175 - Challenging Family Law Property Questions
Todd and Leh take on some challenging family law questions surround real and personal property. They not only discuss answers to the questions, but they also discuss how to avoid ever being stuck in these situations to begin with. They questions they tackle include:
If my ex quits paying his share of the homeowner dues on our vacation property and takes off, what can I do? Has he abandoned the property?
I was awarded the house in the divorce. At first, I allowed my ex to stay in the home, but now I have a renter and he is refusing to leave the home. What can I do? Do I have to go through the eviction process?
My Husband’s ex-wife will not remove her personal property from our home. How do we force her to remove her stuff?
I am wanting to start a business and our marriage is on the rocks. I do not want her to get any of the business if things do not work out. Should I have her sign a post-nuptial agreement, or have my brother put the business in his name?
Leh Meriwether: Welcome everyone, I'm Leh Meriwether and with me is Todd Orston. We are your co-hosts for the Divorce Team Radio. A show sponsored by the divorce and family law firm of Meriwether & Tharp. Here we learn about divorce, family law, and from time to time, even tips on how to save your marriage if it's in the middle of a crisis. If you want to read more about us you can always check us out online at AtlantaDivorceTeam.com. All right, Todd, are you ready?
Todd Orston: To answer people's questions? Always.
Leh Meriwether: Okay, good.
Todd Orston: There was no sarcasm there. So yes, to answer your question, I am ready.
Leh Meriwether: If you couldn't tell by Todd's answer, we're going to be discussing some challenging family law questions that we pulled recently and there's some good ones in here. Really good questions with some serious consequences and we are going to analyze them. I don't think we'll get to all of them because there's a lot of them.
Todd Orston: Leh likes to talk.
Leh Meriwether: This is true, but there is a lot to break down on some of these questions even though some might seem simple on their face. We're going to go a little bit deeper and talk about how you might avoid some of these situations.
Todd Orston: We usually dig also deeper. The interesting... Well, it's interesting to me, right? The way that we approach these, sometimes it's a very narrow question, we're going to usually expand on that. For instance the first on is going to talk about property. It's not going to be limited to just an answer to a specific question. It's probably going to go, and we're going to dive a little bit deeper, into property issues. Hopefully by answering these questions it has a broader appeal if you will in terms of the helpfulness and usefulness to people listening.
Leh Meriwether: I'm very glad you said that because I didn't want anybody who "Well, I don't know if they're going to answer my question," and suddenly tune out because we're going to use each of these questions as, for lack of a better word, a teaching moment to break down, again, how you might avoid some of these things. Definitely don't tune out just because we're answering questions, we're going to get some practical answers and dive a little deeper in ways you can apply our answers to all of your problems. Got it?
Todd Orston: All right. I'm on board.
Leh Meriwether: Okay good. I can't see your face right now so I couldn't tell if you were listening or not. Just kidding.
Todd Orston: When you hear the snoring you'll know.
Leh Meriwether: If you can't tell we're still not in studio. One day, maybe, we'll be back in studio. So the first question. Co-ownership of a vacation property. "I own vacation property with my ex. He has not paid his share of the dues for four months. He is not taking care of the property and I heard he has moved out of state. Can I get abandonment on him?"
Leh Meriwether: In answering this question we're going to stay focused on Georgia law because there may be different answers in different states but we're going to focus on Georgia law.
Todd Orston: I'm going to jump in for a second. There's a lot missing in terms of information that we would probably need to give the best answer. Is this a pre-divorce situation? Is it a post-divorce situation? In other words, is there an order in place that deals with a lot of the issues that you and I, Leh, would be interested in making sure are dealt with properly. Like, is there an order that says who's going to live there? Who is going to have temporary use and possession of the property? Who is going to be responsible for the expenses related to the property? Who is going to deal with upkeep issues.
Leh Meriwether: Who gets to make money from the property because it says it's a vacation property? Are they using it for rental purposes?
Todd Orston: That's right, so there are a number of issues that we would need to deal with if we were representing this person and questions we would need answers to. Now, building on some of the things that you and I just said, let's assume that it is a pre-divorce situation. Abandonment really isn't the right term. Sometimes people want to use it in a very specific way and so it's not a matter of if they abandoned, but if there's not an order in place that deals with those issues that I raised, then that's got to be the focus. You're going to need temporary terms meaning a temporary order that deals with who gets to live there, who' going to be responsible for it, pay the mortgage and other expenses, upkeep it. If it's generating income who's going to collect that money?
