Just When You Thought It Was Over…

Some Outcomes in a Divorce Are Permanent, While Others Are Designed to Change

Chris RobertsChris Roberts, Principal

Everyone has something to protect in a divorce, and I have yet to meet a client who doesn’t feel relief when the process is over. Many of those clients, however, are surprised when an issue they thought they resolved for good resurfaces later.

In Maryland, the reality is that some issues can never be permanently resolved in an initial divorce proceeding, while others are always resolved in the first case. Stilll others are capable of being resolved in the first go-around by agreement, depending on the terms of the deal.

Property Issues are Resolved, Once and for all, at the Time of Divorce

The Court is expressly authorized to resolve disputes regarding marital property at the time of divorce, but has no authority to do so once the divorce case has concluded and the time for appeals has passed. That means that, if marital property issues are not resolved at the time of divorce, they cannot be resolved later.

It bears noting that there is a distinction between the general notion of property and the term “marital property” which is specifically defined by statute.

Orders Related to Children Are Never Permanent

Child custody and/or visitation issues are never permanently resolved.

In Maryland, the Court is guided by one overarching standard related to children, to which all other legal standards speak – the best interest of the child. At the end of the day, judges are tasked with making decisions that serve children’s best interests. That is not only true when a judge signs an order following a contested custody proceeding, but also when a judge memorializes a private agreement between the parties related to children, which is also generally incorporated into a consent order.

Though a child custody order will conclude the current dispute, the Court retains authority to modify such orders should circumstances require it to serve a child’s best interest. Things change in life, and if those changes impact a child negatively, public policy demands that courts be able to intervene for the sake of the child. The same is true for child support. If there is a material change in a parent’s income, or expenses for a child change significantly, the Court always has jurisdiction to modify an existing child support order.

For Alimony, it Depends

Alimony is typically modifiable, both in amount and duration, if circumstances and justice require a change.

If the Court determines alimony initially, the alimony will always be modifiable, as the law does not authorize the Court to make its alimony determination non-modifiable. In a private agreement, however, parties can agree that alimony be non-modifiable, both as to amount and duration. Parties can also be more creative than the Court in negotiating the terms alimony.

As examples, in a private agreement, alimony can be based on a formula that automatically accounts for a fluctuation in income, and can terminate when an alimony recipient cohabitates with another person and/or upon the arrival of a certain date. A Court is not able to craft such solutions. The language of a private agreement is important in securing the non-modifiability of alimony.

Indefinite Alimony Does NOT Mean Permanent Alimony

Case law tells us that alimony is not intended to be a lifetime pension, so there is no such thing as “permanent” alimony.

The statute provide for “indefinite” alimony, which essentially is an open-ended period of alimony. As mentioned previously, court-ordered alimony is modifiable; however, it may also be terminated if either party dies or marries, or “if the court finds that termination is necessary to avoid a harsh and inequitable result.”

What constitutes harsh and inequitable result? That is the proverbial (and in some cases literal) million dollar question, and it is a judge’s job to determine based on the facts of the case. If you are the would-be payor of alimony, this uncertainty places a premium on having an exit strategy for your alimony obligation. This can be achieved via a negotiated resolution and careful language detailing the specific circumstances when alimony will terminate.

My Spouse and I Have a Verbal Agreement. What is the Quickest Way to Obtain a Divorce in Maryland?

AvatarDonna E. Van Scoy, Principal

The short answer is: it depends.

Obtaining a divorce in a short marriage with no children and few, if any, assets is very different than a long marriage with children and assets. Then there are marriages in between the short marriage and the long marriage with combinations of no children or children and a variety of assets.

A logical first step is to contact a lawyer. While you and your spouse have reached a verbal agreement and are working together, a lawyer cannot represent both parties in Maryland. No matter your level of cooperation and intentions, you and your spouse can easily have conflicts of interests in a divorce. So one or both of you should to consult with a lawyer.

