E04: Divorce & The Balance Sheet—Asset Division

In this episode of It's Just Human Nature: Let's Boyle It Down, we tackle one of the most complex—and often misunderstood—aspects of divorce: Asset Division. Whether you are just beginning the process or navigating the final stages, understanding how your financial life is dismantled and reassembled is critical to your future. We break down the steps, dispel common myths, and provide a clear roadmap for managing the marital estate. If you are struggling to understand how to separate your life—and your finances—from your spouse, this episode provides the clarity you need to move forward with confidence.

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Transcript

SPEAKER_00 0:00

We're back.

SPEAKER_01 0:01

So we're back with let's boil it down. And today both me and Bob Kipness are going to tell you a little bit about assets and a divorce. Um, it's a multifaceted topic. It can be very complex or it can be very simple, depending on what the assets are and what needs to be divided. But there are many, many, many issues in this. Number one, the the identification of those assets. Number two, the categorization of those assets. Number three, whether or not there's any reimbursement or dissipation due to either the marital estate or the non-marital estate, along with valuation of those assets. So we'll start with identifying assets. Bob, what do you have to say about that topic?

SPEAKER_00 0:55

Good morning. I'm glad to be back. Um, so the first area of inquiry would be whether or not there's a prenuptial or premarital agreement. That's what I would look to first to see if we can identify what the marital estate is versus the non-marital estate, because essentially you need to get to the judge what the marital estate is or to opposing counsel so you can start trying to negotiate a settlement.

SPEAKER_01 1:21

So there's all kinds of assets though, aren't there, that are you know, that need to be identified.

SPEAKER_00 1:26

What are what are those in? Absolutely. So first you want to identify any real property, houses, land owned by the parties, any land deals the parties are in, anything to do with real property. Next would be the liquid assets, cash accounts, CDs, money market accounts, stock accounts, while not cash, could be readily converted into cash, things of that nature.

SPEAKER_01 1:56

Businesses?

SPEAKER_00 1:57

Businesses, absolutely. Very important issue, and potentially assets of the marriage.

SPEAKER_01 2:04

Okay. And what about more recent kinds of assets that we've had to deal with? Cryptocurrency?

SPEAKER_00 2:10

Cryptocurrency we're dealing with now, and they're like some of the other assets. The key is how do you value the asset, start with the purchase price, and then go to the marketplace and see what they're trading at.

SPEAKER_01 2:22

So it would be fair to say that the very first thing we're going to do is identify the assets and start to create a balance sheet for the parties.

SPEAKER_00 2:30

Exactly.

SPEAKER_01 2:31

Okay. And the balance sheet would include all real estate, all cash assets, businesses, cryptocurrency, any other type of um investment that they may have. Is that correct?

SPEAKER_00 2:42

Exactly. And then you have to make a determination whether or not it's part of the marital estate or non-marital estate.

SPEAKER_01 2:48

What does that mean?

SPEAKER_00 2:50

Well, and there's a presumption under Illinois law that any assets acquired during the marriage are marital. That presumption can be rebutted by numerous things. One would be a premarital agreement. If you say I came into this uh marriage with 10 McDonald's restaurants that are going to forever stay non-marital, then you know in your inquiry that goes on the non-marital side of your balance sheet. And that becomes important when you're dividing the marital estate because one of the factors the court looks at is each party's non-marital estate. I had a case once where my guy had in excess of five million dollars, the marital estate was worth 500. So we gave the wife the whole marital estate.

SPEAKER_01 3:37

So the there can be an inequitable distribution between the parties. Is that right?

SPEAKER_00 3:44

That's true. And in Illinois, equitable does not mean equal.

SPEAKER_01 3:48

And that's something that we deal with all the time, don't we?

SPEAKER_00 3:51

All the time.

SPEAKER_01 3:51

Everybody comes in and thinks that equal is what's going to happen. And that's not really what it is, is it?

SPEAKER_00 3:58

No, it's not. And that's something we talked about the other day when you have to manage your clients' expectations. Because again, equitable does not necessarily mean equal.

SPEAKER_01 4:09

So in your case, the wife got a hundred percent to the marital estate because it was such a small amount compared to the husband's non-marital estate. Isn't that right? And there's other factors too, aren't there in why somebody might get more than 50%?

