Tag Archive for: Assets

Protecting Your Business Partners from Your Marital Fallout

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Most people are prepared to undergo intense scrutiny and background checks when entering into a business partnership or for consideration to high-level corporate and finance positions. 

It’s a common occurrence meant to unearth skeletons and expose red flags in your life. 

The business partners or corporation want to know how your problems may become their problems if you are onboarded and welcomed into their fold. 

Your prospective or current marriage may be one of the things they look at with discomfiting interest. 

There is ostensibly a good reason for this personal invasion of privacy. Divorce has the potential to shine a spotlight on your business interests and investments in what’s called “Discovery.”

Discovery is a mutual exchange of financial documentation during divorce. It includes all income, assets/investments, and debts. It is an exhaustive and time-consuming process meant to ensure that all cards are on the table and there is full transparency relating to the divorcing parties’ individual and collective finances. The intended endgame is a fair and equitable financial settlement agreement. 

The inevitable consequence is the required production of documentation relating to business interests and investments. This makes prospective business partners queasy as they typically don’t want confidential documentation relating to their business exposed in your divorce. 

To give you some examples, one of my divorcing clients had 3 business partners. It was a very successful hands-on business and all 4 of them were actively involved on a day-to-day basis. Typically, I meet with my clients alone and we loop in their accountant and other professionals when needed. In this instance, all 4 business partners insisted on being at all meetings relating to the business, its valuation, forensic accounting, and documentation that would be produced. My client’s wife was seeking a marital portion of the business (of which my client was a quarter owner). She was also trying to understand its income structure and claimed there had been downward manipulation of income in anticipation of divorce – a fallacious assertion, which we needed to refute. 

Another example is a frantic phone call I received from a new client. He was in Europe for a corporate meeting with his business partners. His wife called him during the meeting to tell him she was seeking an immediate divorce. His business partners overheard and became so concerned as to how they would be affected that they told him to call me immediately on speaker phone and explain to them the process of discovery, equitable distribution, and allocation of business interests under NY divorce law. 

Fortunately, there are preventative measures to cut such problems off at the pass, including prenuptial and postnuptial agreements. 

For prospective or current business owners a very popular prenuptial or postnuptial clause is making a business separate property, and moreover, barring discovery of the business. 

This clause is one I am strongly in favor of when I represent the business owner and one that I am strongly against when I represent the non-business owner. However, everything can be made possible for the right price. If it is used as a barter for something worthwhile I can get for my client, it is open for discussion. 

Negotiating any prenup or postnup involves a lot of listening and diplomacy because we are trying to foster a marriage and engender love, endearment, and a sense of fairness between the parties. It needs to work for both parties, not just one. 

However, prenups and postnups are also instruments where strong advocacy for one’s client is needed to ensure the client is protected.  

We need to walk a fine line and be careful how we tread and define terms. If we are too inflexible with our own client’s interests in complete disregard of the other party’s interests, it can backfire. 

For more information on prenuptial and postnuptial agreements and walking the fine line of negotiating your ideal terms, contact The Law & Mediation Offices of Cheryl Stein. 

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

Title Doesn’t Matter

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In marriage, title doesn’t matter. Titles to houses, cars, accounts and businesses can all get overridden by the statute and court system in a divorce.  

I often do consultations where people say things like, “I’m married, but we keep everything separate.” They operate under the assumption that, because each party has assets in their own name, it’s separate property under the law. They think that the default in a marriage tips to individual title, and that the only things that are jointly owned are whatever has been purchased jointly and/or is held in joint names – unfortunately for them, this is a gross misconception. 

Everything purchased during the marriage is presumptively marital property, regardless of title. The burden of proof is on the person who wants to prove otherwise. 

For example, someone might purchase a property in their separate name during marriage. However, title in their sole name doesn’t matter. The overriding presumption is that everything purchased after the date of marriage is marital property. 

Inheritance is, by definition, separate property. That said, if someone uses their inheritance money to purchase a property that they put in their separate name — and then they use money earned during the marriage to pay towards the equity and the principal on the mortgage — then that person has commingled and made a portion of that house marital property. 

Businesses are handled a bit differently. When it comes to businesses, the titled spouse does get a leg up, and the non-titled spouse is typically entitled to smaller percentages than other aspects of equitable distribution, such as accounts, that weigh in favor of 50/50 splits. Non-titled spouses typically get approximately 5% – 33% of the value of the business interest, and where they fall on the spectrum and whether the court would go outside of this most common range is based on the direct and indirect contributions each spouse has made to the business. Let’s say a husband has a contracting business in his exclusive name, as appears on the corporate and business documents, his wife is presumptively entitled to a portion of the business, even though she is a non-titled spouse. 

Prenuptial and postnuptial agreements offer a means to explicitly delineate personal separate property from joint marital property. Their flexibility allows us to go above and beyond what the law provides and create unique solutions that make sense for the situation. 

To learn more and appropriately protect your rights and interests, contact us.

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

Divorcing an Addict

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I’ve had many situations where one party is an addict and the other party has to deal with the repercussions or where both parties are addicts but one is more functional. In several cases, the parties actually met at AA. I’ve represented the addict spouse, the non-addict spouse, and neutrally mediated many cases involving addiction.

Studies show that addicts don’t necessarily get better — instead it’s about containing or channeling the addiction. Oftentimes, for a multitude of reasons, the partners of addicts are willing to cut the other party some slack because they don’t want to throw in the towel on the marriage. Sometimes, a post-nuptial agreement is done instead of a separation or divorce, sometimes nothing is done.

When thinking of addiction, most people conjure images of alcohol, drugs, and smoking, but there are so many other forms of addiction that can have deleterious effects on relationships and marriage, like sex addiction, gambling, video games and screen time, and engaging in dangerous and high-risk sports and behavior to test one’s edge and get their adrenaline pumping towards making them feel more alive, or on the flip side, to numb themselves from feeling anything.

I have a case in which a woman was married to someone who is a sex addict. He spent the down payment for a new house on his addiction. Because they have three young children, the wife took a wait-and-see attitude. For his part, the husband went to a rehab facility and found 12-step meetings to attend afterward. Unfortunately, as time went on, it became clear that his addiction was a factor once more. While it did not affect his career, he was not able to juggle his addiction and his marriage. I represented the wife in the divorce getting her 75% of the parties’ assets in an equitable distribution relief package to compensate her for the money the husband dissipated on prostitutes, escorts, and his porn addiction.

Another common situation I’ve come across is when there is a combination of addiction and rather acute mental illness, such as bipolar disorder. This is especially relevant when there are changes to medication used to treat mental health issues, or the person simply stops taking their prescribed medications. These situations can change overnight, and often cause people to want an immediate divorce in order to protect the children, in addition to protecting assets, and their own mental health and sense of safety.

Gambling addiction is also widespread. A client’s husband recently revealed to her that he has $150,000 in gambling debt and a co-debt with someone else for over $50,000. She is obviously very concerned about her assets, which primarily consist of the marital home. One option for this couple would be a post-nuptial agreement, putting everything in the non-addict spouse’s name.

Within more religious and tight-knit communities, I’ve seen many miserably unhappily married people choose to stay married to an addict solely because they fear stigma. Often, they have children and are afraid that others will think the addiction is inherited. If people live in a community where addiction is a highly stigmatized black marker, they don’t want people to know, so they choose to “stick it out” in their marriage — a very loveless marriage for the sake of maintaining a facade.

Feel free to contact me if any of this resonates and you or your spouse struggle with an addiction.

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?

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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