Todd Orston: We've had situations where it was income generating and expenses weren't being paid, but the other party that wasn't paying the expenses was collecting the rent and pocketing it. These are all issues we would have to deal with formally in either a temporary agreement or in a final agreement that ultimately gets submitted to the court and becomes an order of the court.
Leh Meriwether: That's assuming the person's ready to file for divorce. If you're married, it's joint property. Each of you can make your own decisions about it. You can take care of the property and keep all the profits from it but if you're thinking about a divorce, going back to what you said, Todd, it would need to be addressed in a temporary agreement. Since they did use the term "ex," let's break it down if they're an ex husband versus an ex boyfriend, because the analysis is different on both scenarios. Let's go first with ex husband.
Todd Orston: If it's an ex husband then the first question I'd be asking is, is there an order? Show me what the order says in terms of ownership, possession, responsibility, management of that property. Because if the other party's actions rise to the level of a failure, a violation of the terms of an existing order, then a contempt might be appropriate. If a behavior is jeopardizing what was a marital asset, the terms might even allow, usually in Georgia, modification of equitable division is not permitted. But, if there's a management issue, if the other party was supposed to be taking care of the management of the property in preparation let's say, for an ultimate sale and they're not doing it, well it may open the doors to some kind of a contempt/modification regarding the management in order to get it sold without it being lost to foreclosure.
Todd Orston: The difference between the two that you just mentioned, boyfriend, ex husband, is a huge one because one is dependent pretty much solely on the law relating to divorce and ownership of property. In Georgia that's equitable division of property. If it's a boyfriend then that doesn't apply and really we're talking about straight, real property law. Then it's how is it titled and things of that nature to determine what your rights are and the other party's obligations are.
Leh Meriwether: So the practical takeaway from this is, if you're going through a divorce, most of the time people do settlement agreements. Sometimes you've got to have a trial in front of a judge. If you're doing a settlement agreement it's important to have contingency clauses. For instance if it laid out that he was supposed to be responsible for the home owner's association dues for wherever this vacation property is, what happens if he doesn't pay it? What recourse do you have as the co-owner of this property. If you all are remaining co-owners of the property post-divorce, then you must have a series of significant contingency plans. It is imperative to have it in the settlement agreement.
Leh Meriwether: Most of the time, Todd, you and I we recommend one party or the other party keeps it. Once you deal with it in the divorce you cannot come back and deal with it again. Because it's what's called res judicata. It's a Latin term it means it's already been decided and the courts are trying to avoid people coming back to court again and again on multiple issues. So it must be dealt with. What happens if someone fails to do something in the agreement? You can file for contempt but often the court is still limited to what's in the settlement agreement. The court could order him to pay but you may not be able to sell it because you didn't address that in there.
Todd Orston: The court may not be able to do anything because this is a problem people have. They so want to get through the divorce that they skirt the issues, they don't get into the detail, the contingencies that you're talking about. Time and time and time and time again people come to us after the fact and they're like, "I entered into this agreement, what can I do?" Depending on what you did in the first place sometimes our answer is, there's nothing. There's nothing that we can do, you're in a really bad situation. Or what we can do is very limited. So please, if you're writing up an agreement, if you're trying to come up with terms, be exhaustive. Go into that exhaustive detail to make sure you've dealt with those contingencies so that if something happens, if you-know-what hits the fan, you have recourse. You can go to court and the court can actually do something for you.
Leh Meriwether: I even had a case where the couple owned multiple businesses, they divided up most of them but one of them they decided to keep together. When we come back I'll tell you how we dealt with that in the divorce.
Leh Meriwether: I just wanted to let you know if you ever wanted to listen to the show live you can listen at 1:00 AM on Monday mornings on WSB so you can always check us out there as well.
Todd Orston: Better than counting sheep, I guess. You can turn on the show and we'll help you fall asleep.
Leh Meriwether: There you go.
Todd Orston: I'll talk very softly.
Leh Meriwether: Welcome back to Divorce Team Radio, this is Leh and Todd and we are talking about some challenging family law questions. Where we left off, we were talking about co-ownership of vacation property where one person quit making payments on it and left the state and the question is, can I get abandonment on him? Of course there was lots of information that was missing from this question, we've been diving into that. Where I left off was, we were talking about how you've got to address these things in a divorce agreement or even if you're having to have a trial, what you should be asking the judge to do in his or her order.
