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What Is Divorce Planning, And Should I Consider It?

Ciyou & Dixon, P.C. attorneys sometimes receive questions like this. This aspect of a divorce carries at least four different meanings, one of which is viewed as a taboo topic.

The first is simply what a spouse contemplates and does just before meeting with a divorce attorney (or after) to facilitate the process. This is a common conversation that Ciyou & Dixon, P.C. attorneys have with clients: “Please bring us the following documents: your last three years’ tax returns, last six pay stubs, a completed financial declaration, a copy of your most recent statements on any financial account . . . .”

The second is also one commonly known to those getting married and considering a divorce in advance: a prenuptial or post-nuptial agreement. In the most basic form, these documents, which are usually prepared by a lawyer, and the first of which is governed by the Uniform Premarital Agreement Act, specifies how assets and liabilities will be apportioned if the marriage ends in divorce.

As a general rule, couples, like any other set of people or entities, are free to contract in advance for a future circumstance. But there are two major limitations to these agreements that Ciyou & Dixon, P.C. advocates see occur. One is based on public policy. If a spouse is disabled or otherwise unable to take care of himself or herself, a court may order spousal maintenance. This effectively picks the support source for this disabled spouse and the divorcing spouse over the government.

A more common prohibition relates to children. Neither the divorce court, nor the parties, may determine what child-custody, parenting and support obligation should be entered into in the best interests of the child under the controlling law alone (without court review) and prospectively. Parents may thus not contract away the legal rights and/or duties that parents have to their children. These rights belong to the kids.

The third and fourth types of divorce planning are what is unstated, but nevertheless operational in some divorces. Unfortunately, Ciyou & Dixon, P.C. sees the third and illicit type more often that we would expect. This type occurs in situations where a spouse knows that he or she is divorcing the other. With this decision made, he or she begins secreting, transferring and encumbering assets long in advance and covers his or her tracks as well as possible.

The express purpose of this type of premarital divorce planning is to deprive the other spouse of his or her rightful share of the marital estate. In Indiana, this is presumed to be one-half of the net marital estate. Obviously, this is inconsistent with the Divorce Act.

To undo this type of marital divorce pre-planning, the other spouse must be able to key his or her attorney into this concern. With this, Ciyou & Dixon, P.C. attorneys advise clients about the ways to track the money and to engage a forensic accountant to uncover these marital assets. So long as there is some proof or a good-faith basis for this, a trial court may order account fees and legal fees to untangle illicit marital divorce pre-planning.

The last type of marital divorce pre-planning is perhaps the more common of the two, and one we see with some frequency. The usual situation in which this type occurs is where there is a high-income-earning spouse and one who stays at home, often to raise the children. In this circumstance, the monied spouse decides that he or she is going to divorce the other.

Under various guises, such as simplifying life or to deal with a financial setback, the spouse in the financially powerful position then begins to divide the marital estate in a way that will minimize the divorce cost and time and be very appealing to a trial court to want to order as final division of the marital estate.

For instance, this spouse persuades the other to downsize houses and purchase a home that is comfortable, but far smaller, less expensive in maintenance and taxes, and within proximity to a home or to an area where the divorcing spouse plans to purchase a more-expensive home after the divorce. The planning spouse “knows” to a reasonable certainty that he or she is not going to live in this house for long.

The same may occur with automobiles, and the financial accounts may be moved (i.e., closed and replaced with individual accounts). With skilled lawyering, this divorce pre-planning may not only work, but remain undetected throughout the ensuing divorce proceedings. There is nothing inherent illicit, illegal or unethical about an attorney and his or her client engaging in this process.

In between these last two types of pre-divorce planning, Ciyou & Dixon, P.C. sees a fair amount of grey area. It is here where a line may be crossed. A couple of more-common examples demonstrate the point. The first is with a client “interviewing” or “consulting” with many of the probable divorce attorneys in order to conflict them out from representing his or her spouse when the divorce is filed. A corollary is where the most desirable experts are retained by one spouse in advance of filing if there are unique assets to be valued.

This frames the rather complex legal landscape that may constitute divorce pre-planning. At Ciyou & Dixon, P.C. we see many permutations of the four core types. The key we stress to our client is the ways to identify such planning. Alternatively, where pre-planning is sought, it has to be legal and make sense to the other spouse given the client’s objectives and the law. Where properly used, this may be an effective divorce tool and save money, time and heartache.

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