I’m Diana Shepherd, the Editorial Director of Family Lawyer Magazine. It’s my absolute pleasure to introduce the participants in today’s Roundtable on how wealth shock generated by volatile real estate and stock markets plus COVID can impact high asset divorce settlements. Our host for today’s Roundtable is Sharon Klein, who began her career as a trusts and estates attorney and now has more than 25 years of experience in the wealth advisory arena. She’s also been inducted into the Estate Planning Hall of Fame. An esteemed member of Family Lawyer Magazine‘s advisory board, Sharon heads Wilmington Trust’s National Matrimonial Advisory practice.
The three family lawyers participating in this round table – Alton Abramowitz, Marlene Eskind Moses, and John Slowiaczek – are all past Presidents of the American Academy of Matrimonial Lawyers. All three are also diplomates of the American College of Family Trial Lawyers, which is a select group of 100 of the top family law trial lawyers from across the US. They are highly respected, experienced, and skilled lawyers with a lot of knowledge to share, and we’re glad that they’ve agreed to share it with us today. So, without further ado, here is your host, Sharon Klein.
Sharon Klein: Thanks so much, Diana, for that very kind introduction! It’s my pleasure to be here with my three esteemed guests. John, I’d like to start with you for my first question about the so-called wealth shock, which is how the very volatile stock market and real estate market can impact property division in high asset divorces.
There was an article in Bloomberg recently where Evan Spiegel, the billionaire co-founder of the messaging app Snapchat, lost 30% of his fortune in one day – and Mark Zuckerberg of Meta at one point was reportedly down $5.7 billion. These are very high-profile and exaggerated examples of the swings that can occur in someone’s net-worth.
When you’re trying to divide assets in a divorce, which can include security accounts, retirement accounts, homes, and other assets, how does wealth shock impact property division?
John Slowiaczek: When clients initially come to see us, their first reactions are generally fear, apprehension, and uncertainty about the system. We talk to them about time and time commitments. A normal divorce in most communities takes approximately a year or more. Not only are they dealing with the valuation issues at the time of the divorce – when it’s filed or when it’s instituted – but they also have to deal with the evidence presented to the court. The real estate market is sometimes the most volatile in the beginning because someone usually has to move. In today’s market, people are having difficulty with rent and some are moving out of the family home into another property. If they’re going to purchase a home, they don’t have the equity portion they may have had to buy a new home in the past. If they’re looking to rent, they’re looking at a loss of inventory in many of the communities and finding problems with the costs.
The initial shock when it comes to the whole process deals with the family home. Who will live there, and how long are they going to stay? Then they start looking at their assets, and they look at the business and property valuations – including the history of the finances and the income for the company. But the spikes that are occurring today do throw things out of whack for the people trying to do the business valuations.
Wealthier people generally have a better understanding of their cash flow and stock portfolios because they’re more used to riding out the storms than those who are less wealthy. But the wealthier people are more troubled by fundamental issues, including whether they will be paying their divorce obligations with today’s dollars or tomorrow’s dollars.
As lawyers, our responsibility is to try first to determine what constitutes the marital estate, then to value and then divide the marital estate. If it were a simple process where everything was divided equally, then the risk would be the same for everyone. In divorce, people start cherry-picking assets, taking high-value or tax-free assets, and trying to give the other party the short end of the stick.
When people come to us, our responsibility is to manage their expectations, explain the difficulties they will encounter during the process, and make them realize that the lawyers have very little control over the outcome. The courts want us to try to value assets as close to the trial date as possible, which takes a year from our first appointment with the client to when we ultimately present evidence to the court. That all comes back to building expectations or managing expectations for the client and discussing the individual assets. The housing market is continuously changing; what we do at the beginning of the divorce being filed might not translate to what we do at the end of the divorce.
Sharon: What you’ve said is so interesting, John, and it really underscores to me how important it is to run financial projections when someone is getting divorced. Working at a financial advisory organization, this is something that I see helping clients every day.
How do you project different scenarios? How are things going to play out in the future? Including cash flow projections and risk assessments, which are so important for two reasons: one is to give family lawyers ammunition at the negotiating table, and two, after the divorce is final, to be able to invest the assets in a way that’s going to sustain a desired lifestyle. The wealth shock you were talking about makes those analytics even more important because you could build additional layers of risk-to-stress test outcomes and see how they hold up to those shocks. There’s also the question of what would happen to model cash flows or assets, like privately held businesses that might have been affected by the wealth shock, or generally creating different scenarios so clients can make informed decisions.
