Family Law
winter 2018
page 2
Valuation date is critical in
property division
Woman who got $2M in
divorce still gets support
page 3
Arbitration agreement
enforceable against spouse
page 4
Wife’s claims from first
divorce can’t be revived after
failed reconciliation
Can a court make you maintain
life insurance for your ex-spouse?
I
n many divorces, one spouse is ordered to
make monthly payments for “alimony” or
“maintenance” to the other spouse to help
that spouse support him/herself. Usually
the spouse receiving the payments is entitled to
keep receiving them unless he or she remarries
or starts “cohabiting” or living with someone else
as a partner.
But what if the spouse who’s paying the sup-
port passes away sooner than expected, leaving
the other spouse without any means of support?
In some states, a judge can order one spouse
to purchase and maintain a life insurance policy
for the benet of the other spouse to protect
against that. is means the spouse pays an
insurance company a certain amount of money
each month (a “premium”) in exchange for the
insurance company’s promise to pay the ex a certain sum (a “death
benet”) if he or she dies.
In many states, this is a pretty new development. For example,
Virginia just passed a law giving divorce courts the power to order a
support-paying spouse to keep a life insurance policy for the benet of
the recipient spouse. Previously, Virginia only allowed courts to order
that such a policy be maintained if it was being used to support the
children. Still, the new law has its limits. For example, it doesn’t allow
a judge to order a paying spouse to go out and buy a brand-new policy
for his or her soon-to-be ex. e court can only order that an existing
policy continue aer the divorce, preventing the paying spouse from
changing the beneciary.
continued on page 3
© nito103
The Historic John Price Carr House
•
200 North McDowell Street
•
Charlotte, North Carolina 28204
(704) 370-2828
•
www.CharlotteDivorceLawyerBlog.com
The Historic John Price Carr House
200 North McDowell Street
Charlotte, North Carolina 28204
(704) 370-2828
www.CharlotteDivorceLawyerBlog.com
The Historic John Price Carr House
•
200 North McDowell Street
•
Charlotte, North Carolina 28204
(704) 370-2828
•
www.CharlotteDivorceLawyerBlog.com
The Historic John Price Carr House
200 North McDowell Street
Charlotte, North Carolina 28204
(704) 370-2828
www.CharlotteDivorceLawyerBlog.com
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Sometimes a division of property in divorce is quite
simple. e value of assets is very straightforward
and splitting them is easy. But some assets can be
much tougher to value and the issue can become quite
contentious. is is particularly true when dealing with
spouses’ interests in a business. at’s when the impor-
tance of the valuation date comes into play, as a recent
Florida case indicates
In that case, a couple with two children was divorcing.
e husband had ownership interests in three companies
that operated a number of restaurants across the state. At
one point during the proceeding, a trial judge assessed
the value of the couple’s marital estate as of the date the
divorce petition was led. But when the court issued its
judgment, it used a later date to value the couples’ busi-
ness interests. is dierence mattered because the busi-
ness earned signicant prots between the two dates.
e husband argued that the wife shouldn’t be entitled
to share in these “post-valuation” prots.
An appeals court agreed and reversed the trial court,
holding that these prots shouldn’t be divided between
the husband and wife.
A case in Minnesota, however, had slightly dier-
ent facts and a slightly dierent result. e husband in
that case ran a successful gelato company. In 2008, he
and a business partner bought a majority interest in the
company and set up a limited liability company to hold
his interest. He transferred 20 percent of his interest to
trusts created for his children, with the rest held in his
own name.
Over the next few years, the value of his share in the
gelato company grew signicantly. Meanwhile, a par-
ent company was established and the husband held in
interest in that company too. Soon the members of the
parent company, including the husband, sold all of the
parent company’s assets, including the gelato company,
to Unilever, a big multinational corporation.
e husband led for divorce in 2014, around the time
the Unilever deal closed. e LLC that the husband set
up received about $70 million up front plus a right to a
percentage of future “earn out” payments from Unilever
based on future sales.