Moving the Process Forward

  1. Be open to the fact that you and your spouse may not have considered every issue that needs to be addressed in your divorce. It is possible that what you agreed to with your spouse will negatively affect your rights. A lawyer will explain the law, review your agreement, and identify any issues. TIP: Do not sign any agreement with your spouse before reviewing with a lawyer.
  2. Both you and your spouse should each meet with a lawyer. While you have the right to obtain your divorce without the assistance of counsel, in my experience that can result in delay and greater expenses than securing legal advice at the beginning of the process. If your spouse does not want a lawyer, you can be the party that moves the divorce along. However, your lawyer will need to recommend to your spouse (in writing) that they obtain counsel. Your lawyer could provide two or three names of other counsel for you to share with your spouse. Then hopefully your spouse will also seek counsel, or at the very least your spouse could review the final agreement with an attorney.
  3. To assist in the evaluation of your case, come prepared to your initial consult. Write down what you believe is your agreement with your spouse. Bring a list of all your assets including current values and any debt associated with the assets. Bring a copy of your current mortgage statement, your last three years of tax returns, your last three paystubs and, if possible, your spouse’s last three paystubs. If there are children consider how you and your spouse will parent your children and what the children’s schedule will be with each parent.
  4. Once you have all the information necessary to propose a settlement to your spouse, a Separation Agreement will need to be drafted. Your spouse (and counsel) will need to review and approve the agreement. If both of you continue to cooperate with each other in the spirit of divorcing as quickly as possible, the Separation Agreement could be completed and executed as soon as your lawyer can draft the agreement and your spouse can review and approve. While it can be longer or shorter, the average completion of an agreement is 30 to 60 days.
  5. The next step is to file a complaint for an uncontested divorce. Your spouse has to be served and has up to 30 days to file an answer. The fastest ground for the divorce is a Mutual Consent. You and your spouse can speed up the answer time up by working to file the complaint and answer at the same time or together.
  6. The court will then schedule an uncontested hearing. The moving party (the one who files) and their lawyer need to be present. The other party (and their lawyer) can also be present. During COVID19 the hearing is being held remotely. While these are uncertain times, the hearing is normally scheduled in four to eight weeks. The divorced is usually finalized in within 14 days.

The information above depends on a settlement being reached and the parties truly working together. Each case is different. Contested cases can take anywhere from a year or two, or more. Again, involving a lawyer once you start considering a divorce will help you have the information you need to manage your divorce as efficiently as possible.

Not All Dollars Are Equal: Which Assets Are Most Valuable in Divorce?

AvatarErik Arena, Principal

One thing is usually certain in the aftermath of a divorce: You’ll experience a reduction in net worth and in standard of living. This is unavoidable as one household becomes two.

But just because it will happen doesn’t mean you can’t take steps to lessen the blow. By choosing wisely and unemotionally when dividing the marital assets with your spouse, you can minimize the reduction in your net worth post-divorce.

Not all Dollars Should be Valued Equally in Divorce

Although all asset transfers between spouses (incident to divorce) are tax-free events, some of those assets may later be subject to sizeable income and/or capital gains taxes that must be paid entirely by the receiving spouse, significantly diminishing their net value. It is imperative that these consequences be known and understood by you and your attorney so that you don’t end up with less than your fair share of the net assets.

Which Assets and/or Dollars are Most Valuable?

Value means many different things to many different people. When dividing assets between spouses, it is important to keep in mind the classes of assets identified below, which vary in net present value. If you and your spouse are trading assets from different classes, adjustments may need to be made to ensure you are not losing fair value.

  1. Cash is king! It is both liquid and not subject to any further taxes. It doesn’t get any better than that!
  • Cash, funds in checking and savings accounts, and the money market portion of any investment accounts.
  • Home sale proceeds. If the family home is sold as part of the divorce, those proceeds are also liquid and not subject to further tax (as any capital gains due will be paid at the time of sale, after application of your combined spousal $500,000 capital gains exclusion).

2. Other assets not subject to any further tax. Generally speaking, the replacement cost for these items exceed their private re-sale value. Retaining those items as part of your divorce will mean less dollars spent by you post-divorce to get yourself situated.

  • Furniture and home furnishings.
  • Automobiles.

