreement, which bears no weight.

An analogous situation can occur in mediation. Mediators typically have each party sign a waiver stating that anything said in mediation is private, confidential, and cannot be used in litigation. The parties often strike agreements on various issues and start planning their future and making arrangements based on their agreements. If mediation falls apart and litigation begins, what the parties agreed to during mediation is meaningless. Nevertheless, the parties are often so stuck on what happened in mediation, where they were an active participant, able to get many concessions they were satisfied with, that four years later they are still reminiscing about it with nostalgia. It wasn’t successful—why be fixated on something that didn’t work.

In one extreme example of a mediation case gone sour and turning into a bitter litigation battle, the husband broke into the mediator’s office at night to steal the records from his case, which he thought would highlight the concessions his wife agreed to make during mediation. Besides being a criminal act and downright meshuga, to what end? What was to be gained? The deals struck in mediation stayed there and are bootless.

When divorcing parties start to live under the terms of the agreement before it’s actually drafted, it can be like a house of cards that falls apart. It is important that adequate protections are in place and that things happen in a sequential order.

A good practice is to have “interim agreements” or “stipulations.” In litigation, parties typically enter into stipulations along the way as they settle and resolve select issues and can then move forward to tackle the outstanding issues. For example, there may be a custody trial or settlement with a parenting agreement executed, on the heels of which follow the financial aspects of the case. It is wise to engage in a similar practice in mediation. The parties should each have consulting attorneys, and valid interim agreements can be entered into as the mediation progresses.

In almost every case, there are the pressing, time-sensitive or “elephant in the room” issues that need to be tackled first, which often include but are not limited to:

•Custody, visitation, and parenting issues.

•Interim support plan.

•One spouse moving out of the marital residence.

•Closing joint accounts and devising a plan to pay off marital debt.

•Deciding whether to file tax returns jointly or separately and who claims the children as dependents.

•Removing one spouse’s name from investments they know nothing about and feel they may need immediate protection from.

With the guidance of consulting attorneys, valid agreements can be entered into, settling each of the situations the parties are most concerned about along the way.

Often, when parties resolve the matters they are most anxious about, the rest falls into place more easily.

Whether parties choose to litigate or mediate, it is important to consult with an experienced attorney at the very beginning, when they start thinking about divorce or discussing it with a spouse, to ensure they are adequately protected.

Feel free to contact me with any questions.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com

How to Get What You Want in a Divorce

/in , , /by

From the outset, I discuss with my clients what their bottom line is and what they are willing to negotiate on. Typically, in the beginning, the client wants everything but the kitchen sink. Over time, however, the way that bottom line ends up morphing is astounding, especially as the urgency to get relief from the situation envelops the client. Of course, the goal in litigation is to get the other side’s bottom line to morph towards you as much as possible. In mediation, it’s to get the clients to meet somewhere in the happy middle.

One of my clients wanted his wife to have a certain amount of life insurance, with him being the trustee. She agreed, with the stipulation that she be the trustee of his life insurance. He didn’t want that and realized it wasn’t important enough to him to delay the process. So, he chose to “pick his battles” and took this out of the negotiation altogether (even though that was originally his ideal end situation).

Another client wanted her husband to pay towards multiple extracurricular activities for their very young child, especially as he could more than well afford it. His position was that he would pay towards only one extracurricular activity that he thought most appropriate to enhance the child’s development at any given time. He was very obstinate on this point and would not budge. They had a joint custody arrangement, where ALL decisions relating to the child were to be made jointly, and both parents were very involved. She ultimately decided that if she allocated and budgeted her money carefully enough and cut down personal spendings in other areas, she could come up with the money to pay for the child to be enrolled in multiple extracurricular activities at a time, as was really important to her. We proposed that she would be responsible for all extracurricular activities above the one he agreed to pay for, but that she would also NOT need his consent. He resisted at first because it meant relinquishing some of his control and decision making. Ultimately, he begrudgingly acquiesced, and the parties signed off on it.

Those can be categorized as more “small ticket items.” Sometimes, divorcing parties start to feel such an overpowering desire for immediate relief and resolution, they start bending on “big ticket items.” For example, they may start offering to accept significantly less in basic child support than they are entitled to pursuant to the statute; or to pay a lot more (if they are the non-custodial parent to pay basic child support). It is critical that the parties are anchored, thinking it through clearly, and not “selling their shirts,” so to speak, for the immediate gratification of a speedy divorce.

As clients go home and crunch their own numbers, they seem to start analyzing their lives more. They think about their lifestyle and what they want in the short and long-term future—different things end up being important than what was initially thought.

In terms of negotiation tools, what people think is going to be important to the other party often isn’t. This is most poignant during mediations when each side fills out a separate intake form where they convey their desired results and bottom lines. I’ve had a wife say in mediation, “I know him; I know what’s important to him.” As the mediator, I knew that, in fact, it was something else that was important to him—something the wife would not have thought of—and vice versa.

Sometimes, during litigation, the other party’s responses to a settlement proposal focus on something that is such minutia to my client, we would laugh about it. That’s an important piece when bartering—each party can receive “his/her minutiae” and everyone can be happy.

Often when clients think through their situation, they calm down on their own. What once was a problem becomes a non-issue. So rather than throw fuel into the fire, let things simmer on their own. Be willing to morph your bottom line, and focus on what’s really important to you in your divorce negotiations.

Cheryl Stein, Esq.
The Law and Mediation Offices of Cheryl Stein
Offices in Manhattan and Brooklyn
Phone: (646) 884-2324
E-mail: cheryl@cherylsteinesq.com