SPEAKER_00 4:25

Sure. There's various factors that the court looks at when dividing the estate, including but not limit to age of the parties, health of the parties, lifestyle established during the marriage, those types of issues. And if you have an economically disadvantaged spouse because of a prenup or some pre-existing uh assets, then that has to be taken into consideration when you're dividing the marital estate.

SPEAKER_01 4:52

One of the factors is also the opportunity to acquire assets in the future. So would that include like if one of the parties was going to have a greater earning capacity in the future?

SPEAKER_00 5:03

Absolutely. And that also ties into spousal support.

SPEAKER_01 5:06

Okay. So when we're dealing with um, you know, identifying assets and and and and putting them into the non-marital or marital category, it's gonna be very important, can't it?

SPEAKER_00 5:17

Oh, absolutely. That's key to the case.

SPEAKER_01 5:20

And it's also then after we finally identify them and we kind of establish a balance sheet, did we then move to the the valuation of these data sons?

SPEAKER_00 5:31

Yes, that would be the next step to try and round out the balance sheet and instead of just classifying them, quantifying them, and uh the number you ascribe to each asset, so you can then move over to div dividing the estate.

SPEAKER_01 5:48

We talked about non-marital just briefly a second ago. What is the definition of non-marital in Illinois, if you know?

SPEAKER_00 5:56

Well, it's uh an estate that's not contemplated for division. It's contemplated and factored in when dividing the marital estate, but you don't divide a non-marital estate, you just award it to one party or the other. The next natural inquiry would then be is the marital estate due any reimbursement from the non-marital? So I've run into that as well, where the marital estate pays joint income tax on a business that's non-marital. What do you do with that?

SPEAKER_01 6:29

Yeah, well, that's that's that's reimbursement, and there's a lot of case law on that. But let's go back to the definition of non-marital for a second so that we can make sure that everybody who's listening gets the idea. So isn't non-marital something that you that won by the parties acquired before the marriage by by inheritance or by gift, is that correct?

SPEAKER_00 6:50

Absolutely.

SPEAKER_01 6:51

And those that's really what non-marital property is, isn't it?

SPEAKER_00 6:54

Yes.

SPEAKER_01 6:55

Okay, and the only exception or the additional way that you could have non-marital property is if by chance your prenuptial agreement gave somebody an an interest as their non-marital, even though it might have been marital. Is that correct?

SPEAKER_00 7:11

Exactly.

SPEAKER_01 7:12

And you can do that in a prenup, which we discussed, you know, the other day.

SPEAKER_00 7:15

Or a post-nump. You can do it after they're married as well.

SPEAKER_01 7:18

Or a post nump. But typically it's if it's inherited, gifted, or acquired before the marriage, correct? Okay. So now we have the definitions of marital and non-marital. We've started our balance sheet. We've got the listing of all the assets on the balance sheet. We move to the valuation. And we'll get to reimbursement dissipation in a second, but let's stay with the valuation here for a little bit.

SPEAKER_00 7:42

It depends on the asset. If it's a stock account, you get a strike price and you get a date, and you determine, multiply it by how many stocks you have and determine what the amount is. Very different from a business valuation, which is another topic for another day. We could do a whole session on it. Probably six. Right. How to value a business. And then you would need to value the business, whether or not it's marital or non-marital. You could look for a stipulation from the other side as to value, or you could just hire a forensic accountant and valuator to value the business.

SPEAKER_01 8:23

Yeah. So the business is one thing, and business valuations can be very complicated. Is that correct?

SPEAKER_00 8:28

Oh, yeah.

SPEAKER_01 8:28

And the valuators can disagree.

SPEAKER_00 8:31

And they do for the time.

SPEAKER_01 8:33

And by a lot. Yeah. I mean, I had a case where my client, my my valuator evaluated it for my client at about six million dollars, and the husband's valuation expert came in at $100,000. Now, the husband's valuation expert was notoriously um hired. Well, he was hired as a hired gun. Oh, yeah. You know, so he would do what the other side wanted. But, you know, so I mean you can have those kinds of variations. Um, and and that if you in in cases, can't you?