3. Assets subject to capital gain but not income taxes. These assets will fluctuate in value and will be subject to capital gain taxes if you need to sell them to generate cash. The order of priority in each case will vary depending upon the tax basis of each asset or holding:

  • Stock and/or mutual fund holdings in investment accounts. These may also throw off interest and/or dividends, which, in some cases, is taxable income to you.
  • The family home. Depending upon the home’s tax basis, you may face a hefty capital gains bill if you assume ownership and then sell it later. Further, at the time of that sale, you’ll only be able to use your own $250,000 capital gains exclusion, as opposed to the combined $500,000 exclusion for spouses.
  • Other real property not used as primary residence. Any capital gains problem is compounded with these properties because there is no applicable capital gains exclusion.
  • Stock options
  • Vested restricted stock
  • Some artwork

4. Assets subject to income tax at the time of exercise or withdrawal. These assets will also fluctuate in value. However, when it comes time to withdraw from them, you’ll be taxed on those withdrawals and/or distributions at your ordinary income tax rate in the year in which you take the distributions. Accordingly, the present value of retirement assets, when compared to cash assets, must be adjusted for both present value (as cash is available to you now, whereas retirement, if drawn early, is subject to an additional 10% penalty tax) and after-tax value.

  • Most employer sponsored retirement plans (note: IMF and World Bank pensions are not taxable)
  • IRAs
  • Certain pension plans
  • Retirement annuities

Each divorce is different and there can be legitimate reasons why assets are divided a certain way. The information above is intended to inform and educate you, so you can use that knowledge to move forward in a strategic fashion.

Are You a Millennial Thinking about Marriage? Here’s What You Should Know about Divorce

Liz EstephanLiz Estephan, Attorney

Millennials are causing a 24% rate in decline in the divorce rate, according to Business Insider.

There are a few reasons for this statistic like waiting longer to get married, establishing careers, and paying off student loan debt. But if you are a millennial and have decided to get married or are thinking about marriage, here’s what you should know about divorce.

Accounts and Assets

If you and your soon-to-be spouse decide not to have any joint accounts, this does not mean that you do not have an interest in his or her account.

Once you are married, at least in the District of Columbia and Maryland, typically any income to either you or your soon-to-be-spouse is considered marital property. You and your spouse should have frank conversations about your financials and disclose any and all accounts to each other.

Upon divorce, marital assets and accounts are equitably divided.  If you do not know your spouse’s accounts and assets and your spouse is not forthright when you are navigating a divorce, you may have to spend more money in discovery to determine all of your spouse’s accounts and assets.

Real Property

Are you and your soon-to-be spouse thinking about buying property in Maryland or the District of Columbia? Perhaps you had better wait until you are married.

When you are married and buy property in either of these two jurisdictions, there is a presumption that you and your soon-to-be spouse will be tenants by the entirety rather than joint tenants or tenants in common. Tenants by the entirety means that each spouse has an undivided interest in the real property and there is a right of survivorship (if one of you were to pass, the survivor would assume ownership of your home). Maryland has a presumption that real property owned by a married couple is held as tenants by entirety.

If you purchase property before you are married, you could either be tenants in common or joint tenants.

Tenants in common means that you and your soon-to-be spouse have an undivided interest in the property, you are joint owner, but you each own a specific share of the property, your shares do not necessarily have to be equal. Tenants in common do not have a right of survivorship. This could become an issue if your soon-to-be spouse has children from a previous relationship or marriage as the children could inherit your soon-to-be spouse’s interest in the property, not you.

Joint tenants means that you and your soon-to-be spouse have an undivided interest in the real property with rights of survivorship. You and your spouse must intend to create a joint tenancy and the deed should reflect a joint tenancy. Maryland has a presumption against joint tenancy.

Non-marital Property

Do you have a trust, inheritance or real property that you received prior to marriage? This type of property is typically considered non-marital property. For example, if you thinking about using an inheritance to put towards a down payment on a home with your soon-to-be spouse, do not lose track of any of the documentation showing where the money originated.

If you divorce, you want to prove to your spouse and potentially a court, that you have a greater interest in the property because of your non-marital contribution. If you have significant premarital assets, you should consider a prenuptial agreement.

My soon-to-be Ex and I are Friendly: Do I Really Need a Divorce Lawyer?

AvatarCasey Florance, Principal

With the proliferation of online resources, and the ongoing pandemic, it is both more tempting and more possible than ever to craft your own Settlement Agreement from the comfort of your living room.

Online “forms” abound, and services like Legal Zoom can help you feel like the “do-it-yourself” (DIY) agreement is tailored to your particular situation. As a result, divorce lawyers frequently get asked: Do I really need a lawyer?

