April 9, 2019
Occasionally we come across language in divorce decrees that is written in a loose or vague manner.
The most important aspects of the intended award are outlined, but the details are not. Often this will lead to confusion when it’s time to carry out the decree. Let’s look at some hypothetical examples:
“Alison is awarded 50% of the joint brokerage account.” There are some key aspects missing here. First, on what date are we to value and apportion the account? Is it the date the decree is signed, the date it is approved by the court, or the date the account custodian receives the instructions? In a volatile stock market, there can be big swings in account values in a short amount of time. Confusion can arise even if a specific date is mentioned. If the decree stated “Alison is awarded 50% of the joint brokerage account as of March 17, 2019” the implication here is that if the account is worth more than that when the account is divided her ex-husband will retain the excess. If the account is worth less, than Alison is getting more than 50% of the current account value. Also, is Alison given one half of each position in the account, or can she choose specific holdings that equal 50% of the account? This is important when dividing a taxable investment account, since some holdings can have large gains that will be taxable in the future, while other positions might have losses that would reduce the person’s taxable income. A more explicit description might say “Alison is awarded 50% of the joint brokerage account as of March 17, 2019, with gains and losses from date of decree to date of division. Each position in the account will be divided equally with fractional shares awarded to Alison.”
Here is an example of a confusing alimony award:
“John Doe shall pay the sum of $3,465 per month as alimony when Jane Doe commences receiving her marital portion of John Doe’s pension with ABC Corp. Prior to that time, John Doe shall pay the monthly sum of $4,718 as alimony. When Jane Doe commences receiving monthly Social Security benefits, John Doe shall pay the monthly sum of $3,976 as alimony.”
So, what happens if Jane starts Social Security (in which case she is supposed to get $3,976 per month) but is not yet receiving John’s pension (in which case she is supposed to receive $4,718 per month)? What if Jane is receiving Social Security and John’s pension – does she get $3,465 or $3,976? This could have been clarified as follows:
“John Doe shall pay the sum of $4,718 per month as alimony until Jane Doe begins receiving Social Security or John Doe’s pension. When Jane Doe commences receiving Social Security John Doe shall pay the monthly sum of $3,976 as alimony. When Jane Doe commences receiving her marital portion of John Doe’s pension with ABC Corp. John Doe shall pay the monthly sum of $3,465 as alimony. If Jane Doe is receiving Social Security and her marital portion of John Doe’s pension, John Doe shall pay the monthly sum of $3,465 as alimony.”
Confusion and difficulties may arise if the parties agree to sell the marital home at a future date and allow one spouse to live in it until that date. Here we advise being very specific as to who is paying the mortgage, property tax and home insurance, as well as current and future maintenance. We also advise having specific language obligating the couple to maintain the house and seeing to repairs in a timely manner.
Being clear and specific may mean drafting a longer document that takes more time to complete, but this can save time and money for the parties, account custodians and others when they attempt to carry out the instructions.