SPEAKER_00 9:06

Of course. And then ultimately it's up to the trier effect.

SPEAKER_01 9:09

The trier effects the judge, right?

SPEAKER_00 9:11

Right. There's no juries in Illinois divorce court.

SPEAKER_01 9:14

I just had somebody the other day um who was shocked at that. They thought they were gonna have, as this woman put it, 12 is it people raising their hands, okay, and voting. And it was like, no, nobody in the audience is gonna be raising their hands and voting. The the the the man or woman on the bench is the person who's I still get that question all the time.

SPEAKER_00 9:35

So there are no stupid questions for your perspective or current divorce lawyer.

SPEAKER_01 9:40

And that's exactly true. The one thing, and I know we talked more about hiring a lawyer the other day, but just to fill in that little blank, no dumb questions, please ask whoever you hire whatever you need to know. Because as I said the other day, education and empowerment are really two very, very, very important aspects of going through this process. But back to the valuation. So that's how we value a business, and we'll talk more about that on a different time. But what about real estate?

SPEAKER_00 10:09

Well, real estate, we just did it in a case where we agreed to the same real property appraiser just so there weren't two competing ones. And he did the walkthrough and came up with a valuation that everyone could live with.

SPEAKER_01 10:24

And that's that's a typical way of doing it. But isn't there a aren't there differences between valuing residential property and valuing investment property?

SPEAKER_00 10:34

Oh, absolutely. If it's income producing, it's a whole nother ball game than um residence.

SPEAKER_01 10:39

And again, you need an expert to come in and do that, right?

SPEAKER_00 10:42

Yeah, for sure.

SPEAKER_01 10:43

And there's a lot of people who say, why can't I just have my realtor come in? You know, why can't the realtor in the neighborhood just give me a value and why can't I live with it?

SPEAKER_00 10:53

There's a stream of income that has to be reduced to present value, just to touch upon that. So, no, just the garden variety, real property appraiser cannot do that.

SPEAKER_01 11:04

Yeah. And even on residential real estate, we really can't use a realtor because they're they're not considered an expert. Is that correct?

SPEAKER_00 11:12

Right.

SPEAKER_01 11:13

So that we need to hire the qualified um real estate appraiser versus a realtor to come in and give us a value.

SPEAKER_00 11:22

Absolutely.

SPEAKER_01 11:23

But don't we always try to go to realtors just to get the ballpark?

SPEAKER_00 11:27

Yeah. So it's a shortcut, but you can ask for a market analysis as opposed to a an appraiser, appraisal, and the market analysis will put you into a ballpark. You can reach out to the other side to see if you want to go the full route of an appraisal or if you can stipulate to the value.

SPEAKER_01 11:47

And a lot of times that's what we do, right?

SPEAKER_00 11:49

We get two different, you know, the not an exact science anyway, because it's essentially based on comparables. So they try and find exact properties, which you never can, because there's something unique about every property, either location or layout or condition. Condition's a big one. Um, yeah, so it's it differs.

SPEAKER_01 12:14

Right. So we can get the market analysis as a stopgap measure, but then ultimately on real estate, we need that appraiser to come in if we're gonna need to go to trial or before take it to a trial fact, correct?

SPEAKER_00 12:29

Yes.

SPEAKER_01 12:30

And have you found, I found, that um appraisals will tend to be lower than um like market analysis or that, because what I've learned is that most appraisers um do most of their work for banks. And therefore, what they're really appraising is whether or not it's good for a loan. And, you know, so they're just looking to get it in at the a value that's in excess of what the mortgage lender is going to lend.

SPEAKER_00 13:01

Right. I've had that same experience.

SPEAKER_01 13:03

Yeah. So sometimes getting the local realtor to give you what they really think they can get for it can be far more helpful than an appraisal in terms of negotiating, you know, not not usable at trial, but in terms of negotiating, um, you know, finding out what it would really sell for is really what the key of what we're trying to do, isn't it?

SPEAKER_00 13:26

Yes. And it's quicker and cheaper and easier to do the market analysis.

SPEAKER_01 13:30

And you generally they have a lot better idea of what's going on in the neighborhood, too.

