AVOIDING AN EXPENSIVE ERROR

October 12, 2010 § 1 Comment

Imagine having this nightmare: 

You represent the husband.  He has $376,000 in his securities account.  You negotiate a property settlement agreement by which the wife will receive $203,200 from the account, and he will own the remaining $172,800.  Couldn’t be plainer or more clear-cut.  A few months drag by before you finally get the QDRO drafted and approved by the court.  You ship it off to the plan manager, who calls you and tells you that the account is now only worth $204,000, and what exactly is it that you would like her to do.  At this point in the nightmare, you wake up in a cold sweat.

Unfortunately for the parties in In re Dissolution of  Marriage of Wood, 35 So.3d 507 (Miss. 2010), the nightmare was all too real.  The facts set out above are the facts in their case.  The former Mrs. Wood sued to collect her entire amount due under the agreement, and Mr. Wood took the position that sticking with the numbers in the property settlement agreement was an impossibility, and to grant Mrs. Wood her relief would produce an unfair and inequitable result.

Chancellor Dorothy Colomb ruled that the parties had actually negotiated an agreement whereby Mrs. Wood would receive 54% of the account balance at the time of the divorce, and Mr. Wood would receive 46%. 

In affirming the chancellor, the Supreme Court addressed valuation dates, impossibility of performance and canons of construction.  You can read the decision to get an appreciation for the complexity of legal issues that the draftsmanship created in this case.  

The cardinal point for practitioners, however, is best summed up in the court’s own language at page 515:

“As this case illustrates, incorporating an estimate of an asset’s value into a property settlement agreement can cause problems when the parties later try to divide the asset, and the estimate turns out to be incorrect or inaccurate.  Therefore, we make the following recommendations for the benefit of the bar.  Where the value of an asset must be estimated because of the inherently indefinite or fluctuating nature of the asset itself, we recommend the use of percentages when setting forth the asset’s intended distribution in a property settlement agreement. Where the value of an asset remains sufficiently concrete or static, however, we recommend the use of specific dollar amounts.”

Mrs Wood expected to get $203,000, and that’s what she negotiated for.  Instead, she got $110,160, or $93,000 less than what she expected.  The lesson is to think about what you’re doing and what could or might go wrong, and how you can guard against it.

MORE ANECDOTAL EVIDENCE ON PRO SE PROBLEMS

September 15, 2010 § Leave a comment

In the past week, I have three pro se divorces presented to me that illustrate some of the problems that people can create for themselves when they undertake to represent themselves.

Case 1.  A fairly standard no-fault divorce with no children, no joint debts, no joint property.  Husband gets the homestead that he owned before the marriage, and will pay wife for her marital equity.  The wrinkle is in a paragraph that provides that the parties will divide the husband’s “retirement annuity,” and allocating the tax liability between them.  When I asked the husband how he expected to accomplish it without a QDRO, he replied, to my surprise, that the plan administrator had already disbursed the money to the parties, and that his accountant had told him he could avoid the 10% penalty by addressing it in the property settlement agreement.  The agreement did include the phrase “Qualified domestic order,” but did not include any of the ingredients required to constitute a true QDRO within the meaning of the law.  I have no idea how the IRS will treat the parties’ home-made paperwork, but if they end up having to pay the 10% penalty, I would bet both of the following will be true:  (1)  Both parties will be unhappy; and (2) It would have cost a lot less to hire an attorney to ensure that it was either done right or the liability shifted to the attorney.

Case 2.  Property settlement agreement with no provision for custody at all, although a child is identified.  When I asked why there was no custody provision, the response was that the child is 18 and in college, and there does not need to be a custody arrangement, a statement with which I disagreed.  When I asked about the lack of any support provision, the response was that there was no need for support because the child is in college, another statement with which I disagreed, especially based on my own personal experience.  I did not bother to read the rest of the agreement, but if the property division was as incomplete as the child custody and support provisions were, I doubt it would have been “adequate and sufficient.”

Case 3.  A well-dressed young couple approached the bench.  Dad is holding a 2-year-old child, whom he is feeding with a baby bottle.  I find three shortcomings in the agreement.  First, although they agree to joint legal custody, there is no tie-breaker; you can’t have a committee of two, so who will have final decision-making authority?  Second, the agreement states that “both parties shall claim the children as tax exemptions.”  How will that work?  Do they mean that both claim both children in the same year, or that the exemptions will be divided between them somehow?  Sounds like another trip back to court to me.  And third, there is no provision for child support for the two children, ages 2 and 4.  When I ask mom about it, she says “I am not asking for any support.”  Well, I can’t approve it no matter what you want because I have to watch out for the children.   The husband proposed that the 3 of us should sit down and I could point out ways to fix their paperwork, but I demurred on the basis that I am prohibited from giving them legal advice, and even if I could, I could not advise both of them in the same case because of their competing interests.               

Neither of the cases with children had UCCJEA affidavits.

I previously posted on the problems of pro se litigation here.

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