Divorce Analysis Blog

Advanced Ideas About Divorce and Money

Divorce and Privacy in the Age of Facebook

One of the most remarkable changes to the divorce arena over the past few years is how social media tools such as Facebook and our paparazzi-obsessed society have been able to open doors into people’s private lives because of their divorce.

Notable examples include:

Jack Welch, CEO of General Electric: Based upon filings in his divorce case, he was challenged by GE shareholder activists for receiving unreasonably high compensation

Frank and Jamie McCourt, Owners of the LA Dodgers: Information found in divorce flings have jeopardized their ownership of the team

Barak Obama: He would likely not have won the Presidency had information about his opponents activity at swingers clubs not been publicized via a divorce filing in the Illinois Congressional contest.

From Wikipedia: Jack Ryan is a Republican from the state of Illinois who was forced to withdraw from the 2004 United States Senate race due to an alleged sex scandal involving his relationship with his ex-wife, actress Jeri Ryan.[1][2] His eventual replacement, Alan Keyes, would go on to lose the general election to State Senator and future President of the United States, Barack Obama.

Individuals often lose their well guarded privacy as a consequence of the divorce process. The question many of my clients ask me pertains to how they can maintain their family’s privacy and not end up with the social and financial shocks that happen because of the way others view their marriages and lifestyles.

The core of the problem rests with the fact that a divorce is a lawsuit which takes place within the legal system. The public has a constitutionally-guarded automatic right to see all documentation filed with the courts. This public airing of dirty laundry is especially risky in a divorce situation because your court filings will center around 2 major areas: children and how you raise them and money – internal processes that most families keep private. In these 2 areas, divorce requires DEEP disclosure of all the intricate details of a parent’s finances and behavior. Adding to this is the fact that your actions within the divorce process are also publicly available. For example, how would your employer view it if you were sent to jail for contempt of court because of something filed by your ex wife?

So who can obtain this information about your family life, lifestyle and financial affairs?

• General public curiosity: Neighbors and others who simply want to gossip or sell your story.

• Business/Political associates and foes: Mark Rich, the famed financier pardoned by Bill Clinton, was actually revealed via his divorce from his wife Denise. In fact Barak Obama might even owe his presidency to information disclosed in Gov. Ryans divorce which led him to drop out of the race (in which he was the most popular candidate in the history of Illinois), leaving his young opponent Barak Obama to win the seat in Congress!

• Your former spouse: postings on facebook, myspace and dating sites have often been used in arguments that one parent or the other was either unfaithful or was derelict in their parental duties.

So what can be done to increase your level of privacy?

1) Consider a new venue: often switching the filing location can isolate the divorce from a curious public
2) Ask the court to seal sensitive records.
3) Hire a private judge
4) Use a collaborative or mediated process.

At Divorce Analysis we apply all of the above and more to help clients protect their privacy.

August 18, 2011 Posted by | Alimony, California Divorce, Child Support Calculation, Community Property, divorce, Prenuptial Agreement, Uncategorized | , , , , , , , , | Leave a comment

Divorce realities #1: Divorce lowers standards of living

Over the next few days and weeks, I will post some “divorce realities”.  These are simple facts that I have learned from working in many high net worth divorce cases.  While they are simple and short, they are powerful in that they apply to most situations.
Divorce Reality #1:  Your standard of living will, most likely, drop, the only question is: how much?

Married couples share costs for big items such as rent/mortgage, cars, even cable TV. There are also intangibles such as child care time or time spent cleaning the house. Once couples separate, each party will need to pay for these necessities separately, ie on their own. In the absence of more income, these costs will comprise a larger slice of each person’s income.

Consequently after a divorce, one should plan for higher costs, and, if living on half (or less) of the previous income, should consider budget cutting measures. Others do well with increasing their earnings by retraining or re-educating themselves.

Some people derive hope from laws saying that divorcees have a “right” to live at their prior standard of living. In fact these laws are themselves divorced from the economic reality that this “right” is impossible for both parties to make into “reality”. The true “reality” is in fact, exactly the opposite.

