Noteworthy Nuances of High Profile and Celebrity Divorce (Part Two)

Stacy D. Phillips

Part Two: A Particular Kind of Tug-of-War

In dissolutions of high-net-worth and celebrity marriages or domestic partnerships, intellectual property rights, profit participation, residuals, and royalties often represent the most valuable of all the assets. They frequently become a battleground for control. Contracts are typically made over long periods of time, and are constantly renegotiated and amended. Valuing such assets can quickly become a hotly contested issue. These assets require a sophisticated and experienced family law attorney, working with a top forensic accountant, who understands the nuances involved.

The matter of support is often a particularly difficult challenge when the major earner of the couple is a professional sports figure. Because their ability to play and earn at the highest levels is limited to a finite time period, support (both spousal and child)—and custody, for that matter—could change dramatically when the professional’s career ends. The lifetime of an entertainer’s career can be similarly brief or span decades, presenting equally complex implications. These are nuances that must be managed when the income of the earning spouse/parent exceeds the couple’s marital standard of living and/or the reasonable needs of the children.

Child custody is another highly nuanced area of family law, particularly when one or both parents are required to be “on location” or travel extensively for business. The amount of time spent with the children, where that time is spent, the level of child support, the ages of the children—all are factors that impact custody agreements. If a parent’s absence is due to filming away from home, for example, is that parent entitled to makeup time? Are the children to visit on location, missing school, friends and their normal routine? Are the children of an age to fly alone? These sorts of custody arrangements are, in many cases, subject to annual renegotiation depending on the working parents’ professional demands. All too often, these negotiations can devolve into contentious Control Wars.

What is especially difficult about most divorce and custody cases is that this tug of war over control does not begin or end in my office or the courtroom. It may go on for years, long after the divorce decree or judgment of paternity is official. I truly believe that a better understanding of how to mitigate control battles would greatly benefit anyone contemplating or in the midst of divorce, and those who suffer from what I term “divorce residue.” Attorneys, even the best ones, cannot be expected to stop these battles or manage the other party. I have seen, however, that if both parties resolve to diminish the legal, financial, and emotional Control Wars, there is hope for the prospect of healing and peace.

Noteworthy Nuances of High Profile and Celebrity Divorce (Part One)

Stacy D. Phillips

Part One: Control is the Common Denominator

As a family lawyer specializing in high-net-worth and high profile cases for more than 30 years, you can imagine that I have seen it all. Representing many celebrities—often involving financially complex, high conflict matters—I have observed that whatever the salacious headlines, particular facts, and individual circumstances of each case, there is one important commonality: control.

It is a given that every case I handle will have its share of “issues,” many of which go beyond the division of assets. Frequently, some urgent situation or chronic problem creates a dispute involving the need/desire/obsession of one party to dominate the other. Neither gender has exclusivity when it comes to pursuing, possessing, and asserting control, whether during the marriage, the divorce, or its aftermath. The reality is: Control is prevalent in any relationship. And, when couples are jockeying for it, a legal case becomes a contest. All too often, contests escalate to wars because, by nature, human beings are competitive.

Control is a fickle power. It can change hands at the flick of a need or want, or due to external forces (such as employment or health problems), or internal circumstances (such as falling in love with someone else). The battle for control is amplified in most personal relationships that fail, and may not be limited to the former couple. It can also include various personal and business associates and advisors.

Celebrity clients often face the same issues as other divorcing individuals; however, there are important nuances at play. There are issues of income, support, child custody, and legal fees, of course, but not of the garden variety. Often it is precisely these complications that can cause the Control Wars, leading to prolonged litigation and negotiations. There are no cookie-cutter solutions.

Many wealthy individuals, and especially celebrities, face paternity suits. In these cases, innocent children often become a lever for control. Moreover, if paternity is established, the father could have substantial child support responsibilities, considerable legal fees, and too often, personal and professional images can be tarnished by leaks to the media from the party trying to gain leverage. Sadly, after the dust settles in these battles, the children of such relationships frequently become collateral damage.

Next month, in Part Two of this article, I will share some interesting nuances particular to high profile, celebrity, and high-net-worth divorces and child custody matters.

Emotional War Games

Stacy D. Phillips

We frequently hear stories about contentious divorces that seem to be right out of the movies. Unfortunately, these situations may not be so far-fetched. They are the emotional war games that some people engage in to assume and retain control during a divorce.

Many divorcing couples do not want to engage in any type of war, especially an emotional one. Contrary to their best intentions, however, individuals can get caught up in the turmoil of feelings, and it seems only natural to initiate or defend themselves in emotional warfare. Some participate with gusto while others do so reluctantly. In either case, attacks are launched and defended against. Casualties and collateral damage are real.

There is the ever-popular “emotional blackmail” maneuver, which is far more common than one might think. This type of battle tactic often involves the children, which is unspeakably sad. Next, there is the “hit ‘em below the belt” ploy used by the classic passive aggressor. Here too, children are often recruited as unwitting allies, and the negative effects can last for many years. Texting and emailing, of course, have become the weapons of choice for many warring couples. Inundating the other with all manner of electronic assaults is far too common. But be warned if you are tempted to go down this path: texts and emails can live forever and are certainly retrievable to be used as evidence against you.

Social media platforms are rife with the detritus of couples at war. Some attackers even engage in a deeply offensive practice known as “revenge porn,” where they post intimate, personal photos of their soon-to-be-ex-spouse, causing humiliation and significantly raising the stakes of battle.

Perhaps Danny DeVito’s character in The War of the Roses said it best. “There’s never a winner, only degrees of losing.”

New Year, New Habits.

Stacy D. Phillips

As 2017 draws to a close and we look forward to a fresh start in the New Year, we would like to suggest some new habits for your consideration. Divorce is a challenging process at any time of the year, but a renewed outlook and new practices in January will give you a greater sense of control and empowerment. Take some time over the holidays, perhaps when your children are with your ex (or soon-to-be-ex), to commit to some or all of these.

Get organized. This means doing some groundwork: have all of your records, documents, income tax returns, budgets, bank, brokerage and credit card statements, appraisals, insurance documents, pink slips, and wills and trusts copied, organized, and ready to give to your lawyer. Remove all important documents from your home and place them in a safety deposit box or with a trusted friend.

Get equipped. Consider getting a separate e-mail address and scanner/fax machine for your home or office. Maintaining private, dedicated means of communication with your attorney and team of advisers is always smart.

Be an active participant with your attorney. It is essential to work with your attorney in the most productive ways possible. Don’t use your lawyer as a hand-holder. Constant phone calls for support, reassurance, or just venting, will not only be unproductive, but also costly. You and your attorney are a team, but this relationship is not meant to be a therapeutic one.

Reveal all. Do not hold back anything from your lawyer. Working closely together requires you to be truthful, thorough, and forthright. If, for example, you have “phantom” income that suddenly appears as a result of investigation by the other side, or you say something counterproductive in a deposition that could come back to haunt you, you may be defeating your own purpose. No matter how good your counsel, if he or she is caught off guard because you failed to reveal important information, you will find yourself defenseless.

Reset. Once these productive actions are completed, you will be ready to take on the New Year’s challenges and opportunities. This process, in reality, is a gift to yourself and one that will continue to bear fruit as you move through the divorce process.

We wish you happy, peaceful holidays and a positive, productive start to 2018.

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.

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.