: Do you find people trying to conceal their
wealth?
Marvin: Sure.
Riesel: And how easy is it to find
assets that have been cleverly concealed?
Schaefer: Boy, if somebody really wants
to do it to you, and they have enough time . . . .: How do
you go about uncovering that?
Marvin: You have to do the tracing
routine. We have it, even in a small office like mine. I have a very brilliant
woman who’s a former Big 8 tax partner. And she’s full time.
Riesel: You need someone who will look
at the assets in each of your cases to see if there’s been a fall off.
Schaefer: Precisely. We do an analysis;
I’m sure all of us do the same thing. You look at the income, the expenses, the
assets. If there’s an unusual gap, you start searching.
Spiegel: One of the evolving areas is
electronic discovery. It’s just really beginning, and it’s going to be
enormously expensive. I’ve heard stories in a corporate litigation
context—millions of dollars are being spent. It’s just a matter of time until
that’s going to get into family law. : What does
that mean, exactly?
Spiegel: It means going in, getting
court orders authorizing you to go through not only my email, but [my spouse’s]
email for the last three years, and all kinds of issues. : How does
that affect how you counsel your clients?
Spiegel: Often, especially in custody
cases, people are so polarized they can’t talk, so they’re emailing everything
to each other. I tell them, "Make sure that you expect a judge is going to read
that email." I often edit their emails on a regular basis. You’d be amazed what
goes on, what they put in email when they don’t get that type of advice, and
it’s going to end up in front of the judge at some point. No thought is given
to: What if somebody looks at this?
Schaefer: About 80 percent of the time,
we can talk until we’re blue in the face and give them the best advice the four
of us could muster, and they’re going to ignore us anyway. : Well, it’s so emotional.
Spiegel: People who don’t communicate
well in a bad marriage expect that, all of a sudden, they’re separated, they’re
at war and their communications are going to improve.
Marvin: A lot of the damage is done
before they even come to see us—the emails between girlfriends and boyfriends,
those kinds of things. We just have to tell them that these could be subject to
discovery.
Riesel: Cell phone records. They’re
often a killer.
Schaefer: Someone once asked me, "What
do you think is the greatest source of business nowadays?" I said the BlackBerry
and email.
Marvin: And it’s all retrievable,
everything . . . and now the photographs.
Schaefer: I’ve got one that, if it ever
hits the newspaper, it will trip Detroit upside down. What these people sent
back and forth to each other, you wouldn’t want to look at. There’s nothing
really particularly provocative about it, unless you’re a first-year medical
student. And this is one of the highest-placed executives in the country.
Spiegel: One of the things I’ve learned
to tell people is: Don’t inadvertently destroy any of that stuff, because if you
do, you can create some major problems. You can lose things on the computer when
you don’t want to. If that happens, you can be subject to accusation that you
destroyed it. : You
mentioned trusts and the role that they can play. Do you ever find that the
older generation will establish, say, a generation-skipping trust in advance? Or
what’s the timing in terms of what’s allowed?
Schaefer: If it’s a legitimate trust
created by a nonparty to the divorce action, that is what it is. The court is
bound by that. If it’s really an irrevocable trust set up for legitimate tax
purposes or estate planning, the court’s bound by that. Our court says that if
it’s a trust, it’s irrevocable and you’re a beneficiary of it, to the extent
that you have access to that trust’s books and records, you have to disclose
them.
Spiegel: The cash flow from a trust is
up for grabs as far as child and spousal support in California. There’s a recent
case in California that said that recurring, regular patterns of gifts from
parents could be treated as though it’s income. : What does
that mean, recurring patterns?
Schaefer: It would be similar to a
situation if you had a lawyer who’d been making half a million dollars a year
and he said, "I can’t practice anymore, I’m 45 years old and I can only make
$50,000 a year." It’s likely the court would impute the $450,000 a year of
income to him for the purposes of support and alimony.
Riesel: The courts will do the same
with this regular and consistent gift that parents or grandparents have given
the spouse during the course of the marriage. If it suddenly dries up, the
courts are very suspicious.
Spiegel: It’s really unfair in that the
parent may want to make it in the context of an intact marriage, when some of
that money is going to the benefit of the grandchildren. But now the supported
spouse has got a new significant other, living with somebody else, remarried and
this money is going to the benefit of him or her.
Marvin: I think it’s also generational.
Today’s generation is much more involved. With really significant wealth, you
have the family offices that look after all family members.
Spiegel: It’s also highly, highly
likely that grandparents of this generation have been touched by divorce. It’s
not like 80 years or 50 years ago, where it happened to other people.
Marvin: Oftentimes the first suggestion
of a prenup doesn’t come from the parties who are getting married or their
immediate family, but as was said, an office manager calls and says, "OK, we got
so-and-so ready to do your prenup." "Well, what do you mean?" "Well, we’re not
going to allow anybody to see the books and records of our company." And then
that starts everything spinning.
Riesel: I think you put your finger on
an issue that families of wealth have to deal with: It’s not only at the time of
the divorce that assets are going to be divided. They’re going to have to let
the spouse’s forensics come into the family business or their own business and
muck about in their books in an effort to put a value on it. There are huge
issues the business owner faces at the time of the divorce.
Spiegel: The business can be held
hostage. Key employees can be tied up. Often that’s used as leverage to try to
extract a settlement. Trade secrets can be exposed.
Marvin: You’re required to sign a lot
of confidentiality agreements now, which we never used to do. The problem with
those is that they are supposed to be signed by whomever you’re outsourcing
these things to. And there are more and more people who are seeing these things;
if you sign the confidentiality, you get to see the books and records of the ABC
Corp. Not even the IRS has ever seen those books.
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