In our initial discussions, you mentioned that the court would typically not take into account the after-tax value of assets unless a potential sale is imminent. It’s important to calculate the after-tax value of assets, and if you have an asset like a business or a home that’s going to be sold at some point, you probably want to analyze the impact of capital gains taxes and sales costs so you can see what your client is actually going to receive at the end of the divorce. You can’t do that analysis without sophisticated analytics.
It is challenging to show these complex calculations with an Excel spreadsheet, for example, because an Excel spreadsheet is static: it doesn’t account for different rates or potential changes in tax law. It’s vital for family lawyers and their clients to work with financial professionals who can provide that kind of analytical data.
John: You must set the stage on the very first day you meet with your client about the after-tax value of their assets. You don’t want them to make false assumptions about how their assets will be divided.
Sharon: Alton, let me turn to you now and ask for your thoughts on the impact of wealth shock on asset division in high net-worth divorces.
Alton Abramowitz: It has had a significant impact because the current economy is very uncertain; for instance, someone who had significant wealth in the form of cryptocurrency a year ago may have lost a substantial portion of that wealth today. I was sitting in a bankruptcy creditor’s hearing this week where our former client, the husband, lost $35 million in cryptocurrency; that’s significant, and it impacts his ability to comply with the settlement he worked out with his ex-wife.
Similarly, the price of real estate in the New York Metropolitan area where I practice is very uncertain. Residential real estate is increasing in value; retail real estate, on the other hand, is very difficult to value because of the impact of Amazon, which has hurt the retail industry terrifically. Also, not as many people are working in their offices in New York City as before. If you drive up Madison Avenue, where my offices are located, almost every block has vacant storefronts, and that impacts the value of that real estate in a very negative fashion.
Rental residential real estate has become inflated, and some clients face demands from their landlords asking for 40% or more in terms of increases in their lease renewal. When we start a matrimonial case in New York, we must identify all of the assets and liabilities as John indicated. We do that on a court form of the net-worth statement, which contains a balance sheet of assets and liabilities and a profit and loss statement. We have to work with financial professionals to try and predict different scenarios depending on what the markets will do not only today but also 10 years from now.
Sharon: It’s tricky business, but when you’re armed with the data, it makes it a little more understandable and concrete for clients. Marlene, is there anything you would like to say regarding the wealth shock topic?
Marlene Eskind Moses: It’s critical to ensure that you and your financial experts are getting the most up-to-date valuations at every important juncture because financial disclosures might be required.
In Tennessee, where I practice, financial disclosures are not required at the front end – but in some states, they might be. You may have a financial disclosure valuing assets and liabilities at one set of numbers, and then you might go to mediation and have a completely different set of numbers. And it’s crucial for practicing lawyers to know that these values are fluid, particularly on days that some businesses increase in value while others decrease, or some go out of business. Lawyers need to be prepared and flexible to work with their financial advisors at every juncture.
Whether it’s mediation or arbitration or a settlement conference or a trial, update the numbers and ensure you have the underlying documentation necessary to substantiate the differences at each juncture. Divorces can extend over months or years, and our markets are variable, flexible, and dynamic. It’s vital to ensure that we have the most current information possible during the divorce process.
Even if there’s a final resolution, either in a settlement situation or in a trial where a judge makes the call, it could still take a long time between when the trial occurs and when the judgment comes down – especially in a settlement with retirement accounts. It’s a lot of work.
A good practice tip would be to use percentages of accounts as opposed to using fixed numbers because they’re going to vary from day to day. The percentages will also give you a more realistic picture of how the asset should be divided. As practitioners, we can ask the judge to divide by percentages instead of numbers.
Sharon: That’s great advice, Marlene. Often, that’s what’s done in estate planning documents: you don’t give someone a fixed number, you provide them with a percentage of the assets to account for fluctuations. Once you try a case and submit it to a judge for their ruling, you’ve all mentioned that you’re typically stuck with the numbers at trial. That you can’t revisit significant swings – which causes some people to come to an arrangement themselves so they won’t be subject to those fixed values. That underscores your point, Marlene, about being current with your numbers and the valuation of the assets.