SPEAKER_00 13:34

Right.

SPEAKER_01 13:35

And that's so, which an appraisal is doing them all over the the the county, the state, the Midwest.

SPEAKER_00 13:42

Then you have to take a step back and determine when was the property purchased, what was the source of funds used to purchase the property? Does one party or the other want to keep it? That's a big question to answer for your divorce lawyer. And if so, how do you offset that equity in the balance sheet?

SPEAKER_01 14:03

And so now we've got like the business valued, we've got the real estate valued, we've got um all of this on the balance sheet, and we've got the liquid assets, which are relatively easy. Um, but when we're looking at stock portfolios or crypto or any of these types of appreciable assets, do we need to look at the tax consequences?

SPEAKER_00 14:28

Absolutely.

SPEAKER_01 14:29

And what would that involve?

SPEAKER_00 14:31

That would involve the purchase price at the time of purchase to see what the capital gains would be to liquidate the asset. So if you think you're getting, if you have there's a million-dollar stock account and you think you're getting 500, you're not. And that's something that you need to impress upon your client.

SPEAKER_01 14:50

Yeah, and and that's something again that clients need to be educated on is depending on what the the basis, the tax basis of each of these assets is worth, um, that can affect what the real net um Absolutely. Okay, and and the net is what you're really interested in when you're resolving a case, is it not?

SPEAKER_00 15:12

For sure.

SPEAKER_01 15:13

The one asset that we forgot to mention earlier was retirement accounts.

SPEAKER_00 15:17

Right. We haven't gotten there yet.

SPEAKER_01 15:18

Okay.

SPEAKER_00 15:20

All right. How much of the retirement account was earned during the marriage? How much of the stock account is vested and has vested during the marriage would be some initial inquiries to determine.

SPEAKER_01 15:32

And then there's a couple kinds of uh retirement accounts.

SPEAKER_00 15:35

There's defined benefit, 401ks, IRAs, Roth IRAs where the tax has already been paid.

SPEAKER_01 15:43

Those are more defined contribution plans, correct? So like a 401k, uh, you know, an IRA, those are defined contribution plans, which kind of means that you're contributing, your employer might be doing some match. Match, right. But it's not a defined benefit. What you get at the end is more based on how much you accumulate, correct?

SPEAKER_00 16:06

Right.

SPEAKER_01 16:06

Where a defined benefit is the old pensions. If you work this many years, if you you know, we we will agree to pay you a percentage of your final salary or an average, you know, for life, right?

SPEAKER_00 16:21

Right. And hopefully that entity doesn't file bankruptcy and wipe you out.

SPEAKER_01 16:26

Yeah, then that used to happen, um, which is one of the reasons that a lot that a lot of our ERISA laws came into effect. Is that true? And the ERISA is the pension laws that the federal pension laws that govern what employers can do with these this money, you know, whether they can bankrupt it. They kind of started to protect it a little bit with these ERISA laws, did they not?

SPEAKER_00 16:50

Yeah.

SPEAKER_01 16:50

Okay. So that makes it a little safer these days, but still. And again, I mean, this retirement accounts are not taxed at the time that you contribute. So they're taxed when you take it out. So that can be a different result for each of the sponsors.

SPEAKER_00 17:07

That's a key inquiry in and of itself as well, because um the retirement accounts is not worth what you think it's worth.

SPEAKER_01 17:17

Yeah, you've got to tax affect it.

SPEAKER_00 17:19

And it's good to associate with an accountant who can give you some projections in that regard so you know what you're dividing.

SPEAKER_01 17:26

Right. And if somebody is going to have a higher income bracket at retirement than the other one, that can make a difference also, correct?

SPEAKER_00 17:34

Absolutely, because now in your divorced life, you can no longer file joint income tax returns. Right. So any tax on the uh withdrawal of those funds will be yours and yours alone.

SPEAKER_01 17:48

And we people ask this question all the time. Um, what about social security? And that's not an asset, is it?

SPEAKER_00 17:57

No, and that's not something we can control either. That's federal law, and that's uh it's called comedy, C-O-M-I-T-Y. Federal law controls.

SPEAKER_01 18:08

And what federal law says is each of you gets your own social security.

