Worth: How large a risk does divorce pose to wealth today versus years ago? For many men, divorce was positive, financially speaking, because the man was the one who brought the money to the relationship and then had more control of it afterward.

"I JUST charged—I’ll admit it—$50,000 to do a prenup on a very wealthy young man whose father is one of the wealthiest people in the country." —John F. Schaefer

Sheila Ginsberg Riesel: Yes, it used to be that title controlled. And at the end of a marriage, if the assets were in a party’s name, that party walked away with those assets.
Morton E. Marvin: Connecticut was never a title state—at least during my life as an attorney—so title doesn’t mean anything these days. But we have some uniquenesses vis-à-vis New York laws. We don’t have a freeze date, which you do. We do not value licenses or celebrity status. We do not recognize separate property. We also don’t recognize inherited property, though that is starting to change a bit.
Riesel: That’s all the more reason why prenups in Connecticut would be a critical thing for people to think about.
Marvin: Connecticut passed a premarital statute in ’95. And our Supreme Court just came down in a very famous case in which they basically said, "You sign it, we’ll enforce it."
John F. Schaefer: Historically, premarital agreements were found to be void if they promoted or facilitated divorce. They were useful in protecting assets in the event of a death, but in the event of a divorce, they were historically found to be—because the law abhors divorce, supposedly—void. That has changed dramatically in the last 20 years.
Riesel: Exactly. Prenups, certainly in New York, are very honored and accepted. If your prenup passes basic requirements of disclosure and counsel, and no-fraud and duress, it is going to be enforced. You have the opportunity to protect your assets going into a relationship. You just have to be careful not to destroy the relationship before it starts.
Marvin: That’s why I don’t like premarital agreements.

Worth: Really?
Marvin: I am not a big proponent of premarital agreements for young people who are getting married today. I won’t do them. I think they are valid for a person who’s marrying for the second time, and who has a large estate and wants to protect children and grandchildren. I will consult on them, but I will not do them. I usually refer them elsewhere.
Riesel: I think when the young children of the wealthy get married, there’s a real concern that Mama and Pop or Grandma and Grandpa have about preserving the family wealth in that context.
Schaefer: What do you charge for one of those, Sheila?
Marvin: Not enough.
Riesel: I think that’s the right answer. I’ll be candid and tell you I find them the most difficult agreements to do. A divorce is easy—the relationship’s over; I’m doing the best I can for my client.
Schaefer: We don’t have any crystal balls; it’s tough. I just charged—I’ll admit it—$50,000 to do a prenup on a very wealthy young man whose father is one of the wealthiest people in the country. I represented the wife, or the wife-to-be. These kids are in their late 20s. Think of the risk I’m taking by trying to forecast how long this marriage is going to last and what she’s going to get if it fails.
Riesel: It’s a nightmare. They really are very difficult.
Lance S. Spiegel: Ten, 15 years ago, I litigated a prenuptial agreement. The attorney who represented the wife was on the stand for five or six days. The attorney who represented the husband was on the stand for five or six days. And they can’t charge. That story is one I often use to justify why I charge those types of fees.
Riesel: You’ve got to report it to your malpractice carrier as soon as you sign off on it.

Worth: Is that why you’re not interested, Mort?
Marvin: No. I’m just not a proponent for youth. I understand what Sheila said about parents and grandparents, and I think there are other ways you can protect those assets. Trust-and-estate planners can protect those assets. That’s the advice I give to clients. As you’re going into this marriage, are you marrying for love or for money? Take the money aspect out of it, and then you don’t have to worry about it.
Like John said, I don’t know five years from now whether she should get $100,000 a week or $5 a week—and why shouldn’t she benefit from some of the growth that’s been accumulated during the marriage, notwithstanding that it came from premarital assets or inherited assets? If you’re going to take the concept of marriage as a partnership, then the partnership has to have some validity.
Schaefer: If they’ve been married for five years and he’s got $200 million, she’s going to get something.
Spiegel: It’s an emotional minefield. It turns into an "I would never do that to you" discussion. Lawyers who are trying to protect their clients get blamed for it.

Worth: Have you seen it do damage to relationships?
Spiegel: I don’t think it’s ever forgiven. Traditionally, it’s the guy who wants it. I’ve seen cases where it didn’t happen because the conflict was so great, and then, when the divorce came: "I never forgave him for bringing up the premarital agreement."
Marvin: I’ve seen people not get married on account of it.
Riesel: While I agree with Mort that in the situation I proposed, you can do it another way, there are situations based on New York law where you can’t be protected other than in a prenup from valuing an enhanced earning capacity. That’s something that really gnaws—that they not only have to divide their accumulated assets, but when you have to pay your spouse out for your enhanced earning capacity, it’s really your earning power going forward. You don’t have an asset, really, to divide, there’s no bank account you can split up.
Schaefer: And it’s the same assets that generate the income that you’re paying the alimony and the child support and all the other expenses out of, so it’s truly a double dip.