Alton, on the topic of COVID – and hopefully, we’re past the worst of the pandemic now – it looks like COVID is going to be around indefinitely, and we’re going to have to adapt. What do you think are the short and long-term effects of COVID on divorce among net-worth couples?
Alton: Initially, during COVID, many families relocated out of urban areas to suburban or rural areas to get away from the congestion. Many people moved to their second homes, which impacted where they proceeded with their divorce filings. Certain areas are more gender-neutral than others in terms of how they divide assets. People are not – at least in the large metropolitan areas – returning to their offices the way they did in the past.
We’re finding that the primary wage earner is now doing more childcare work. Several disputes occurred early in the pandemic about whether or not parents should vaccinate their children and who got to make those decisions. There was significant litigation over that.
The impact has been tremendous across the board in terms of how people look at their assets today as opposed to before COVID. Certainly, with the recession and the wild swings in the stock markets, percentages are a much better method of dividing cash equivalents such as stocks and bonds.
Our courts tend to divide those kinds of assets and retirement assets more often than not on a 50-50 basis. Some of our litigation comes in over retirement benefits, particularly pensions, 401(k)s, IRAs, and 403(b) plans where there is premarital money in those assets and monies earned during the marriage. Thus, the courts create what we call in New York “a coverture fraction.” This means a relationship between the length of the marriage and the length of time the title holder has been in the retirement plan. Our courts tend to divide the result of the application on a 50-50 basis.
Similarly, we trade off assets. For instance, someone taking the house may be trading that asset and automobiles – like a Mercedes for example – against interest in a business. The courts value businesses in New York at the time of the divorce action because the courts have held that the title holder can influence the asset’s value over the course of the litigation, which often runs upwards of two years or longer in today’s world. The courts are very conservative in terms of valuing those assets. But if you’re going into mediation, as Marlene mentioned, everybody’s free to do what they want. You might want to look at the current value of a business. An owner of a cryptocurrency trading exchange interest will certainly argue that their company has lost value over the last couple of years – the same thing with real estate people.
On the other hand, nursing home values have increased with the aging and retirement of the baby boomer generation. We’ve seen a wholesale retirement factor going on, even in our courthouses where 40% of the court staff – the personnel who support the judges in New York – have retired over the last two years, much earlier than expected.
The lawyer must factor in all of this when helping clients look at their assets and potential income. Factors like their social security benefits, how much their retirement benefits will throw off in terms of income, the ability of the income-producing spouse to pay support for the long term or the short term, and the impact of having young children in the household are all things to be considered.
We see a lot of second-generation families within the same household where people have been married multiple times and have had children with multiple spouses, which complicates things as well.
A lawyer’s job is to look at all the details, develop a package they want to promote and be willing to accept trade-offs. Sometimes, you may take more alimony in lieu of a division of certain assets, like an interest in a spouse’s business. Those things are essential in determining how to get to the end of the case.
Sharon: One of the comments you made that resonated with me, Alton, is that estate planning and tax solutions are great ways to reduce the tax impact in these high net-worth divorce cases, both pre and post-COVID. You said that the tax savings associated with creative planning could sometimes exceed the value of what’s being negotiated.
I have a situation that would have had disastrous tax results if there hadn’t been a team of advisors in place. It was a very acrimonious divorce where the wife was putting $10 million in a trust for the husband – for his lifetime benefit – and on his death, the trust assets were going to pass to the children of that marriage.
There’s a section of the internal revenue code providing that if one spouse creates a trust (while both parties are still married), and the other is the beneficiary, it’s a so-called grantor trust. The spouse who created the trust is responsible for paying taxes generated by all distributions made to their spouse, even if their partner becomes an ex due to divorce. How is this possible?!
The tax status lasts forever because, for tax purposes, the internal revenue code only looks to the status of the parties at the time the trust is created. It does not look at the status of the parties later if they happen to be divorced.