SPEAKER_00 18:13

Predicated on what you've paid in, the duration of your marriage, etc.

SPEAKER_01 18:17

And we're not allowed to divide the social security benefits between the parties, correct? Correct. And but one thing that I think people miss is that right now, under those laws, the under earning spouse or the lower-earning spouse, they will have the right to take their social security benefit or to take a benefit based on their spouse if they were married for more than 10 years.

SPEAKER_00 18:43

More than 10 years, correct.

SPEAKER_01 18:44

And that's something that we need to factor in, and we'll talk more about that when it comes when we get to support. But it's something, it's a question that's asked to me all the time because people just think when they're talking about retirement accounts that that Social Security would factor in there, and it just doesn't. So we need to make that clear. Um and what about these defined benefit plans? So if you're gonna get a pension, okay, at the end of the the your retirement, can the other spouse get a part of that?

SPEAKER_00 19:14

Yes. And so in the past, we've used actuarials to help us value some of those pension rights or benefits. And then you true up or true down to make it whatever percentage division you're trying to gain.

SPEAKER_01 19:29

So you're doing that if you want to offset the pension benefit against other assets, right?

SPEAKER_00 19:35

Right.

SPEAKER_01 19:36

But there's also a way to divide the actual benefit between the parties, correct?

SPEAKER_00 19:41

Right.

SPEAKER_01 19:42

And is there something called the hunt formula that does that for us?

SPEAKER_00 19:45

There is. And what's the hunt formula, Bob? It's a legal method for evaluating, dividing pensions in a divorce case by calculating the marital share.

SPEAKER_01 19:58

And what how do you do that?

SPEAKER_00 19:59

It's the number of months for service over the number of months of marriage times the benefit brings us to our number that we are looking for.

SPEAKER_01 20:09

So to put it a different way, the numerator is the number of months of marriage, the denominator is the number of months that the spouse was employed by that entity. Correct. And then we multiply that by the benefit.

SPEAKER_00 20:23

Right.

SPEAKER_01 20:24

And then we divide that by whatever percentage we're going to divide the estate under. Right.

SPEAKER_00 20:30

Exactly.

SPEAKER_01 20:30

So we come up with a number um that gives a fair distribution of that pension benefit um to the non-participant spouse. Is that correct?

SPEAKER_00 20:42

True.

SPEAKER_01 20:42

And when we do that, we can also do this if there's um like 401ks or IRAs that where there was some money in there before the marriage, and then more was contributed after the marriage.

SPEAKER_00 20:57

Exactly. And we have to keep in mind that that transfer is a non-taxable event. It's only taxable to the spouse when he or she withdraws the funds.

SPEAKER_01 21:08

Right. So we don't have a taxable event when the non-participant spouse receives their money from the 401k or the IRA, correct? Correct. They get it into a retirement account in their own name. And then when they withdraw it, they pay the taxes on the part that they received. Is that correct? Right. Now, there's also a provision that allows people to take out money from uh qualified um retirement plans at the time of the divorce without a penalty. Is that correct?

SPEAKER_00 21:43

Correct.

SPEAKER_01 21:44

So let's say, and I've done this so many times, let's just say that the husband has a large retirement account and that the wife is going to get an interest in that retirement account and she needs cash for you know. To move forward, maybe to pay off some credit cards, maybe to buy a new car, maybe to buy a new house, whatever the case may be. She can take a one-time distribution at the time she receives the husband's qualified like 401k, right, and not pay a penalty if she's under the 59 and a half.

SPEAKER_00 22:22

Right. I was gonna say she needs to be 59 and a half.

SPEAKER_01 22:25

No, under 59 and a half, she can take the one-time distribution. Right. Right. And if you're over 59 and a half, there's never a penalty. Right. Right. So and then, but she will have to pay the taxes, correct?

SPEAKER_00 22:36

Mm-hmm. Yes.

SPEAKER_01 22:37

So it's a way of transferring cash to a spouse that may not be getting a lot of cash in a divorce.

SPEAKER_00 22:45

Right.

SPEAKER_01 22:46

And have you done this?

SPEAKER_00 22:48

Years ago.