During the divorce, the wife demanded a cut of the
earn-out payments as part of the property division. A
trial judge, using the date of the closing as the valua-
tion date, said “that only the up-front payment could
be divided. Any future “earn-out” payments were the
husband’s non-marital property, according to the court.
But an appeals court reversed the decision. According
to that court, the earn-out payments were built into the
price of the deal and should have been considered as part
of the value as of the purchase date. Now the husband
will have to split these payments with his ex-wife.
All of these types of issues are very complicated, and
a divorce court in one state won’t necessarily treat them
the same as a divorce court in another. So if you have
complicated property arrangements, such as interests in
businesses that are structured in unconventional ways,
it’s important to discuss all your options with a family
law attorney.
Valuation date is critical in property division
© Buurserstraat38
For anyone who thinks
alimony and support is just for
those spouses who otherwise
might not be able to support
themselves, a recent Virginia
decision says otherwise.
In that case, a woman whose
husband was the primary bread-
winner during their 27-year
marriage got half of their $4.5
million marital estate in the divorce. is means she
was awarded more than $2 million for her share.
Considering the modest lifestyle that the compara-
tively wealthy couple had maintained, a lot of people
would say her share of the estate would have generated
plenty of income for her to live on.
But over the husband’s objection, the divorce judge
also awarded the wife $12,000 a month in spousal sup-
port. e husband appealed, but the Virginia Court of
Appeals upheld the award.
e court reasoned that the wife had given up her
career to raise their child and that her sacrices in
living a frugal lifestyle had enabled the couple’s wealth
to grow. e husband was still working in his lucrative
career as a nancial planner, which would enable his
assets to continue grow while, at some point, the wife
would begin dissipating her assets to support herself.
e court believed it wouldn’t be fair to force the wife to
live entirely o her assets while the husband’s contin-
ued to accumulate.
Laws around maintenance and support are, of
course, complicated and can dier from state to state.
Talk to an attorney to learn more about how the law
might handle your situation.
Woman who got $2M in divorce still gets support
continued from page 1
Can a court make you maintain life insurance for your ex?
This newsletter is designed to keep you up-to-date with changes in the law. For help with these or any other legal issues, please call our firm today. The information in this
newsletter is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.
Other states have similar laws. In Minnesota, a court
apparently has the power to order that a life insurance
policy actually be purchased in certain circumstances.
ere’s no specic statute in place that states this, but
courts have ordered spouses to do this without higher
courts overturning the orders on appeal.
Regardless of where you live, however, you shouldn’t
expect a judge to order your ex to purchase or maintain
a life insurance policy for your benet at the drop of
a hat. If it’s allowed, the judge will take into account
things like how old or healthy the paying spouse is.
at’s because insurance companies don’t like to insure
older, sicker people given the high likelihood they’ll be
paying a big death benet before collecting much in
premium payments.
Courts will also consider the age and health of the
spouse who supposedly needs support. If that person
is fairly young and healthy, a court is less likely to enter
such an order because that spouse is probably capable
of working and contributing to his or her own sup-
port. If a judge is considering ordering a life insurance
policy as backup for alimony payments, the judge will
probably take into
account the number
of years for which
alimony has been
ordered. It wouldn’t
be fair to make
someone purchase
a policy for a longer
term than the
alimony term. Like
anything else, it
all comes down to
fairness.
It’s also worth mentioning that if you live in a state
that does not allow a court to require someone to buy
a new policy or maintain an existing policy for the
ex’s benet, you might want to check your existing life
insurance policies and, if you have someone else in
mind who you’d rather receive the proceeds if you pass
away, change your beneciary designations. But it’s
also a good idea to rst talk to a family attorney to nd
out more about the laws where you live, since these are
such complex issues.