The divorce is irrelevant. If you had told the wife in my case that she would be liable to pay the taxes on distributions made to her ex-husband forever, she would’ve been quite horrified. What the attorneys did, in this case, was to create the trust after the divorce decree was final, so the parties were not married when the trust was created. If I had not been speaking to the attorneys about structuring, that surprise tax result likely would not have been discovered until way after the final divorce, which would’ve made it difficult to undo.
One of the reasons I was involved from the outset was that the parties picked Wilmington Trust as the trustee. Having an objective third-party as a trustee is often the best solution in a divorce scenario when trusts are being set up. You can help eliminate suspicion that might otherwise attach to a friend or family member acting in that role by selecting an independent corporate trustee. For example, this wife wanted her friend to be a trustee; that would’ve been an extremely awkward situation for the husband, who would have had to go to his ex-wife’s friend every time he had a request. And the friend’s actions may be shrouded in suspicion as to whether he was acting in everyone’s best interest, or to please the ex-wife.
Planning is crucial, whether you’re talking about pre or post-COVID, and the savings just can’t be underestimated. Marlene, let me turn to you and ask you about your observations on the short and long-term effects of COVID on high net-worth divorce.
Marlene: It was amazing, shocking, and a surprise to all of us because in the cases we had already resolved and settled, we thought that everybody had clear instructions about how to proceed, how to get paid, how to determine parenting time, what schools for children to attend and decisions about their medical care. All those instructions went up in flames with COVID because the questions now were:
- Do the children go to school or do they homeschool?
- Can they go to the neighbor’s house to play?
- Can they go on vacation?
- Can they see their relatives?
- Should they get vaccinated?
- Should they wear masks?
And so, the area for disagreement enlarged.
The instructions people had in their parenting plans and final decrees were no longer relevant or sufficient for the COVID times. People really needed assistance from family law attorneys to help navigate this difficult and challenging time, and sometimes the courts were accessible to us, and sometimes they weren’t.
Fortunately, we were able to work remotely as family law attorneys. Some people couldn’t continue their work, but we were able to do so, and we were actually very busy during COVID times. We’re still busy. Family law is not seasonal.
Some people could not work and had no money coming in, so they couldn’t comply with their previous orders, which was a real problem. Then there were the dependent spouses or the spouses receiving child support who wanted more funds because they had to incur more expenses. It was challenging, but fortunately, people, for the most part, worked together one way or another, and we were able to figure out how to manage it and keep families on track. But there’s still litigation, and obviously, we’re not over COVID. It’s better in that we’re functioning. For example, things aren’t shut down as they were, creating less difficulty.
Sharon: And do you see those effects continuing to linger as we transition out of the pandemic?
Marlene: We’re not through it all the way, and there are still COVID-related decisions to be made. I don’t see it going away. As practitioners, we are more mindful that we need to plan for these kinds of situations that currently exist and that may continue to exist. We have to think about them as we develop agreements or try a case. COVID is not over, and it may never be over. We’ll always have challenges, as we’ve come to learn.
Sharon: John, let me turn to you and ask if you would like to add your thoughts on the COVID impact front.
John: Everything that Alton and Marlene said is true, but I also think we are more inclined to look at our mortality because of COVID. What we call the gray divorce – people who are older and considering a divorce – are recognizing that change may come to them and could alter their life in a heartbeat. And if their marriage is struggling, they decide to come to see us when they wouldn’t have done that before the pandemic. COVID has changed people’s perception of ending their relationships as they get older.
The other problem that COVID has created is a backlog in the courts. We were talking earlier about valuation dates being close to the trial – but our courts were clogged because so many people were away and we kept filing cases. Cases were getting backlogged, and they’re still slowly working through that system.
We all have to confront a slower process than we were used to in the past. It has increased the anger between couples and, as Marlene said, the conflicts and the difficulties are there for both children and finances. That anger is palatable and we, as lawyers, have to deal with it. It makes our job harder, and it goes back to the expectations we were talking about in the first part of the discussion: we just have to manage it.
Sharon: The point you make about that gray divorce is so important. People appreciate their mortality and consider the consequences of being stuck with someone they don’t want to be with for the rest of their lives. Gray divorce can be especially problematic for women who may have been out of the workforce for an extended time caring for children, frequently making it difficult to reenter the workforce, and even if they do, they will often earn less than the breadwinner spouse. And often women may need to establish or improve their own credit if they have relied on their spouse – they may not have even had a credit card of their own, and they may have been an additional cardholder on their husband’s credit cards. Women in this position frequently can be dependent on an ex-spouse for financial support, making the financial analytics that we’ve been talking about even more important to project out what they are going to need in terms of alimony and settlement proceeds to sustain a desired lifestyle.