March 15, 2011 Posted by | Alimony, California Divorce, Child Support Calculation, Community Property, divorce, Uncategorized | Leave a comment

Banking on a divorce?

When I was at Harvard Business School, we sometimes would socialize with students at Harvard Law School – the future elite legal minds of the world including people such as Barak Obama and Supreme court justices.  One common feature of my friends in law school was their expressed disinterest in careers involving math.  And these are the elite ones.  After graduating, not only did I notice that none of these great legal minds went into family law (which is why a good attorney is hard to find) but more than that, the attorneys in family law refused to do even the simplest math.  They get around doing math in two ways:

1)       Formulaic doctrine:  Divorce laws are often written like the old “story problems” from math class in elementary school.  You may recall that these were the most difficult ones.  And yet, professionals with no interest in doing math are asked to solve them for clients in divorces!  Worse yet, if you actually do the math, you find that the equations cannot even be solved by folks with PhDs in math!  That is why many of the divorce outcomes seem random and unseen.

2)      CPAs:  CPAs are fine at adding and subtracting but they are not well trained in the world of analysis.  The difference can be seen in a simple example.  Most people are familiar with balancing their checkbooks – this is the domain of the accountant.  At the same time, most individuals must buy a house or rent an apartment.  This requires analysis of questions such as “how much can I afford to pay” and “would I rather have carpet or hardwood floors?”  Accountants count, which means they are very good at looking at the past and balancing numbers.  The problem is that most of the problems you encounter in a divorce require analysis (in fact in some cases you do have to evaluate whether to buy your house from your spouse!).  It is in this area that accountants fall short.

So how do we address this problem?  Learn from the pros!

Divorce, in many ways, is a business transaction; more similar to a corporation that wants to merge with another or, spin off a subsidiary.  For example, many are familiar with the fashion firm Prada.  When they wanted to spin off a part of the company, now called Mui Mui, who did the CEO call?  His attorney?  No.  His accountant?  No.  In fact, one thing we learned at Harvard Business School was that there are 2 types of professionals you should call first to make sure you capture the best of such a business transaction.  They are: management consultants and investment bankers.  At their best, these professionals have the experience and the analytical capability to maximize their clients’ financial benefits from the transaction.  So if a divorce is analogous, why do people call accountants and attorneys first?  Perhaps it is because Hollywood tells them to do that.  If they are serious about preserving their wealth, professionals who can give skilled tailored financial advise are the best first move.  Divorce Analysis is not an accounting or law firm, in fact, we stand as consultants and financial advisors giving highly tailored professional advice on the best ways to optimize the financial aspects of their divorce.

December 6, 2010 Posted by | California Divorce, Child Support Calculation, Community Property, divorce, Prenuptial Agreement | Leave a comment

Top 10 things to know about divorce and money

Divorce is usually about a person’s financial well being and their children.  Logically one should have strong advice about money and kids.  Surprisingly these areas are not taught in law school.  Therefore it is important to have expert advice from skilled individuals trained outside of the law.

The top 10 things to know about divorce and money:

  1. The couple’s net worth does not necessarily get divided in half:  most divorces end up at something other than 50%
  2. Both sides will  take a decrease in their standard of living
  3. You will be selling everything whether you like it or not
  4. There is no relationship between price and performance of divorce attorneys
  5. Private judges are not necessarily better than the public courts.  But sometimes they are
  6. Alimony (support) is, financially, a loan:  look at the repayment likelihood
  7. Two different settlements of the exact same amounts can have vastly different values
  8. The system places no value on risk – you can end up with lots of them (common risks—credit, investment, liquidity, tax, no recourse)
  9. Divorces almost always have tax implications
  10. The system, while “equal” can create cashflow assymetries that can sink you

Accountants COUNT, but the best decisions are made as a result of decision ANALYSIS.  CPAs are usually not forensic accountants:  Forensic accounting can mean many things.

June 10, 2010 Posted by | California Divorce, Child Support Calculation, Community Property, divorce | | 1 Comment