SPEAKER_01 22:49

Okay. I I I've done it fairly often. And I I just recently did one where the client didn't have the ability to pay the attorney's fees at the end of the case. Um, so what we did is is that we made sure that she received enough of a distribution from the retirement account to cover attorney's fees. Um, I had another one recently where um it went the other way. What the judge did, which I thought was very unique, um, was that she ordered the husband to pay the attorney's fees of the wife, and he didn't have enough cash. So she ordered more retirement money transferred to the wife. So the and then allowed the wife to take it out of the retirement account without the penalty. And it was really from the husband's share of the of the retirement account.

SPEAKER_00 23:38

That is unique.

SPEAKER_01 23:39

So it it worked out where everybody was happy. The wife got her attorney's fees paid by her spouse. And at the same time, the husband didn't have to go and beg, borrow, steal, or you know, take out a loan, you know, to pay those fees. So you know, there's a lot of different things that can be done with retirement accounts.

SPEAKER_00 23:57

Sounds like a good remedy or way to get to it.

SPEAKER_01 24:00

Right. And there's a lot of things that can be done with retirement accounts at the end of a case, right?

SPEAKER_00 24:04

Yes.

SPEAKER_01 24:05

And sometimes what we do is we offset like the house. If one party wants to keep the house and the other party has retirement money, we give them more of their retirement money to offset the value of the house to get to a equitable division, correct?

SPEAKER_00 24:21

I did that recently where we did not divide many of the retirement accounts because it necessitated quadros, letters of direction, a lot more work, whereas we just gave her two of the whole assets.

SPEAKER_01 24:34

Yeah. And so there's a lot of different ways that you can divide assets when you get there, correct?

SPEAKER_00 24:39

Yes.

SPEAKER_01 24:39

Okay, so let's go back to our balance sheet. So we listed the assets, we determined whether they were marital or not marital, and then we've now put values on them. Is that correct?

SPEAKER_00 24:49

Right.

SPEAKER_01 24:49

So, and we talked a little bit about then how you divide it, how it does not have to be equal. Um, but the next part of that would be coming to a consensus on how those assets get divided, right?

SPEAKER_00 25:02

Right. You got to get to a meeting of the minds, as they say, to see how to divide the estate. If you can't determine how to do it amongst yourselves, a lot of times a pretrial with the judge to get some recommendations on how to divide assets is warranted.

SPEAKER_01 25:18

Aaron Powell And pretrial is when the parties or the lawyers go back and talk to the judge and give the judge kind of a nutshell synopsis of the case, and then the judge makes recommendations as to what the judge believes he or she would do if the case was before them on trial, right?

SPEAKER_00 25:37

Aaron Powell Exactly. And usually you got to go into the pretrial with a pretrial memo that you've previously tendered to the court so they know what the case is about.

SPEAKER_01 25:47

And what your can't help draft that pretrial memo.

SPEAKER_00 25:51

Well, the client reviews it for accuracy, and some clients do help draft while others just review and approve.

SPEAKER_01 26:01

And some clients become problematic and and want to write their own thesis to the job.

SPEAKER_00 26:08

Right. You don't want to overlawyer your case in that fashion by adding another non-attorney to it.

SPEAKER_01 26:14

Right. And we've all had this situation where clients want to be involved, okay, in all of this. And where I think clients need to be involved on a certain level. Have you seen cases where the client has been overly involved in the preparation of the balance sheet or the pretrial memo or many of these risks?

SPEAKER_00 26:42

Absolutely. And you gotta strike a balance as to what is readily usable and easily definable, and and sometimes if you meddle too much in it, the lawyer does know best at the end of the day.

SPEAKER_01 26:56

Yeah. And I I think we all know that um, you know, there there's the judges, and I think we said this the other day, you know, the judges are there to give you a decision. They're not there to do what people want as justice. So that you're not going to write a a pretrial memo that is sitting there telling the judge all the bad things that the other side did or all the terrible things that went on during the marriage, because most of this is just not relevant to what the court wants or needs to hear.

SPEAKER_00 27:32

At the end of the day, Illinois is a no-fault state. So while you may want to get your pound of flesh, it's you don't get much traction uh uh from it.

