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Coaches Corner
Legal

Divorce for the Well To-Do

by Laurence J. Cutler, Esq., and Erin D. DeGeorge, Esq.

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Divorce for those of substantial wealth relative to those of limited wealth is an oxymoron – aspects of divorce between the two classifications are both similar and yet quite different.  In final analysis, it is a question of degree – that is, the number of zeros behind the dollar signs.  This summary discussion will deal with certain procedures and aspects of divorce which are similar to both classes.  The distinctions lie in the availability and desirability of various procedural vehicles to the two groups.

Privacy and Confidentiality
Nearest to the hearts of you -- the rich and famous (next to, of course, your money) -- is privacy and confidentiality.  None of you in your right mind wants to spread your dirty laundry in public – least of all those of you blessed with substantial wealth.  With divorces of such persons being instant grist for media dissemination, generally, it is better for all concerned (especially their children on a whole host of levels) to have disposition of your matter not a matter of public spectacle.  All too often, the perceived lesser-advantaged spouse may play the publicity card (or threaten to do so) in order to eke out a financial advantage – or in simple parlance – vie for “hush” money.  Perception by the lesser-advantaged spouse that the financially-advantaged spouse will deal with her or him fairly (whatever that may mean) will usually go a long way toward negotiations where calmer minds prevail.  Another method of seeking to assure a divorce far from the public eye is for a pre-marital agreement to address issues of confidentiality and mediation and/or arbitration out of the public limelight.

Pre-Marital Agreements
In the run-of-the-mill usual case of two young persons marrying for the first time (with, hopefully, their full, long lives ahead of them), a pre-marital agreement does not seem to be necessary except in those cases in which it is reasonably anticipated that one party may later be the beneficiary of a large estate or trust.  In other words, they start with nothing, and anything they might acquire during a long marriage should be divided according to law.

On the other hand, a subsequent marriage of more mature individuals (but not necessarily of senior status) who have acquired reasonable assets and perhaps have children from former relationships (and who have some greater degree of wisdom and circumspection than starry-eyed youths) may wish to guard against what might not turn out to be a marriage made in heaven.  Thus, a pre-marital agreement would seem to be appropriate in order to protect assets in the event of a short marriage or upon death.

Enter now those of you of younger age who are not only financially secure, but may have substantial wealth in your tender years or be in line for such status in the future during marriage.  You lucky folks, too, are prime candidates for the protections of a carefully drafted pre-marital agreement.  In such cases, it is not unusual for a battery of advisors to be employed for various inter-disciplinary advice, such as a matrimonial lawyer; a financial advisor, a tax advisor, a family trust and estates lawyer, etc.  Clearly, these cases involve the most forethought, planning, and time before the nuptials are exchanged.  Last minute drafting in these cases (especially) is a no-no.

Lastly, as alluded to above, a carefully drafted premarital agreement can address issues of confidentiality, privacy, secrecy and alternative dispute resolution methods.

Mediation/Arbitration
Alternative dispute resolution methods are, in many cases, the waive of (not just the future but) now.  It is virtually universal that (for a myriad of reasons) there is a backlog of matrimonial cases in courts of this land.  That means that the time between filing of the initial divorce papers and final resolution by a court (in a contested matter in which the parties are unable to amicably settle their matter and disposition by court decision becomes necessary) is ever-increasing – in some cases, years.

For those of means, alternatives to judicial resolution are available.  Simply put, mediation is a system in which a third party(ies) is retained to help the parties (usually with legal counsel) resolve their matter by assisting and facilitating the negotiations.  On the other end of the systemic spectrum is arbitration – a system in which a third party(ies) is mutually appointed by both spouses who will conduct a formal or informal “hearing” in order to receive presentations of the parties as to issues, facts and positions, who then makes a binding decision – usually with limited right of appeal.