Marlene, what’s the best way to agree on financial matters during a high-asset divorce?
Marlene: The best way is to prepare immediately when your client walks through the door. It’s important to ascertain what the assets and the liabilities are and to have some clear notion about what will need to be done in the divorce case, then clearly communicate that information to the trier of fact, the mediator, or the arbitrator.
Once you’re gathering that information, you need to determine what team you need to assemble for the client to get the maximum result. That team needs to have a financial person; it could be a forensic accountant or somebody who clearly understands the financial assets, how they increase or decrease, and how assets should be divided.
You may need a business valuator as well as a financial expert. The financial expert needs to have tax capabilities and understanding because businesses are dealing with taxes and people are dealing with taxes. It’s important to understand the consequences of the tax impact; even if an asset’s not being sold, the businesses and the people are paying taxes yearly, and you need to know the status of those.
It’s also important that you have an estate planner, someone who can prepare the trust, such as what you did, Sharon, which was terrific, in the divorce case. Or you need someone who can help analyze the trusts and understand the trust’s purpose, who the trustee is, and who the beneficiary is.
Questions to consider are:
- How can you unravel the trust if you need to?
- Is it revocable? Is it irrevocable?
- What do you need to do now?
- Does the trust need to be divided?
There could be foundations that need to be handled or charitable vehicles that you need to understand how to deal with. So it’s critical to gather the right team.
If the divorce involves children, you may or may not need a mental health expert or a custody evaluator. Those decisions need to be discussed and addressed on the front end; the sooner you get these people on your team, and as part of the process, the stronger your case gets developed and the stronger your presentation will be to whomever you’re presenting it.
You also have to be careful about attorney-client privilege because whatever you send to your team may be subpoenaed. That’s tricky because you have to be cautious about the information you disclose to these folks knowing it could be subpoenaed. But working with them, giving them information, and keeping them up-to-date about the information will help when you present your case. You will have what you need, and you’ll be strong, and it will not be able to be refuted because you’ve done your homework.
The question then becomes, what’s the best way to get a settlement? Be prepared and strong in your work, and have your experts up to speed and clear about their numbers so you’re advocating for your clients from a position of strength. That’s the best way to do it.
Another thing to consider is what the other side is doing, what they want, and what their needs are. Think about how you’re packaging the settlement and how you can get the most for your client. Then sell your desired outcome so that it’s reasonable or advantageous to the other side.
Think about dividing an orange: you cut it in half and each side takes their half. In a situation where you have to be creative, it could be that one side wants the outside of the orange for potpourri, and the other wants the inside of the orange to eat. That’s how you could enlarge the marital pie. As you’re getting into settlement conferences, it’s essential to understand and think through how you can enlarge the pie to make settlement more likely.
Sharon: I love that orange story Marlene because each person ends up with 100% of what they want, so you really get 200% instead of dividing something in half. It’s music to my ears when I hear you underscore the importance of surrounding the client with the right multidisciplinary team from the outset – which, as you mentioned, is the family lawyer, a financial advisor, a trust and estates lawyer, an accountant, and maybe other professionals at every stage. Then when the divorce is pending, that same multidisciplinary team can work together to run sophisticated financial projections that back up your claims; maneuver through complicated valuation, tax, and planning issues, and perhaps explore creative financing options if one spouse has to buy another out of an illiquid asset, like a business; update estate planning documents; make sure tax filings are correctly positioned; and then, post-divorce, invest the settlement proceeds in a way that will sustain a desired lifestyle. Marlene, I agree with you: it’s all about the team.
Marlene: I would like to add that when hiring these professionals, they may not be the same professionals that the couple worked with before the divorce. Those people may have a conflict if they represented both parties, and you may need to hire other experts to work with the former experts. Sometimes, the former experts are necessary and important, but they may not be the advisors you need for the divorce situation.
Sharon: John, let me turn to you and see if you have any tips about the best way to agree on financial matters with a high net-worth divorcing couple.