Leh Meriwether: I had a case once where the parties, I won't give too much detail, but they had multiple business together. So four of them, let's say they had five together. They divided up four of them, so basically one party kept two, the other party kept two. Or maybe one party kept one, the other party kept one and they sold the other two. Then there was one that was actually very, very profitable and they did not want to give it up, but the problem was if it wasn't addressed in the divorce, then they could never divorce themselves of the business later. So what we did was we drafted, we as a firm, drafted a 65 page operating agreement for the business. It had all kinds of contingency clauses in it.
Leh Meriwether: They wound up later on I think, years later, they did wind up selling the business pursuant to the operating agreement. It was a serious effort and there was a lot of money on the line so it was critical to make sure you thought through every single contingency in the future. What if someone doesn't do this, what if someone does this, how do you deal with it? That's what we did. That's the value of having an attorney working with you when you have any property, whether it's real property or businesses of significant value.
Leh Meriwether: Now let's touch on what if this person is an ex boyfriend and not an ex husband. You can't get him for abandonment and this is a real problem that we see all of the time now. People buying things now, boyfriends, girlfriends, buying real property together but not doing anything like a written agreement.
Todd Orston: Again, then you're dealing with just straight, real property law, looking at title. Whose name is the house titled in? Because that's going to dictate ownership, that's going to dictate who has control over the property and so if you bought a house with somebody you never married, it's a little strange, just by virtue of getting married, now all of a sudden a whole different set of rules and laws apply. You're married, it's marital property, therefore the divorce court can deal with issues.
Todd Orston: You don't have that benefit when it's a boyfriend or a girlfriend. I usually tell people as a practice tip, be very careful. Look, I'm not throwing stones. My wife and I, obviously we didn't move in but we did buy a house before we were married. Of course that would be wrong. That was more sarcasm. But we bought a house before we were married and our families even said to us, are you sure? We were and it worked out but the bottom line is, that's a dangerous situation. Because if things had not gone well then one or the other divesting that person's interest in the property and dealing with all of the property issues, it can get really messy because you don't have the ease of going to this judge, a divorce judge, who can make some equitable decisions as to what's going to be done with the house.
Leh Meriwether: I think it's important to explain this real quick, the difference between legal remedies and equitable remedies. A legal remedy means that there's something in the statute. A statute is basically a rule that's been put out by the legislature of the state. The statute says in this scenario here's how you deal with this situation. A court of equity has the power to make fair decisions when there is no law governing what to do. So a court can say-
Todd Orston: Discretion.
Leh Meriwether: They're given discretion to do things with real property that maybe have nothing to do with the title on that real property. Because on a title situation, the court can only look, whose name's on this title? Well it's this boyfriend and this girlfriend. And the girlfriend comes to court and says he quit paying the dues and he's left the state. I don't want him to have any ownership interest in this business, I mean this place anymore. Court can't do anything. As I said you're on the hook for these dues if you don't want them to try and foreclose on your vacation house because you didn't pay.
Leh Meriwether: If you were to do this. Go in together with a boyfriend or girlfriend, since you don't have the equitable authority of a judge to feel with this exact situation, you have to do something like an operating agreement or a partnership agreement, that basically says, in this situation, perhaps they're making profit from it. If someone fails to do their part, they abandon the profit business. You've got to do a contract on how you're going to deal with this business so you can at least file a lawsuit under contract law.
Leh Meriwether: Without that your remedies are very limited. There are remedies but they're not very good ones.
Todd Orston: I understand it seems like, well, it sounds like I'm negotiating some kind of a business deal. You are. That's the problem. Because if you're not married, then you don't have the protection of the law and the ability for a court of equity to jump in and try and help you, and therefore it truly is a business issue. I understand it's a romantic relationship, but it's a business issue as to how that asset's going to be dealt with in different situations. So be very careful and I would definitely talk to an attorney if you're planning on doing something like that, to see what kind of documentation you can put into place.
Todd Orston: Almost like in a marriage you can get a prenup that will dictate how things are done. This operating agreement you can deal with some of those contingencies to make sure that you are protected just in case.