Although it is hard to advise people how to avoid needing my services, I typically tell potential clients that the answer really depends on the circumstances of their case and level of complexity of their custody and/or financial situation, as well as the dynamic between them and their soon-to-be Ex. There are a lot of resources and dispute resolution processes available to the self-represented person (read: divorcing person who does not have an attorney), but there are also many pitfalls.

Regardless of the chosen path and circumstances of the case, however, one thing I always tell anyone who will listen is this: you absolutely must meet with an attorney to review any Settlement Agreement BEFORE you sign it. Here’s why.

  1. It is important to be certain that the language of your Agreement actually sets forth the terms you have agreed upon.

    Just because you and your spouse/co-parent are comfortable negotiating directly and coming to agreed-upon resolutions for the issues arising out of your relationship, does not mean you are comfortable translating those agreed-upon concepts into written agreement terms.

    If your goal is to avoid Court and costly litigation while making your own decisions about your family, then your DIY Settlement Agreement will not serve its intended purpose if you have to spend money later litigating over what your agreement was supposed to say, or worse, seeking the Court’s interpretation of your agreement because you two have a dispute about what your agreement means. It is also important for you to understand your agreement so you know what you need to do once it is signed in order to comply with it moving forward.

  2. You don’t know what you don’t know.

    Many online tools for drafting DIY Settlement Agreements contain a series of options you self-select based on the categories listed. But more often than not, there are details about your custodial situation — or your finances, assets or debts — that are not represented in these pre-drafted menus. Or the options do not adequately capture your specific situation.

    The danger here is that once you sign an Agreement, you may have waived rights you didn’t even realize you had. Furthermore, by neglecting to include entire topic areas in your Agreement, you may have accidentally waived your ability to later address those topics.

  3. There is very likely “boiler plate” language embedded in the form agreement that makes certain provisions unable to be modified for any reason.

    In Maryland, there are often sections of a Settlement Agreement that are unable to be modified by a Court once the agreement is signed by both parties. For example, it is typical for agreements to state that the division of assets cannot be modified by the Court at any point in the future.

    It is also not unusual for time-bound alimony payments to be non-modifiable. As a result, it is extremely important to understand which provisions of your Settlement Agreement are able to be modified in the future, and which ones are not. Failure to understand your agreement – when you had the opportunity to review and understand it before signing it – is an unlikely basis for undoing your Agreement later if you are unhappy with it. And signing an Agreement which says that certain provisions are not able to be changed by the Court may leave you with little recourse.

  4. Ensure that the Agreement meets your goals.

    If you have attended mediation with a third-party neutral and the mediator drafted your Agreement, it remains important to have it reviewed by your own attorney before you sign it. You will want to ensure that the agreement meets your individual goals. Just as important, you want to make sure you actually understand each and every provision of your agreement. Many people don’t realize that a mediator does not represent either party’s interests and cannot provide legal advice; rather the mediator’s goal is to facilitate a resolution.

I recommend anyone going through a divorce to have an attorney guiding them through the process, explaining rights and obligations, strategizing to reach goals, and advocating for their interests. For many people, this option is not feasible for a variety of reasons. When that’s the case, it is nevertheless imperative to meet with an attorney to review your draft Settlement Agreement before you sign it.

Welcome to Your Source for Divorce Law

The Divorce/Family Law Group at Lerch, Early & Brewer is proud to present our new Divorce Law Source blog.

In an age where Google searches and web browsing are the go-to for most people to find information about everything, we are thrilled to provide an easily accessible one-stop shop for all things family law and divorce.

Featuring content authored by each of our accomplished and skilled family law attorneys, we encourage you to use this forum to find the answers to commonly asked legal and practical questions our clients confront pre- and post-divorce, review explanations and analyses of pertinent legal concepts and principles, and receive updates on new practices, rules, laws, and the family court system in Maryland and D.C. We will be featuring new posts and content each week. We look forward to welcoming many regular followers and invite you to recommend desired topics for future posts. Please subscribe to the blog on the right-hand side of this page.

Lerch Early’s family law attorneys represent clients in every facet of family law including divorce, custody, child support, alimony, property division, modifications of custody, child support, and alimony, prenuptial and postnuptial agreements, litigation, divorce and custody settlement agreements and alternative dispute resolution, guardianship, and adoption. For more information, please check out our website.

We hope to see you soon on our blog!

In Health,

Heather Collier and Erik Arena
Co-chairs, Divorce/Family Law Group