SPEAKER_01 27:42

Yeah. I mean, now there's exceptions to that, which is um like you know, if there's domestic violence, I mean, that might be important to point out to the court.

SPEAKER_00 27:53

Sure.

SPEAKER_01 27:53

Um, and then we get into dissipation, which is one of the bad acts that the courts are interested in, and that our statute actually says they must consider. Is that correct?

SPEAKER_00 28:06

Absolutely. It's the expenditure of marital funds during the marriage for purposes unrelated to the marriage.

SPEAKER_01 28:14

And when you say during the marriage, that includes the separation, correct?

SPEAKER_00 28:17

Yes, and a lot of times there's a lot of dissipation you can find there because one spouse or the other leaves town, takes up with a girlfriend or boyfriend, and starts on a spending spree.

SPEAKER_01 28:31

Right. So any sums of money spent on a third party, like a boyfriend or girlfriend, you know, it is any other significant other or dissipation.

SPEAKER_00 28:42

Right. I've I had one recently where the husband claimed that he owed his mother over a hundred thousand dollars, and after we filed, he gave her a hundred thousand dollars. So we had to go in and get the money back.

SPEAKER_01 28:55

Right. And, you know, we've we've both had cases where somebody has a significant other and they're they're taking them on vacations, they're buying them gifts, oftentimes very expensive gifts. Um, and all of that is dissipation, correct?

SPEAKER_00 29:13

That's all dissipation. Gambling is historically dissipation, drug use, alcohol use, those types of things. Yeah. Can be a dissipation.

SPEAKER_01 29:23

So okay. So now we say that one of the parties dissipated um $100,000. Okay. What does that mean?

SPEAKER_00 29:32

If we're dividing the estate $50-50, he'll owe her fifty thousand dollars from that dissipated hundred. So it's another line item on the balance sheet.

SPEAKER_01 29:43

So it's as if he already got a hundred thousand dollars of assets. Exactly. And they're just not there anymore.

SPEAKER_00 29:49

Right.

SPEAKER_01 29:49

So that goes on the balance sheet, and the wife is entitled to her fifty percent of right.

SPEAKER_00 29:54

We we have to make the wife whole in that regard.

SPEAKER_01 29:57

And the theory is is the other fifty thousand was his money to spend as he chose.

SPEAKER_00 30:02

Right.

SPEAKER_01 30:02

And that but he it's gone. So he's now a hundred thousand dollars down on what it's a lot of times.

SPEAKER_00 30:08

We give advice at the outset, it just makes the case murkier, if you would. Um, it makes it more difficult to get through because emotions come about when you know one of the spouses is whining and dining, a new significant other. Same with don't post on Facebook or Instagram, just shut down your social media when you're going through a divorce. It doesn't help to get a case settled.

SPEAKER_01 30:35

It really does. And, you know, what you forget is that people can get to it. So, I mean, I have my staff looking at the other party's social media all the time to see the partying, to see the new significant other, to see anything else that they may be posting um that may lead to dissipation or to other Right.

SPEAKER_00 30:56

You could find good evidence on a Facebook page and from posts that one of the parties is doing.

SPEAKER_01 31:02

Instagram, any of them. You know, it's all there, and you can find it and you can it use it, correct?

SPEAKER_00 31:08

Right. It's a good research tool.

SPEAKER_01 31:10

It's a good research tool, and it can be evidence, right?

SPEAKER_00 31:13

Oh, absolutely.

SPEAKER_01 31:14

We get it all the time where no, I wasn't with that person, you know, or no, I wasn't there. And now you've got a Facebook or Instagram or some post on the beach having a cocktail.

SPEAKER_00 31:25

Right. Yeah. Exactly.

SPEAKER_01 31:26

With the significant other things. And we've all seen that. The judges have all seen it, and we all know that it goes on. And so posting is just not in your best interest. You know, I don't want to talk too much about parenting because we're talking about assets, but another reason not to post is stop posting your little children on your Facebook and Instagram. It's just not appropriate. Um, people can see it, it can be used against you in a custody, you know, parenting case. Um, just not a good look, you know, to post a family photo once in a while, there's nothing wrong with that.

SPEAKER_00 32:03

Right.