Leh Meriwether: All right so sticking with the real property team, here's another question. "Should I send my ex husband an eviction notice. Me and my ex husband were officially divorced last year in May. In the divorce I was granted default judgment due to my ex not answering the phone when the judge called. I was awarded the house in Georgia. FYI, the home was acquired during the marriage, the home has and still is solely in my name and as the deed and loan documents are in my name solely. He's refusing to leave the house. I have someone willing to rent, since I have relocated to Colorado.
Leh Meriwether: I was told by a lawyer I'm able to press criminal trespassing charges against him to get him out of the house, should I send an eviction letter to warn him I will be out there in a few weeks to regain my property?" This is a fun one.
Todd Orston: In my mind it's actually fairly simple because here, as opposed to what we were just talking about, buying a house with let's say a boyfriend, girlfriend. Someone you're not married to. This is going to come down to what does the divorce court order say? Because if there's a divorce order that says that she has sole use and possession and use of that property, then this is a contempt issue.
Todd Orston: My argument would be you don't need to go down the path of an eviction. You don't need to go down that path because arguably, if the court order is specific and says she gets sole use, possession and ownership of that property and he needs to leave and he fails to leave, it's a contempt issue, file a contempt, have him served. You know where he stays. Basically get him pulled into court. If he fails to show again I have no doubt that the next order from the court, the divorce court, will be yeah, get out and sheriff's deputies are authorized to assist in the removal of him from that property.
Leh Meriwether: I think to me the biggest problem with this is she waited a while to get him out. If it had been within a month and the order said she immediately has exclusive use and possession of the home. This goes again to your point, Todd. What's the wording of that final order? She could've taken that to the police and said, "He's not leaving, will you enforce this order?" Some police will enforce it. Some sheriff's offices will say sir you have to leave that's what the order says. Some will go, "This is a civil matter you've got to take it up with the judge." It depends on your police department. It's worth asking because often times people will say, "Fine, I'll move out."
Leh Meriwether: You can file a contempt but it takes time. He has 30 days to answer. So you file for contempt, 30 days to answer, so you may not get an order ordering him out of the house for another... It may take you 45, 60 days to get that order. Depending on the court system, how backed up they are, has there been a new shutdown because of COVID? That's the challenge there.
Todd Orston: I was going to say my concern of going down the eviction path, especially when there's no agreement or if there's no agreement or lease or anything like that.
Leh Meriwether: Let's hold your concern for the next segment, when we come back.
Todd Orston: Hey everyone you're listening to our podcast, but, you have alternatives. You have choices. You can listen to us live also at 1:00 AM on Monday morning on WSB.
Leh Meriwether: If you're enjoying the show we would love it if you could go write us on iTunes or wherever you're listening to it, give us a five-star rating and tell us why you like the show.
Leh Meriwether: Welcome back to Divorce Team Radio, this is Leh and Todd and we are exploring some challenging family law questions surrounding property and real property. We've had some very interesting questions that have sparked a lot of discussion and we haven't even finished the second question because there's so much good information in here, we wanted to share this information, how we think through things, and some challenges that people run into all the time when they don't properly handle their case.
Leh Meriwether: If you've missed any of the previous shows you can always go back and listen to us at DivorceTeamRadio.com. By the way if you're listening to us on any of the... wherever you get your podcast, don't forget to hit the subscribe button so you don't miss a future episode. Okay, where we left off was, do you go the route of eviction or go the route of a contempt and Todd you made a very compelling argument as to why you would want to go the contempt route, because odds are it's going to be faster than the eviction route because in Georgia, the eviction process is an accelerated process in Georgia, you still have to give the person notice that you intend to do something.
Leh Meriwether: What I said earlier was, my concern was that she waited a year. And by waiting a year she has established what's called a tenancy at will, which would require her to give him notice and he would have 30 or 60 days, I can't remember off the top of my head. Don't do anything until you talk to a lawyer that focuses on landlord/tenant law. There's going to be a delay before you can even get to the court because you've got to give him notice. I definitely think, like you said Todd, going the contempt route is going to be a faster route.
Todd Orston: Absent case law specific to that issue in your jurisdiction that would say that some kind of tenancy was created due to the delay to getting him out, I would say that the best route is going... The contempt route you're not creating any tenant's rights. By filing an eviction immediately you're saying... You're in essence saying that person's a tenant and therefore all of the rights that tenants have apply to that person.
Todd Orston: As opposed to a contempt where you're saying this is not a tenancy issue. That person was ordered to get out, he has failed to get out, judge I'm sorry I didn't have the money to pursue this but I need him out. Then the judge can hopefully deal with it in the form of a contempt.I think overall it becomes a more simple way of accomplishing the goal of making sure he gets out.