Arbitration agreement enforceable against spouse
If you’ve ever signed up for a credit card, a gym
membership, cell phone service or any other number of
services, you’ve probably signed an arbitration agree-
ment without even realizing it. ese are provisions
buried deep within consumer contracts, loans and even
employment agreements under which by signing the
contract you’re agreeing not to take the company to court
over any disagreement that may arise. Instead, you agree
to have your case decided by an “arbitrator” — a sup-
posedly neutral third party who’s chosen and paid by the
company. is means you’re giving up important rights,
such as the right to have a jury hear your case, the right
to have the other side disclose evidence that could help
you win and the right to appeal an unfair decision.
It can be an unpleasant surprise to get into a legal
dispute and nd out you’ve waived the right to go to
court. But it can be even more unpleasant to nd out that
someone else’s waiver applies to you too.
at’s what happened recently in Arizona. Four days
aer a couple’s wedding, the wife signed an auto lease
that contained an arbitration agreement. At some point,
the husband started receiving automated robo-calls from
the leasing company. He asked them to stop, but they
continued calling, which he claimed violated federal
telecommunications laws.
e leasing company asked the court to dismiss the
claim, citing the arbitration agreement.
e husband argued that the agreement didn’t apply
to him since it was his wife’s lease.
But a federal judge disagreed, ruling that when the
husband married his wife, he entered a “community
property” estate, meaning everything that was hers
would also be his from that point on. is included the
lease, said the judge.
at means that when the wife signed the lease, she
was binding the “marital community” of both her and
her husband to its terms.
If you’re curious about what other rights and obliga-
tions you may unknowingly share with your spouse, or
whether you live in a state that shares Arizona’s notions
of “community property,” talk to a family lawyer where
you live.
© nito103
| winter 2018
When a couple takes the dramatic step of divorcing, they’re
generally doing so for good reason. at’s why most couples who
get divorced stay divorced. Still, some couples may decide that
the divorce was a mistake and give marriage a second chance.
Sometimes it works out, and sometimes it doesn’t. But as a re-
cent case from North Carolina indicates, the award that a spouse
received or was likely to receive the rst time around will not
dictate the award the second time around.
e couple in the case, Beverly and Peter Farquhar, divorced
in 2004 aer 10 years of marriage. A year later they decided to
remarry. At the time, they still had
pending claims from their divorce
and they voluntarily agreed to
dismiss these claims.
However, their second marriage
ultimately didn’t work out any better
than the rst one, and aer 10 years
of remarriage they separated again.
Beverly then went to court demanding to reinstate her claims
from the rst divorce, seeking a property division, alimony
award and attorney fee award based on the couple’s situation a
decade earlier.
But a divorce judge said the claims couldn’t go forward be-
cause they hadn’t been led within a year of the couple’s agree-
ment to dismiss them (state law requires the re-ling of such
claims within a year). e judge said it doesn’t matter that the
couple had remarried before that one-year period had elapsed,
because the law’s the law and the clock doesn’t stop.
A court of appeals agreed, stating
that it would be unfair to allow a
spouse to le alimony and property
division claims based on a rst mar-
riage, voluntarily dismiss them when
reconciling, but still hold onto them
as a “sword” to use in a potential
second divorce.
Wife’s claims from first divorce can’t be revived after failed reconciliation
© lightsource
The Historic John Price Carr House
•
200 North McDowell Street
•
Charlotte, North Carolina 28204
(704) 370-2828
•
www.CharlotteDivorceLawyerBlog.com
The Historic John Price Carr House
200 North McDowell Street
Charlotte, North Carolina 28204
(704) 370-2828
www.CharlotteDivorceLawyerBlog.com
The Historic John Price Carr House
•
200 North McDowell Street
•
Charlotte, North Carolina 28204
(704) 370-2828
•
www.CharlotteDivorceLawyerBlog.com
The Historic John Price Carr House
200 North McDowell Street
Charlotte, North Carolina 28204
(704) 370-2828
www.CharlotteDivorceLawyerBlog.com
