Mopping Up After the Divorce

January 11, 2016 § 2 Comments

What do you do when the divorce trial is concluded, the final judgment has been entered, and the post-trial motions have been disposed of? If there’s not going to be an appeal, you just make sure your bill is paid, shake your client’s hand, usher him to the door, wish him luck, say farewell, and shut the door behind him, right?

Well, not exactly.

Do you know whether your client still has his ex-wife named in his will? What about as beneficiary of his life insurance, or survivor on his IRA or 401(k)? Does he still have his ex as POD or survivor on any checking or securities accounts?

I read an article written by a financial advisor recently in which she related an encounter with a newly-married couple, both of whom had been divorced several years before. Both husband and wife had wills that still named ex-spouses as beneficiaries, and the same with life insurance and retirement accounts. When she asked them why they had not been changed, both replied that no one had advised them that they should.

A case in my court recently brought up a similar problem. The wife in the divorce case insisted that she owned the marital residence because the PSA in her 2007 divorce (more than 8 years ago) provided that her ex would execute a special warranty deed conveying his interest to her. Only problem: he never did. So, since May of 2007 she has remained a joint tenant with right of survivorship with that man. If she had died before he tended to that little bit of finish-work, her estate would have to pay another lawyer to do what her divorce lawyer should have done in the first place, and it probably would have involved courtroom billable hours.

Years ago, a man hired me to obtain a QDRO to divide his 401(k) account. He had represented himself in the divorce that took place nearly ten years before. When the divorce was final, he had asked the lawyer who represented his wife how to go about getting the retirement account divided. The lawyer pointed out that he did not represent him, and virtually slammed the door in his face. When the client at last decided to get remarried, he thought that it was time to get the matter tended to, so he hired me. Here is how the PSA read:

The parties agree that wife shall receive the sum of $60,000 from Husband’s 401(k) account.

That was all it said. [For a post on what that 401(k) language should have included, click here]

So we filed a petition for the court to enter a QDRO for her to receive exactly that — $60,000. After being served with process, she went back to her divorce lawyer, who called me and pounded the table, insisting that she was entitled to ten years’ worth of interest. I pointed out that the agreement he had drafted did not have a time frame for payment, that neither party was obligated by the agreement to prepare a QDRO, that there was no interest provision, and that the only definite thing about it was the amount. He called me back a few days later and said his client was willing to settle for the $60,000, and they signed the QDRO, which was entered and the matter finalized. For ten years my client earned money using his ex’s money. Had her lawyer acted in her best interest, he would have gotten that QDRO entered immediately after the divorce judgment.

You might well ask, as I did when my client first hired me, why was his ex not screaming for her money? Well, in the ten years after the divorce she asked him about once a year if he still had her money. She was satisfied with his answers, but apparently no one ever advised her what she was losing by not getting that QDRO entered.

You might also inquire whether my client was unjustly enriched. I would agree that he was, indeed, enriched, but not unjustly so. He did not sleep on his rights. He did not draft the agreement. It was not his obligation to calculate her separate interest. She was wise to want to settle for the principal sim, because if she had wanted to obtain a court ruling that he had been unjustly enriched, and directing him to disgorge any interest received on her money, she would have had to pay the attorney to pursue it, and likely would have  had to pay a CPA to calculate the interest and testify as an expert. After paying those folks, she would be lucky if she got to walk away with the $60,000.

Another nightmare scenario involves credit cards. I represented a man in a routine irreconcilable differences divorce. The PSA provided that each would pay the debts in his or her own name, as well as debts incurred in the name of or against the credit of the other. Thank goodness for that specific language, because he came in a year or so later with a letter from a credit card company reporting that an account in joint ownership was in default and making demand on him to pay more than $10,000. Turns out that shortly before the separation his wife had opened one of those accounts the company had solicited by mail, signing her husband’s name, and kept the account concealed from him. Then, after the divorce, she used it to supplement her income. We notified her that she had so many days to pay the account in full or we would sue. She borrowed money from her family, paid it off, and the account was closed. My client’s credit rating took a hit, but that and a modest legal fee were his total damages.

Lesson learned: it might not be a bad idea in the course of a divorce case to have your client run a credit check.

All of this boils down to a simple professional consideration that I have mentioned many times here: When the case is concluded, your client wants to be finally done with it, and she does not want to have to pay another attorney to clean up after you.

Actually, many of these things can be tended to before the divorce is concluded. That deed can be prepared, joint accounts closed, wills changed, bills of sale signed, agreed QDRO signed by the parties, and so on, with the originals held in the lawyer’s file until the judgment is entered.

When you are through with the divorce, help your client through the aftermath. Make sure she revokes all wills naming the ex as a beneficiary. Make sure there are no financial assets not covered by the divorce judgment that are joint, or have survivorship provisions. Make sure that there are no outstanding joint debts not addressed in the divorce. If a QDRO or deed is required for your client’s benefit, get it done ASAP. People are dying every day. You don’t want one of them to be the person you need to finish up your work.


§ 2 Responses to Mopping Up After the Divorce

  • […] This case also highlights that you need to discuss with your divorce clients how to tidy up their affairs after divorce. They need to do a credit check to make sure there are no joint credit accounts of which they were unaware. They need to cancel all previous wills. They need to execute a cancellation of all prior powers of attorney and file the cancellation with the chancery clerk among the property records. They need to check and change life insurance beneficiaries as necessary. They need to close all joint banking and securities accounts. It’s an important subject about which I’ve posted here before. […]

  • […] A previous post talking about advising your clients in the aftermath of divorce is here. […]

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