John: All the things Marlene said are so accurate. One of the bigger problems is when people start cherry-picking the assets they want because it shifts the whole focus to risk and reward. There may be a problem when one spouse wants to keep the family home because they have an emotional attachment to it. Meanwhile, the other spouse may have the same emotional attachment but is willing to move on. We have to deal with transaction costs, and when you’re taking this cherry-picking approach, the courts are generally not going to factor in transaction costs – either the cost of the sale of the business or the real estate commissions – unless the deal is imminent. It can have substantial tax implications when people look at the value we’ve established somewhere, and then they don’t realize the impact of the taxes on that value as they start cherry-picking and filling up their bucket to get to their supposed 50-50 split of the assets.
I also wanted to add to Marlene’s comments about getting a team together. It is important to get qualified people who are respected in the community and who respect other professionals. The last thing you want to do is have a person on your team who looks at some of the work products of different professionals involved and starts picking it apart and pointing out problems that are personal in nature and not necessarily professional in nature. You want to get people who understand the dynamics of working together to work for a solution for the parties, not just themselves.
Often, egos will step into the equation; the lawyer has to be mindful of this, so when they pick the team, it’s generally people they’ve worked with in the past. And they’re cautious in that regard and ensure that everyone is respectful of the others on the team because everyone approaches the problem differently based on their professional background. The tax lawyer may have a different thought process than the probate lawyer, and they may have a different thought process from the financial advisor, and their process may look different from the accountant who’s done the books. You have to make sure you can blend all of them and have people keeping track of where they are and their function or purpose.
Sharon: The team has to collaborate and communicate and work together in order for the client to be positioned well. You and Marlene both touched on the importance of understanding the taxes associated with different assets.
I want to add one thought to the case I referred to earlier with a potentially surprising tax result, mentioning that a trust creator can be liable to pay the taxes on trust distributions made to an ex-spouse forever. I want to make clear that it doesn’t only apply to trusts created as part of the divorce negotiations. It can apply to every trust created during a marriage, no matter when that trust was created. A trust could have been created five, 10, or even 20 years before a divorce, and if one spouse created it and the other spouse could benefit – and those types of trust are the staples of estate planning – if the parties later get divorced, you can have that lingering tax liability I described.
It’s key during the divorce process to have professionals on the team who can examine every trust created during the course of the marriage, and figure out ways to reduce and eliminate that surprising tax result before the divorce is final because once the divorce is final, you’re likely going to be stuck with that result.
Alton, what are your tips for facilitating an agreement on financial matters during a high-asset divorce?
Alton: The most important thing that a lawyer can do when a new client comes into their office in a high net-worth case – or the regular middle-class family case – is to treat the case as if you’re preparing for trial from day one, but have the ultimate goal of trying to get the case settled. Again, it’s about marshaling all the assets, liabilities, expenses, and looking at tax consequences, if an asset will be sold, and how you structure the division of assets and liabilities in such a way that you get the most out of it.
At the same time, you have to do a cost-benefit analysis. How much will your client have to spend on attorneys and experts to reach a fair and equitable result? To do that, you must look at all the factors in the marriage. Is it a short-term marriage? Is it a childless marriage? Is it a long-term marriage with kids ranging in age from elementary school up to college? Are there other people who are dependent on the two spouses involved, like parents or disabled siblings, or disabled adult children?
These factors should be part of one’s thinking on the short and long-term consequences of making a deal, and how you structure it to accommodate the needs of both spouses to get on with their lives in an independent fashion.
But at the same time, the lawyer must help couples must bury their resentment and hostility, which is a very difficult balancing act.
Treating high-net-worth individuals is unique in many ways. One of my richest clients, several years ago, as we were going over her assets, preparing for trial, and talking about the millions of dollars that she had, with a twinkle in her eye, smiled and said the rich are different, and she’s right, they are.
They are, and lawyers have to be aware of that because the reality is many of our clients in our end of the practice – where we represent people with significant wealth – have much more at stake than we do in terms of our own economics. You have to view their lifestyle and where they’re going to be afterward when trying to set them up to live the best life possible after divorce.
Sharon: I want to discuss something Alton and Marlene both mentioned, which is the idea that high net-worth people often have trusts. A big issue I’ve encountered regarding the trust analysis is whether trust assets in an irrevocable trust are reachable in divorce.