SPEAKER_01 32:04

I I had a case where the wife was an Instagram influencer.

SPEAKER_00 32:09

Influencer, yeah.

SPEAKER_01 32:10

And she was posting every day, you know, she was staging her kids. And it was like, why are you doing this? And why do all these strangers have access, know who your kids are, what they look like, where they hang out, you know, all these things that maybe aren't appropriate.

SPEAKER_00 32:27

Um, and then the comments become inappropriate.

SPEAKER_01 32:30

Right, right. So, you know, just our our advice is to just don't post on social media when you're going through this. You can resume when it's final.

SPEAKER_00 32:39

Right.

SPEAKER_01 32:39

Um, you know, just make sure that any posts are bland and that. So um, okay, so we talked about dissipation and we touched on reimbursement earlier, but let's go back to that. So the statute provides that if one estate, meaning marital or non-marital, contributes money to the other estate, either marital or non-marital, right, that they may be entitled to reimbursement. Is that correct?

SPEAKER_00 33:10

Right. You gotta c prove by clear and convincing evidence the sums that have been tendered to the other estate in order to get it back. But yeah, that could be a big ticket item.

SPEAKER_01 33:21

It can't. So you've got like a situation where maybe the um husband took money from his non-marital uh funds and you know, put them into a joint investment, is that correct?

SPEAKER_00 33:37

Right. And that's a good example because then it's transmuted into marital property. Right.

SPEAKER_01 33:43

So now it's transmuted into marital property, and the issue becomes was it a gift from the husband to the marital estate, or should he be reimbursed, should his non-marital estate be reimbursed for that investment?

SPEAKER_00 33:58

Right. A lot of times we get the answer it was for estate planning purposes, which usually doesn't fly if it's just a gift to the marriage.

SPEAKER_01 34:07

And but a gift to the marriage, you know, gifts have to have a donative intent, an intent to never receive it back, right, um, and a few other factors. Is that correct?

SPEAKER_00 34:18

Correct.

SPEAKER_01 34:19

So if you can show that that wasn't your intent, you could possibly get reimbursement, correct?

SPEAKER_00 34:24

Right. It's called an under 503 C2 is what we refer to that as.

SPEAKER_01 34:30

Okay. And under 503 C2, there is a a part that says that if the transfer was for estate planning or other financial planning purposes, is that correct? Yes. So something along those lines would be I took my non-marital and I put it into a trust and I named my wife as you know, the the irrevocable beneficiary, for instance. Yeah, something like that. And it was clearly just done for state planning purposes. So you could, in fact, get that back. Is that correct?

SPEAKER_00 35:06

You could try.

SPEAKER_01 35:07

Yeah, well, an irrevocable trust is gonna be hard.

SPEAKER_00 35:10

Yeah.

SPEAKER_01 35:10

You know. Um, but if you did it for it, you know, we I see it all the time where people go to accountants, they go to financial advisors, and these accountants, these financial advisors believe that these people are gonna remain together forever. So they start making recommendations of, well, let's transfer this asset that belongs to you over to her or from her to you, you know, for these tax purposes. Um, and now the parties get divorced. Um, you've got to trace that and then make the claim of reimbursement that it was only done for these accounting purposes, right? Tax purposes, right? Hard to prove.

SPEAKER_00 35:49

Hard to prove.

SPEAKER_01 35:50

Okay.

SPEAKER_00 35:51

Um keep your non-marital, your non-marital.

SPEAKER_01 35:54

Right. That's it. It's the simplest answer, but unfortunately, not everybody watches our podcasts.

SPEAKER_00 36:00

Not yet.

SPEAKER_01 36:01

We're gonna keep having people walk into our office with these situations. Um, and that, and I mean, it should be out there. It isn't out there. People don't know this. They believe their accountant or financial advisor or state planning lawyer knows what they're doing. But these people are not prepared to prepare you for a divorce, correct?

SPEAKER_00 36:22

Correct.

unknown 36:23

Okay.

SPEAKER_01 36:23

So, Bob, you made a comment earlier about how one party or the other might want to keep the house, okay, or a particular asset. Remember that? And I remind me of the Ja Jacques Gabor quote of I'm a great housekeeper. I always keep the house every time I get