As Wedding Season Approaches, It’s Prenup Season

 Stacy D. Phillips

As the summer wedding season approaches, so does “prenup season.” Often, the mere mention of a prenuptial agreement (prenup) makes people uncomfortable, as if these documents and the discussions they prompt constitute a wholly unromantic anticipation of ultimate failure—even before the couple share their first dance.

High-net-worth individuals need to protect their financial interests before marriage. A carefully considered, well-crafted prenup is an insurance policy of sorts, should the marriage not work out as everyone hopes.

Here are some scenarios we see frequently in our practice that indicate the vital importance of a prenup:

  • When an individual has children from a prior marriage, to ensure that they are taken care of in the event of divorce or death during a subsequent marriage.
  • When an individual’s family has substantial wealth, to ensure that separate funds used during the marriage to purchase a home, vacation property, fine art, or other valuable assets remain their separate property (unless there is a written intention to gift it to the marital estate/community property).

What is the right time to discuss and sign a prenup? As early as possible before the wedding. Neither party should feel pressured to sign something on the eve of the wedding. Moreover, prenup discussions can bring out issues between couples that need to be addressed, perhaps even in pre-marital counseling. At its extreme, this process can make both parties reassess their readiness to marry each other. At its best, these discussions provide a forum that forces couples to work through the practical aspects of marriage: managing money, raising children, allocating responsibilities of income earners and caregivers, and possible religious differences.

While there are no one-size-fits-all agreements, here are a few cautionary aspects essential to every prenup:

  • Each party should be separately represented by an experienced matrimonial/family law attorney or estate planning attorney. Attorneys who practice in the divorce realm, however, offer an added advantage: they understand the detritus of failed marriages, so they write prenups defensively.
  • The ultimate goal is to have a clear picture of what happens in death or divorce. If the agreement is too complicated or too vague, it won’t serve its purpose.
  • There must be financial disclosure of assets and income of both parties.
  • A spouse who is successful in securing a prenup that is punitive also runs the risk of having that agreement successfully attacked in the future.
  • Be protective. Be fair. Don’t be greedy.

Prenups can prevent not only divorce battles but estate battles as well. After all, it is the peaceful resolution of family matters that matters most.

International Women’s Day

Stacy D. Phillips

Today is International Women’s Day, a worldwide initiative by U.N. Women, the United Nations entity for gender equality and the empowerment of women. This year’s campaign is #BeBoldforChange. Individuals and organizations around the world are celebrating bold ideas and actions to advance gender parity. Please join us in being catalysts for change–helping women and girls achieve their ambitions, challenge bias, and take more leadership roles.

There are so many ways, large and small, public and personal, in which you can participate and make a difference. We hope these suggestions will spark your interest, and ignite your involvement:

  • Take a junior woman to a client or sales meeting.
  • Launch a purposeful female-focused initiative in your company or community.
  • Start conversations to educate boys about stereotypes and violence against women.
  • Nominate women for senior jobs.
  • Encourage female colleagues to serve on corporate boards.
  • Donate your time and talents to a female-focused nonprofit organization.
  • Mentor a woman or girl.
  • Form a support network or commit to advancing an existing one.
  • Encourage outstanding women to run for elected local, state, and federal positions.
  • Celebrate individual women’s journeys and the barriers overcome.
  • Include more women on expert panels.
  • Raise women’s visibility as spokespeople in the media.
  • Drive fairer recognition and credit for women’s contributions.
  • Showcase the success of women leaders in your company or community.
  • Applaud social, economic, cultural, and political women role models.
  • Launch or fund a women-focused scholarship.
  • Encourage more girls into STEM (Science, Technology, Engineering, and Mathematics) education and careers.
  • Support women inventors of new products and services.
  • Celebrate women researchers discovering new knowledge.

Each one of us can be a leader within our own spheres of influence. Through purposeful collaboration, we can help women advance and unleash their limitless potential the world over. #BeBoldforChange.

The Dangers of Kicking the Can…

Erica Swensson

Recently, I sat in a conference room to settle a divorce that started 10 years ago. It wasn’t a complicated estate—a few businesses, a couple of commercial buildings, and no minor children. I was the 4th attorney for my client; and my client’s wife was on her 3rd attorney.

The question de jour

“How did we get here?”

My answer—bad accounting, poorly managed expectations, and lack of certainty.