Leh Meriwether: The learning lesson here is don't wait. If you have an order that says someone's supposed to get out, you need to exercise it. Don't let that person sit there.
Todd Orston: That's right.
Leh Meriwether: A delay creates problems. Going back to our last show, the top things you can do that will ruin your post-divorce life. Not following through on timelines. That creates problems.
Leh Meriwether: Okay, next question. We do have a next question?
Todd Orston: Yes. So the next question is, how can I get my husband's ex wife to remove property out of our home? My husband and I have been married two years, it seems as though his ex wife deliberately continues to leave her property in our home. She always calls his daughters who are not her biological children and tell them she's coming to get the property but never responds when we ask exactly when she's coming to pick it up. It seems as though she's trying to control us from the outside by still having access to our home and by refusing to get that property and leaving it there on purpose. Basically the question is, can I put the property into storage and basically, would I be responsible for the storage fees and how can I deal with that situation?
Leh Meriwether: These are sticky situations, especially when you're talking about personal items that may be worth nothing, but they become a royal pain in the butt. The first thing, the learning lesson from this is to have very specific language in your settlement agreement or order on how to deal with these personal items. One of the things I tend to put into my agreements is the person has X number of days or months to collect their items and if they fail to do that within the time period, they waive their interest in these items. The ownership of them automatically transfers to the owner of the property.
Leh Meriwether: In this case if a similar provision had been in here than her husband would inherit, if she didn't collect them within a six month time period, all the personal property would become her husband's and then he could do with it as he sees fit. He could take it over to her place and leave it on her front porch, he could throw it in the trash, whatever he feels like doing. Because at that point those personal are now his pursuant to the settlement agreement.
Leh Meriwether: If her husband puts it in a monthly storage place, he's going to be responsible for that bill because he's the one entering the contract with it. It all comes back down to what's in the agreement.
Todd Orston: Right, and getting the other party to foot the bill. Look, I think everyone involved here understands that the reason that the property's being left there, has nothing to do with that property. It has nothing to do with anything other than, with lack of a better way to put it, a control issue. She's leaving it there because it gives her a hook. A hook back into her ex husband's life. The problem is, if you throw it out, she can file a contempt and he could end up paying for all of that property that was thrown out.
Todd Orston: If he does something where it's not thrown out but let's say he puts it at the curb or something and it gets picked up, stolen, disappears. Again, he could be held responsible for that. Let's assume you don't have good language in the agreement that would allow for the transfer of ownership at some point in time due to a failure to pick it up, then I would tell you that you need to be very, very careful.
Todd Orston: What I have told people is find some kind of a storage area and basically at that point say, "Look, I am going ahead. I'm going to pay for this for two months." I would send it certified, I would send it by mail, email, skywriting, whatever. Smoke signals, whatever works. Duplication is okay. Send an email, and a letter, and a skywriting, but send those messages so that you're saying something along the lines of, "Here's the plan. I went ahead, I've prepaid for two or three months on the storage unit, but at that point it becomes your responsibility. Here's the information, you can start paying. If you don't, understand that what will end up happening is they will basically seize all of the property in that storage unit, it'll be lost, but I'm removing it from my house. I've given you ample opportunity to remove it yourself."
Todd Orston: Now fast forward you have to think about what it will look like in the eyes of the court. Does it look like you just did something irresponsible that resulted in loss of the property? If you do something like what I just described, at the very least you have an argument to the judge where you're saying, "I did everything I could and she had every, in this situation, she had every opportunity to go there, get her stuff, or just start paying on that. It was a reasonable cost. Start paying that cost, she chose not to, she's the one that lost the property, not me."
Leh Meriwether: At the end of the day it all comes down to what's in the agreement, or the final order of the court. If you're in doubt then talk to your lawyer that represented your case. If you did it pro se, I think it's worth a consultation with an attorney on what is the proper step because maybe you're ultimately successful in a contempt, but you still got to defend it. You lose at least time and sometimes money if you hire an attorney. I like the plan. Give them a heads up of what you're doing. This can all be avoided with the right language in the agreement.