"PEOPLE NEED to take swings at one another. They need that opportunity to feel that they’ve had some recompense for the wrongs, the infidelities." —Sheila Ginsberg Riesel

Worth: Would you say divorce has always been an expensive proposition, or has it become more expensive for people of great wealth?
Marvin: I think divorce has gotten expensive regardless of wealth. Just what you have to do now to protect your client and what’s involved has become a very expensive ordeal. In most of our cases, I assume we’re going to have at least one or two appraisers or evaluators involved. We’re going to have trusts-and-estates people. The total cost is just rising.
Riesel: But it’s not just cost; even in equitable distribution states, you now divide the entirety of the marital assets. And in a long marriage, where there are children, the likelihood is you’re going to divide those assets 50-50, or close to it.
Spiegel: In the real world, people cannot afford this kind of litigation. And in the world that probably the four of us live in and practice in, where the resources are available, it tends to become very, very expensive. The complexity of the issues, what we have to deal with versus what the old-timers dealt with in the ’60s, it’s not comparable.

Worth: And the roles of men and women have changed. Isn’t the woman sometimes the one with more money?
All: Oh, sure.
Schaefer: That’s the situation where you say to a woman, "You’re going to have to pay your husband alimony."

Worth: Is that more common today?
Riesel: I’m certainly seeing more and more women being the moneyed spouse. And it’s not only the financial cost that they have to come to grips with. When their spouses have become more of the child-rearing caretaker, women who have made substantial wealth are now faced with losing physical custody of their children.

Worth: What if there was a nanny?
Marvin: Well, you weigh nanny against nanny.
Spiegel: Nannies tend to be the best witnesses. They often see what’s really going on.

Worth: What are some of the other special circumstances for people of wealth? How about access to business contacts and social contacts?
Marvin: I find it in the foundations they have established. The foundations are very important assets, because people get tremendous benefits from being involved with them. How you value and divide them can be very contentious.
Riesel: Country club memberships can also become contentious, because there is often not the possibility of both spouses remaining members.
Schaefer: You run into questions about whether or not a membership is transferable, or whether a court can order a club to transfer the membership to one spouse.
Riesel: I found the best way to handle it is to divide the assets in the foundation. It can be done from a tax perspective; it’s not too difficult and that gives each of them the opportunity to control what’s done with the assets.
Schaefer: Sometimes there’s a divergence of opinions as to what the goals of the foundation would be. We’ve seen situations when foundations become a problem, then you can spin off or create a different foundation as part of the equitable distribution.

Worth: 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 . . . .

Worth: 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.

"I AM not a big proponent of premarital agreements for young people who are getting married today." —Morton E. Marvin

Worth: 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.

Worth: 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.

Worth: 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.

"I’M SEEING more of a scorch-the-earth mentality—people who just don’t care if nothing’s left. Let it all go to the lawyers." —Lance S. Spiegel

Worth: 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.

Worth: 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.

Worth: We talked about prenups. What about postnups?
Marvin: A postnup is an agreement that you make after you’ve gotten married. I don’t do postnups, either. That’s even worse than a prenup because you’re really saying, "Now I’m getting divorced unless you do A, B and C."
Spiegel: There’s a recent case in California that gives some insight to this subject. Husband had an affair. Wife demanded a postnup. The postnup had a provision that, if he ever did it again, it was going to be a liquidated damage provision—and, of course, he did it again. They went to court to try to enforce it. The court said, "We’re not going to enforce that provision because we’re a no-fault state and this is an effort by the parties to inject fault in their marital settlement, so we’re not going to permit it." Can’t fault her for trying.

Worth: Are there any other new tools our readers should consider?
Spiegel: California child support in a high-income context is crazy. It makes no sense. Our system is based upon a computer formula. Basically, you put in Dad’s income, Mom’s income and how much of the time the kids are with each of them. In the real-world cases it helps, because 99 percent of the time, it kicks out a number that’s not enough. But in the high-income context, you put the numbers in, and they come up with child support numbers that are just—$80,000 a month for child support.
The fight becomes: Is there an opportunity under our statute to opt out of that guideline? And the argument is: Is the person an extraordinarily high earner? And if they’re deemed to be an extraordinary earner, then the guideline doesn’t apply. An extraordinarily high earner in Los Angeles County may be somebody making $3 million a year. In another county, it may be someone making $750,000.
But the new twist is that there’s an effort to say that $80,000 isn’t enough. We want to impute additional income, because Dad has a $9 million art inventory that isn’t generating any money. So we want to say: If it was sold and you invested that money, here’s a return, and impute additional income.
Marvin: I don’t want to be on the end of that one. Whoo.
Spiegel: The pendulum has swung in California in child support. Thirty years ago in paternity cases, Mom and the kids would take a bus across town. Mom would get out, point to the big mansion on the hill and say, "That’s where your father lives." And they’d go back to the other side of town on the bus. Now Mom says, "I want the house next door."