The tendency of litigants and attorneys while moving through the dissolution process is to put off a variety of issues until the time of trial—attorneys’ fees, sanctions, reallocation of expenses… the rationale being that it will all shake out with the final numbers at the end.

On the one hand, this approach can avoid tedious negotiations without the benefit of knowing the final the big picture—a potential fee waster. However, the problem comes when too many items are left unattended—they become too unwieldy to track and difficult to present at trial. More often than not, these items slip through the cracks.

During the pendency of your divorce, there is value in memorializing and formalizing certain agreements. The payment of household expenses, who is responsible, and what happens if they do not comply. It can also help you to understand what you should expect at the time of a final agreement.

Back to my conference room of the long, drawn dissolution. Had the parties had clear, definitive financial agreements with respect to the payment of expenses and accounting of business income, they would not have been left with the sticky (and expensive) task of trying to re-write 10 years of banking history. A few simple agreements from the outset may have made the difference in this case.

Talk to your attorney about your financial expectations and goals from the outset. Don’t be afraid of asking questions and exploring what types of agreements may benefit you and your final outcome.

Ch-ch-ch-Changes! Preparing for Trump’s Tax Code Reforms

Michelle Piscopo and Mary Vidas

Donald Trump was sworn in as our country’s 45th President on January 20 and, prior to his inauguration, he vowed to immediately set into motion many of the promises he made during his campaign. One of the promises made by President Trump during his campaign was to reduce taxes across the board—especially for working class and middle class Americans.

Currently, there are seven different individual tax brackets ranging from 10% to a maximum of 39.6%. Under the plan proposed by President Trump, there would only be three tax brackets:

  • 12% for individuals earning less than $75,000;
  • 25% for individuals earning more than $75,000 but less than $225,000; and
  • 33% for individuals earning more than $225,000

President Trump’s plan also proposes raising the standard deduction from $6,350 to $12,000 for single tax filers and from $12,700 to $30,000 for joint tax filers, and eliminating the head of household tax filing status. Under President Trump’s plan, the corporate tax rate would be reduced from 35% to 15%.  While Trump alone cannot change the tax code, the proposal put forth by House Republicans is quite similar to the Trump proposal. The House Republican plan agrees with Trump’s three tax brackets—so changes in tax rates are inevitable.

How will this impact you?

Lower taxes means higher net income. And, that higher net income could impact you if you are paying or receiving child support, spousal support, maintenance, or alimony. For example, under the current tax code, an individual who earns $500,000 per year would be in the 39.6% tax bracket, which results in net income of $302,000. Under President Trump’s proposal, an individual who earns $500,000 would be in the 33% tax bracket, which results in net income of $335,000. That additional $33,000 of net income will impact your support calculation. Depending on whether you are the party receiving support or the party paying support, this could be good news or bad news. We expect quick changes from the new administration and are keeping a close eye on any changes to the tax code. As this issue develops, if you have any questions about how new tax laws could affect your support order, the attorneys in all states of our matrimonial group are prepared to answer them.

The Top Five Things to Do Before You Discuss Divorce with Your Spouse

Lois Liberman and Marilyn Chinitz

You are facing one of life’s most difficult transitions. After putting your financial affairs in order, but before broaching the topic of divorce with your spouse, we recommend that you prepare yourself by consulting experts who can provide the guidance and support you will need. Knowledge is power, and being fully informed will enable you to protect your rights and those of your children.

Consult a Family Law Attorney. An attorney who is an expert in the domestic relations/family laws of the state in which you reside will be able to provide you with vital information and guidance about what you can expect regarding child support, spousal maintenance, the division of assets, child custody, and parental access. Don’t consult someone who dabbles in family law—consult a specialist in the field.

Consult a Child Therapist. To ensure that your children are shielded from the stress and tension that has led you to make this decision, consult with a child therapist in your area. He or she can make suggestions as to the best way to advise your children about the divorce. These experts can also provide you with tools and strategies to deal with many of the questions and issues that will arise once your children have been told.

Safeguard Important Personal Belongings and Documents. Hurt, anger, and resentment often cause people to act out of spite. Before you discuss divorce with your spouse, make sure to safeguard your important personal belongings, which could go missing or be destroyed. Open a safe deposit box or place these items with a trusted friend or family member.