Todd Orston: That's right. It could be much more simple if you have three months or whatever it is to get the property out. At that point, as of this specific date, the property ownership reverts to husband. Then there is no argument and if you throw it out at that point, doesn't mean the other party can't create a problem, right? Jut because they don't have a strong legal argument doesn't mean they don't file something. They may lose in court, doesn't mean that you don't have to go to court to defend against the frivolous lawsuit. Nonetheless, at least you're legally protected, and if you have that language sometimes you don't even have to go that far because what ends up happening, as that deadline approaches, your communication becomes different. Now you're saying, "Listen, you have seven more days. I've given you three months, you have seven more days to pick up your property. Please understand on the eighth day, I am throwing everything out."
Leh Meriwether: One more thing to add here before we wrap up this section is that, one thing you can do even though it may not be in the agreement is you can offer to help move that stuff. "Hey look, I'll pay for movers, take it over to your place, what's a good time for them to deliver it?" That way, even though you don't have to, it's not your job, that can help avoid a fight later on. It may not be fair but it may be the wise thing to do to avoid a frivolous lawsuit you've got to deal with anyway. Hey, when we come back we're going to continue to break down some challenging family law questions.
Leh Meriwether: I just wanted to let you know that if you ever wanted to listen to the show live you can listen at 1:00 AM on Monday mornings on WSV, so you can always check us out there.
Todd Orston: Better than counting sheep I guess.
Leh Meriwether: That's right.
Todd Orston: You can turn on the show and we'll help you fall asleep.
Leh Meriwether: There you go.
Todd Orston: I'll talk very softly.
Leh Meriwether: Welcome back to Divorce Team Radio this is Leh and Todd and today we're talking about challenging family law questions. We've been focusing in the area, actually, of real estate and real property because we've come across some really good questions that have sparked a lot of debate and a lot of discussion and a lot of practical solutions to avoid the problems of these people that are asking the questions that they're currently in, because pretty much every one of these is avoidable if you think through it ahead of time. All right, by the way if you've missed any of the previous shows and you want to go back and listen to them, you can definitely find us at DivorceTeamRadio.com and there's transcripts of every show there as well. Okay, you ready to get going, Todd?
Todd Orston: I'm ready.
Leh Meriwether: All right. Finally.
Todd Orston: It only took four segments but I'm ready. Nine cups of coffee I'm good to go. I'm kidding.
Leh Meriwether: Here's the next one, this is a good one. "Should I get a postnuptial agreement with my wife while starting a business or allow my brother to put the business in his name. My wife and I are not on good terms. We will probably get a divorce within the next one to two years. We are staying together now for the children. I am starting a business and am wondering if I should have her sign a postnuptial agreement saying she would not ask for any of the business upon the divorce.
Leh Meriwether: My brother suggested that I put the business in his name and bank account in his name as well so I would not have to worry about anything, as he would be helping with the business as well. Would it be more beneficial to put the business in his name, or get a postnuptial agreement? Is that illegal to put that in his name even though I'm part of the business."
Leh Meriwether: Woo. Some good stuff there. First off, if they're not on good terms I'm not so sure she's going to sign a postnuptial agreement.
Todd Orston: That's what I was going to hit first. The difference here is one is a voluntary process. A postnuptial agreement is not something you can impose on someone else. It has to be by agreement. It is, just by virtue of the name, a postnuptial agreement. So looking at her and saying, "Hey, I don't know if I like you, don't know if you like me. By the way I'm going to start a business that I hope will become incredibly profitable, do you mind signing this document so that you will own nothing of that?
Todd Orston: Probably won't go over well. Now it depends, there are some people that stay together because of convenience and if that's the case, maybe she will. It is a voluntary agreement and so the best thing would be exactly that. Absolutely. Enter into a postnuptial agreement that absolutely, specifically spells out that that property, meaning that business, and any and all property owned by that business, either by himself or with any third parties, is his separate property and she won't be able to make any claims. That is, in my mind, the best way to deal with it.
Todd Orston: A far distant second is putting everything in brother's name because, just because you do that the initial problem I'll mention is that this is a court of equity. If the court feels that there's some nonsense going on that he's really the one working the business, he's the one growing the business, he's the one profiting from the business.
Leh Meriwether: He being the husband.