All alternative resolution dispute methods have the virtue of removing a possibly contentious matter from the adversarial and usually angered nature of the courtroom where (hopefully) cooler minds will prevail  But both mediation are arbitration are not without drawbacks.  While participation by the parties in mediation is mandated in many states, the adage that “you can lead a horse to water but can’t make him drink” prevails some of the time with obstinate litigants.  On the other end, the biggest reluctance of rich folks to submit to binding arbitration is the lack of appeal in most cases which scares many away due to the fear of loss without a second opinion.  But that sense of reticence is misplaced.  Consider the following brutal but true fact: whether judges are appointed or elected, many (if not most) who sit on matrimonial matters possess little the training, experience or temperament to be making your life-decisions.  On the other hand, an arbitrator cannot usually be foist on the parties without their consent as to the choice of arbitrator.  Therefore, you are free to select someone (usually a retired family judge or very experienced matrimonial lawyer) of great knowledge of this area of the law to decide your destiny and that of your children.

Consider also that on appeal, grounds for reversal will not lie where the appellate judges hearing your case merely disagree with the decision of the trial court, but only in cases in which the trial judge has abused his or her discretion (that is, his or her decision is so off the wall as to shock their collective conscience of the appellate judges).  Thus, is it only on the outer fringes of the spectrum of possible decision-making which will be rewarded with a reversal.  That, coupled with the fact that the chances of an experienced arbitrator reaching those fringes are remote at best means that even if an appeal could lie from an arbitrator’s decision, there would be only the most remotest of chances that a reversal would be granted.  Having shown that (as a practical matter) a decision of a carefully-chosen arbitrator would be appeal-proof, having the right to appeal is altogether empty, and as such, having no right (or very limited right) to appeal is giving up nothing at all.

The lesson to be learned is don’t be afraid of arbitration, but be smart and embrace it.  The advantages of arbitration for those of you with financial means are (among others) expedition; quality of decision; and anonymity.  The cost of retaining an arbitrator in addition to lawyers, accountants, etc., should not deter those of you who can outwardly afford this method of gaining resolution.  Experience shows that those who are short-sighted in this regard usually, in the long run, pay much more in litigation costs (and spend more time and heartache in engaging in the court process) than if they had availed themselves of this method of resolution.

Estate and Trust Issues
Certain aspects of cases limited to the rich and (maybe not necessarily so) famous arise  (usually) in the context of the passage of family wealth.  The two most utilized vehicles are trusts and devises by last will and testament.  The creators of these documents usually seek to limit the beneficiaries use or access to its resources by either the intended recipient or his or her spouse.  Both parties are (for the most part) essentially bound by the dictates of the four corners of such a devising document.  For the most part, careful draftsmanship of the creator’s legal counsel will carry out the creator’s protective intent.  Supplemental careful draftsmanship by the well-healed intended spouse’s legal counsel should (just about) lock in that protective intent.

But all is not cast in stone.  In most states, income from such immune assets may be used for alimony and support purposes.  Add to that the notion that “absolute discretion” of the trustee is somewhat less than absolute in most jurisdictions, that is, a court may override a discretionary decision of a trustee to withhold distributions as being arbitrary.

The bottom line is simply this:  those of wealth need competent and experienced legal counsel from many disciplines in order to protect their assets from many vantage points.  Nothing substitutes for such advice and services.   So, don’t be penny wise and pound foolish when it comes to retention and reliance on legal counsel   This is not a place to get a case of the cheaps.  Remember: the money you save may be your own.

About the Authors
Laurence J. Cutler, a partner in the Family Law Practice Group of Fox Rothschild LLP, has nearly four decades of experience in matrimonial law and related matters. Larry has been extensively involved in nearly every professional family law-related activity, including serving as president and a founding fellow of the New Jersey Chapter of the American Academy of Matrimonial Lawyers, a founding fellow of the International Academy of Matrimonial Lawyers, a founding diplomat of the American College of Family Trial Lawyers and a founding affiliate of the Matrimonial Lawyers Alliance. He is the co-author of New Jersey Family Law Practice, a five-volume treatise used by virtually every family law judge and lawyer in New Jersey.

Erin D. DeGeorge is an associate in the firm's Family Law Practice Group and represents clients in all stages of family law litigation, including divorce, equitable distribution, custody, support, marital agreements and domestic violence actions.

For more information please visit, www.foxrothschild.com, email: lcutler@foxrothschild.com or call (973) 994-7503.

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