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Out of State Ruling Leads to Rethinking Divorce Settlements that Include College Tuition Provisions
Posted by: Marshall Waller
March 12, 2009

         A recent out of state court ruling may lead divorcing couples to rethink provisions in their settlements as it pertains to their children’s college education commitments.  The potential consequences of such a ruling fall on divorcing parents, who might now be reluctant to accept a commitment to fund a college education as part of their settlement, and their college-bound children who might face a more uncertain future.

         Though this court ruling emanated from New Hampshire, it certainly demands attention in California and elsewhere.  Annmarie Timmins, of the Concord Monitor (January 31, 2009) reported on the ruling in a recent article.  In Timmins’ article, Dad Can’t Be Forced to Pay College Costs - N.H. High Court says Divorce Decree Null, she detailed the decision, “New Hampshire courts can’t force divorcing couples to pay for their child’s college education. That’s true, the state Supreme Court ruled yesterday, even when one or both the parties initially agree – in writing –to pick up the tab.”  The heart of the matter, as it concerns both court-watchers and divorcing parties, was the Court’s nullification of a commitment to contribute to a fund that was written into the divorce settlement.  Timmins described the prior agreement, “The couple and their respective lawyers put that agreement in writing, and Merrimack County Superior Court Judge Kathleen McGuire approved it as part of their divorce decree.” 

         The father then decided to change his commitment, and petitioned the court as such.  After appealing his case to the New Hampshire Supreme Court –after losing a lower court decision –the father was successful in reneging on his previous written commitment to fund his son’s college education.  This is an important decision that reverberates loudly in divorce settlement cases.  The Concord reported, “[The child’s mother] sounded distraught and terrified about what the ruling will mean for her son’s education.”

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Supreme Court Ruling Reverberates For Pension Beneficiaries
Posted by: Marshall Waller
March 11, 2009

An often overlooked but eminently important area of divorce is the changing of beneficiaries on retirement plans, insurance policies and other financial instruments or holdings.  Upon final settlement and with legal guidance, people who have divorced should conduct an entire review of the beneficiaries listed on their various assets, and make changes where appropriate.  A recent U.S. Supreme Court ruling underscored both the importance of changing beneficiaries, and the possible adverse consequences of failing to do so.

People that missed deadlines are not always afforded an extension, regardless of explanation or intention.  U.S. News and World Report (January 27, 2009) recently reported on such a case as it applies to beneficiaries and pension plans.  The Report wrote, “The U.S. Supreme Court said yesterday that DuPont Co. was correct to pay a deceased employee’s retirement benefits to his ex-wire, even after she had renounced her rights to the pension during divorce proceedings.”  William Kennedy, whose pension was in question, did not list his daughter as a successor beneficiary or remove his wife from the paperwork on file.  As part of his divorce had included an agreed forfeiture of his former wife’s right to said pension, seemingly it was his intent was to change the beneficiary.

Regardless of any intent, the fact remains that the beneficiary page had not been changed and the Court ruled that the beneficiary information on file superceded the earlier divorce decree.  The Report continued, “But William Kennedy never changed his beneficiary on the retirement account.  After [he] died in 2001, his daughter, Kari Kennedy, sued DuPont to recover her father’s $402,000.00 pension.”  DuPont followed their standard procedure, and federal law, as it pertained to pension beneficiaries.  “The Supreme Court agreed with DuPont in an unanimous decision.”  Obviously the consequences of this omission was tragic for the deceased divorcee’s heir.

Upon final dissolution of marriage, seek your legal counsel's guidance and direction as to the changing of pertinent beneficiaries on all your financial instruments and assets. Failure to do so, regardless of good intentions could be a dire mistake.

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Bernard Madoff Scandal: The Paramount Importance of Multiple Valuations and Appraisals
Posted by: Marshall Waller
March 02, 2009

         The hardships and repercussions that the current financial crisis is wreaking upon people’s lives have now moved from the present and future, and reached back into the past.  New revelations from the Bernard Madoff scandal have underscored the importance of both complete transparency, and valuation methods used, as they relate to equitable divorce settlements.  Whether valuing businesses, real estate holdings, illiquid hedge fund investments or other financial stakes, divorcing parties should obtain multiple valuations from reputable and independent experts.

         Often times in a divorce settlement, one party will take cash payment as an equitable share of a business enterprise, real estate holding or other investment –rather than dissolve the investment.  While this is quite common, and proper valuations of such have always been of paramount concern, they are especially important in this financial meltdown.  Patricia Hurtado, of Bloomberg News (February 5, 2009), recently reported onan incredible such episode that has emanated from the Bernard Madoff scandal.  Hurtado wrote, “A lawyer who said he had $5.4 million invested with Bernard Madoff sued his ex-wife for the $2.7 million he paid her in cash for the value of the account in a divorce settlement.” The husband in the case, who kept the Madoff account in exchange for the cash settlement, was quoted as saying that, “he now knows that the Madoff account is ‘worthless, literally not worth the paper on which the parties’ valuation rested.’”  The repercussions for both parties could be both devastating and everlasting.

         It is quite possible that upon hearing the evidence in this case, a court indeed might revisit this divorce settlement with the possibility of a reallocation of assets.  As divorced parties have most probably made new financial commitments with their ‘fair’ share of any settlement, such as purchasing a house for instance, any re-division of property could have severe ramifications.  Suzanne Bracker, an New York attorney, was quoted in the article, “It’s what is fair, what is right.  Is it fair that only he should be defrauded by Bernie Madoff and not her?  If he didn’t know that Madoff stole their money, he could go to court and say ‘I got a phantom asset, it doesn’t exist and it’s not fair,’ to convince the court to re-allocate the marital assets.”  The prospects of such a debacle must be strenuously guarded against.

         The severity and unusual nature of this economic downturn is now affecting areas of people’s financial lives, which they might previously thought both safe and unassailable. Financial settlements can be both emotionally charged and difficult in nature, without having to possibly revisit the issue after the fact.  

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