Todd Orston: The husband, and that putting it in brother's name was simply a ploy to try and limit the wife's access to the asset and potential ownership claims in the event of a divorce, the court could look at that and if the court can't touch the asset because it's absolutely in another party's name, the court could say, "Okay but you know what, I'm going to give wife 100% of all the other assets. Or I'm going to create some kind of alimony obligation. Or I'm going to do an equitable division of property, well sir, it's in his name but you are benefiting greatly from this and wink, wink, nod, nod I think it's your company so you know what, you're going to pay this amount per month and you're going to pay all these things and do all these things."
Todd Orston: So really all you have at that point is the business and you've really cheated yourself out of claims to all other assets.
Leh Meriwether: The other issue is, let's say the divorce goes forward and it gets really ugly. The wife, if she has any evidence to support... This is what's called a fraudulent transfer. The fact that the brother has ownership, and I'm putting that in air quotes. If she believes it's fraudulent, because let's say he invested money into the business. SO there's a lot of factors that can play into this. Let's say he put 50 grand. So she finds evidence that he took some marital funds and put them in this business. There can be a presumption that this is a fraudulent activity and she can file to bring in the brother and the business, into the divorce. Which we've seen happen before.
Todd Orston: Absolutely.
Leh Meriwether: You could be dragging your brother into your divorce, which would now double your legal bills if things get ugly.
Todd Orston: If this is a prosperous company, it's not just you might drag him in. If she hires an attorney worth his or her weight and basically, it's almost a guarantee. No attorney's going to look and go, "Oh you built this one, two, three million dollar company. Well, sorry client it's in his brother's name so you get nothing." They're going to go after it because everyone involved knows that it's really your company and therefore there are legal steps to basically make a claim, even if you've done something like transfer it into your brother's name.
Todd Orston: This doesn't sound like transferring. This is starting from scratch in brother's name. That creates, whether there's a fraudulent conveyance, it's an interesting legal issue for me and maybe there's a simple answer I just don't have it, but it's interesting because there wasn't an conveyance, it was started in the brother's name. If let's say he, the husband invested $50,000 and he got nothing for it, and he just made a $50,000 gift to his brother, that opens up a whole other can of worms and again, I have serious doubts the court is going to believe this is brother's company.
Leh Meriwether: Right, and so you're also dealing with a court of equity in this situation so the court doesn't... There may be a legal issue, and the court does have to follow certain laws don't get me wrong. When there's a gray area the court has a lot of discretion. Not only that but we've seen cases where the business was made a part of the divorce, as well as other family members, and then the person decided to try it in front of a jury. If the jury thinks there's something fishy going on, the jury can absolutely issue an order that may change the structure of the business. So there's all kinds of problems here.
Leh Meriwether: I'm going to turn back to the postnuptial agreement. If you don't prepare that correctly, she may try to... She may do something to try and undo the postnuptial. Now postnups, when done correctly, are pretty tight. There's two times we see most prenups or postnups overturned. Number one is a failure to completely disclose the financials, and two a failure to follow all the requirements, the execution requirements and the formalities. It's a formal document and if you don't follow the formalities it can be thrown out.
Leh Meriwether: If, let's say, he says, "Hey I'm starting this business," but doesn't mention in there that he's taking a $25,000 marital asset as his investment to the business. That failure to disclose that in the postnup could potentially be a grounds to throw out the postnup. So you're better off just saying, "Hey I'm starting this business," and put in the postnup that you are optimistic that it's going to be a very valuable business, that it's going to grow.
Leh Meriwether: Because the temptation is to say nothing about the business' future value and then she can try to say, I don't know if it would be successful because you just don't see that very often, but she could try to say, "He told me it wasn't going to make any money and now it's making $2 million a year." He didn't fully disclose what the business was or something like that. A failure to fully describe its potential could create a grounds to litigate it and eventually have it thrown out.
Todd Orston: The postnuptial, you mean?
Leh Meriwether: Depending on your state. Yeah, the postnuptial. So there's all kinds of struggles here. I think the best thing is honesty and you've got to be careful here too because you don't want to say, "Oh, this going to be so successful. I'm going to promise to pay you five grand a month in alimony if you'll sign off on this business," and then the business fails. Now she's going to force that alimony clause against you.
Todd Orston: That's a great point.
Leh Meriwether: That's a struggle.
Todd Orston: You've got to be really, really careful. This is the kind of situation where I often tell people maybe you can handle this on your own. I would do a consultation with an attorney to sit down and really explore options because this is going to get more complex depending on what your thoughts about the company are.
Leh Meriwether: Hey everyone that about wraps up this show, I hope you enjoyed it. Tune in for the next one.