Consider Your Legal Options for Resolution. There are many options available, but not all options work for all parties. Negotiation and/or Litigation between two parties each represented by counsel; Mediation—in which a neutral third party attempts to help the parties reach a compromise; Collaborative Divorce—where each party has an attorney, but the adversarial milieu is replaced by a philosophy of harmony and the goal of getting along. If there is one party who is very controlling or there is an uneven balance of financial power, mediation may not be the best option. If there is a party who is acting unreasonably, you could find yourself having to go back to square one in a Collaborative Divorce because you entered into a contract in which your collaborative attorney cannot represent you in litigation. Seriously consider the dynamic between you and your spouse when selecting your path to resolution.

Ensure That You Have a Support Network. Surround yourself with people whom you trust, to not only provide you with the emotional support that will be essential, but who will also tell you the truth throughout the divorce process—even when it is difficult to hear. Whether that support network is made up of family, friends, and/or mental health professionals, make sure they are in place before you embark on your journey.

Excerpted from “10 Things You Should Do Before You Discuss Divorce With Your Spouse,” by Lois Liberman and Marilyn Chinitz, originally published in ModernMom on March 8, 2016.

Considering Divorce? Put Your Financial House in Order

Stacy D. Phillips

While you may have come to the conclusion that your marriage is over, we recommend that you take the following steps before “crossing the Rubicon” and sharing this news with your spouse. Knowledge is power and your first order of business should be to put your financial house in order.

Know Your Financial Picture. In too many instances, we have met with clients who are unaware of their complete financial situation. Be knowledgeable about both your and your spouse’s finances. Summarize income from all sources. Identify assets and liabilities (in your name, your spouse’s name, and jointly held), including when and how these assets were acquired. List your family’s insurance coverage (medical, dental, property, auto, and life). Once armed with this information, you will be able to obtain a clearer understanding of your entitlement under the law.

Understand Your Monthly Expenses. Be able to articulate how much you realistically spend on a monthly basis both on basic needs and discretionary items. This fluency with regard to your expenses will enable you to better understand your needs on both a temporary and permanent basis.

Obtain Financial Records. Before you even utter the word “divorce” to your spouse, look for bank statements, canceled checks, tax returns, life insurance policies, credit card statements, closing records/binders, loan documents, etc.; make copies of those records; and keep them in a safe place.

Open Your Own Bank Account. It is important to have funds in your own name in case of an emergency and in the event that your spouse attempts to reduce your access to money and credit cards after your announcement. This will also enable you to hire an attorney when you are ready.

Build Your Credit. If you don’t have credit cards in your name, apply for them so that you can build up good credit. Use the cards and pay the entire balance each month. By doing this, not only will you establish your own credit, but it will enable you to document your expenses.

Promoting Peace This Holiday Season

Stacy D. Phillips

Even in the best of times, family dynamics can be fraught. At holiday time, emotions are heightened for myriad reasons, and when separation, divorce, or custody issues are thrown into the mix, this time of year can be challenging. This may be your first holiday sharing your children’s vacation time. Perhaps your communication with the other parent isn’t at its finest, or financial concerns are part of your new normal. All of these—on top of visiting relatives, travel arrangements and hectic schedules—can be anxiety-provoking.

We hope that the following suggestions will help you through the season and bring better communication in the New Year.

  1. Avoid engaging in the “divorce war games” with one another. In the end, it’s the children who suffer, becoming collateral damage.
  2. Forgo the “one-upsmanship.” Be mindful not to try to out-do the other parent with gifts or vacation plans. Your children are likely to feel torn, no matter their age.
  3. Don’t go it alone. Give yourself the gift of some “centering.” Whether in the form of therapy, yoga, or a daily walk with a close friend, both you and your family will benefit.
  4. Be flexible. Easily said, more difficult to do—especially if custody arrangements are relatively new. Try to take the pressure off of transition times. Your children will notice.
  5. Show your children what the holidays really mean: They are all about giving. Ask your children to join you in a kind act for those less fortunate. It will divert your focus away from your own hurt or pain.
  6. Make plans for 2017. Discuss what good will come after the holidays and let your children help schedule activities to look forward to.
  7. Promote peace. No matter what your religious or spiritual beliefs may be, harmony is the ultimate goal, and it starts with you.

All of us at Blank Rome wish you a peaceful holiday season filled with opportunities to create new memories.