Worth: Do you find there are more men who want custody today than there used to be? And not just as leverage in the situation?
Riesel: I’ve seen more fathers who have a sincere interest in being an active parent. The courts in New York don’t have a presumption of 50-50 the way I believe some states do. I’m seeing more judges recognize that fathers play an active role in the raising of their children. That doesn’t end at divorce.

Worth: Is arbitration a way some people can avoid divorce? Is there more of that going on?
Marvin: Well, you can’t avoid it, you just avoid the necessity of having court intervention. But you still have to, in my state, commence an action, even if you go to arbitration, I’m assuming.
Riesel: There is a movement toward alternate dispute resolution, which is the catchall.

Worth: That involves a psychologist and others.
Riesel: Or the whole panoply of methodologies of avoiding a court. Mediation and something called "collaborative law" that some of us have been involved in. I think the foundation for looking at these alternatives is the recognition that resolution by a court is perhaps the least satisfactory way to resolve a matrimonial dispute.
Schaefer: The thing that’s troublesome about arbitration is, your client says, "Well, I’d like to not have this particular judge hear my case, for a variety of reasons." So you select an arbitrator or three, and when the decision comes down, you’re done. The lawyer’s taking on huge responsibilities.
Spiegel: One of the things that I’m seeing more, and this is an expense-related item, is a scorch-the-earth mentality—people who just don’t care if nothing’s left. Let it all go to the lawyers. That’s when the alternative dispute resolutions and the mediations and all of that, you want to try to use those options, especially in those kinds of situations.
Many times cases get to trial because there’s a good-faith difference of opinion; it feels clean and you have to do it. Most of these cases can and should be resolved. But when you have a scorch-the-earth mentality, it’s impossible.

Worth: How do you advise clients when they feel really wronged?
Riesel: Get over it, essentially. I think we would all agree that cases come in and you look at the assets and the child-related issues and we could, each of us, without our clients, sit down and settle it that afternoon. But that rarely happens because of the emotional issues. Every case has a life of its own; it needs to play itself out a little bit. People need to take swings at one another. They need the opportunity to have their story told, to get the feeling that they’ve had some recompense for the wrongs, the infidelities. That’s human nature.
Marvin: Well, I often say that divorce is the death of a marriage and you have to mourn it.
Schaefer: In an actual death, the spouse didn’t have anything to do with it, typically—unless she pulled the trigger. But typically, if somebody’s spouse dies, there’s a grieving process. With divorce, there’s a lot of failure associated with that. Ego comes into effect.

Worth: You’re always having to navigate that, but at the same time try to get beyond it, to calm clients down.
Schaefer: But you can’t do it in a matter of a couple of days or 30 days or 60 days. Sometimes it takes the better part of a year before somebody’s ready to move on.
Marvin: Some courts put a timetable on it. I don’t think any divorce can be resolved within a specific time frame. They should never force you to go to trial until the time is right. Lawyers know when the time is right.
Riesel: I once was only able to settle a case by getting a judge to agree that he would let the wife get on the witness stand to tell her story. She told it in one sentence that went on for 45 minutes. The court reporter was typing so quickly, I thought her fingers would fall off. This woman could not settle until she had an opportunity to tell the story.
Marvin: One other issue, when you asked if we see things differently. You’re seeing a lot more grandparent issues and a lot more relocation issues now.
Schaefer: There are people who aren’t the primary custodial parents who are relocating, and that creates all kinds of problems with visitation, with the ability to be involved in a child’s daily life. We’re also seeing grandparents’ issues. Grandparents still don’t have rights to vis-à-vis visitation, and it becomes a problem.
Riesel: Living as we are in a global world and representing the people that we do, they have job opportunities all over the world. If they are the custodial parent and they have a legitimate reason for wanting to move to Dubai, that creates painful scenarios that require a real Solomon to try.
Spiegel: Some family law judges describe relocation as the closest thing a family law judge has to the death penalty. There are a lot of people who say, "I don’t need him or her anymore and neither does my kid."
Marvin: Alienation now becomes a very popular thing, which is probably one of the most difficult things to prove to a judge, but it has a horrendous impact on the children.

Photography by Thomas Hart Shelby.

Additional Information
 Legal Land Mines
 Absence of Malice