A court will look at factors like:
- Who created the trust? Was it one of the married parties who created the trust and now says those trust assets are off the marital balance sheet?
- Who is the trustee? Is it an independent trustee, or is it someone’s buddy?
- Under what circumstances can trustees make distributions?
- Who has control powers like removing and replacing trustees or making distributions?
- What was the distribution history?
Courts will look at patterns and ask, “Did the couple rely on trust assets to support their lifestyle during their marriage?” If so, the trust assets might be vulnerable in a divorce.
After reading and being involved in many such cases, the moral is that legitimate estate planning – including transfers to irrevocable trusts – can, depending on state laws, successfully remove assets from the marital balance sheet.
But that’s not necessarily bulletproof because the family court is a court of equity and family lawyers will try to poke holes in the planning to tell a story, to convince a court of equity why trust assets should be considered. But the analysis has to start with a review of the trust documents because when all else fails, read the instructions and the trust document is the instructions.
I wanted to add my thoughts here because, in my experience, trusts are typically included in most high-net-worth divorces.
I would like to thank all three of my wonderful guests for a very engaging and spirited discussion. I will turn it back to you, Diana.
Diana: I want to thank Sharon Klein for hosting this Family Lawyer Magazine Wealth Shock Round Table. Sharon is a fellow of the American College of Trust and Estate Counsel and has been featured as one of the Top 40 Women Wealth Advisors in the US by Forbes and on Crain’s inaugural list of the Most Notable Women in Financial Advice. Executive Vice President at Wilmington Trust and President of Wilmington Trust’s Family Wealth, Eastern US Region, she can be reached at www.wilmingtontrust.com/divorce.
I also want to thank our outstanding panel Alton Abramowitz, Marlene Eskind Moses, and John Slowiaczek for giving so generously of their time and knowledge today.
Alton practices matrimonial and family law in New York City. He’s lectured and written on many family law subjects for numerous bar associations and legal publications. He advocated for the reform of New York’s divorce laws via a no-fault divorce, and he is one of the drafters of New York’s spousal maintenance guidelines statute. A partner at Schwartz Sladkus Reich Greenberg Atlas in Manhattan, Alton can be reached at www.ssrga.com.
Marlene is board certified as a family law trial specialist by the National Board of Trial Advocacy and she has long been recognized as an outstanding family practitioner. The immediate Past President of the International Academy of Family Lawyers. Marlene is a partner at Gullet Sanford Robinson & Martin in Nashville, Tennessee. She can be reached at www.gsrm.com.
John has devoted 48 years to the practice of family law. A respected trial lawyer and President of the American College of Family Trial Lawyers, John is recognized as one of the leading family law lawyers in the country. A partner at Slowiaczek Albers in Omaha, Nebraska, John can be reached via his firm’s website at www.saalawyers.com.
Thank you for joining us today!
John: Thank you.
Alton: Thanks for having us. We really appreciate it.
Marlene: Thank you very much. It was a pleasure to have this discussion.
Sharon: Thank you so much for joining! It was my pleasure to host this Roundtable.
Sharon Klein has been inducted into the Estate Planning Hall of Fame, has been featured as one of the Top 40 Women Wealth Advisors in the US by Forbes, and as one of the Most Notable Women in Financial Advice by Crain’s. She is Executive Vice President at Wilmington Trust in NYC. www.wilmingtontrust.com/divorce.
Alton Abramowitz practices matrimonial and family law in Manhattan. A partner at Schwartz Sladkus Reich Greenberg Atlas, he advocated for the reform of New York’s divorce laws via a no-fault divorce, and he helped to draft New York’s spousal maintenance guidelines statute. www.ssrga.com.
Marlene Eskind Moses is board certified as a family law trial specialist by the National Board of Trial Advocacy. The immediate Past President of the International Academy of Family Lawyers, Marlene is a partner at Gullet Sanford Robinson & Martin in Nashville, Tennessee. www.gsrm.com.
John Slowiaczek has devoted 48 years to the practice of family law. A respected trial lawyer and President of the American College of Family Trial Lawyers, John is a partner at Slowiaczek Albers in Omaha, Nebraska. www.saalawyers.com.
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