Sometimes "Flipping the Coin" Works Best

Kate Walsh, star of the television show Private Practice (and formerly Grey's Anatomy), and her ex-husband have adopted a long-time but not-often used approach to dividing the community property.  The Stipulated Settlement Agreement provides:

"One-half of the community property furniture and artwork to be divided by alternating picks after the flip of a coin to determine who will pick first".

To read more about Kate Walsh and her divorce, check out the USA Today article "Kate Walsh, Ex To Divide Assets by Flipping a Coin". 

Believe it or not, sometimes this is the most amicable way to divide up personal property, especially when it does not have much value.  Both parties alternate in choosing until nothing is left.  Kind of like picking dodgeball teams.  For more information on community property, contact Arizona lawyers, Nirenstein Garnice Soderquist PLC.

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Recent Ruling - Undisclosed Line of Credit on Marital Residence

 

The Court of Appeals affirmed The Honorable Judge Hugh Hegyi's ruling in Frantz v. Frantz, 2009 WL 4981533 (Ariz.App. Div. 1), a case that dealt with an issue that is becoming more and more common in Arizona as a result of the State's heavy financial reliance of the real estate market. In Frantz, Husband appealed from a decree of dissolution arguing that the family court erred in its determination that a second lien secured by the marital residence was not a community obligation. At the dissolution hearing, Husband, Wife, and a real estate appraiser testified.  Judge Hegyi stated:

“In finding that the community has $92,000 in equity in the [residence], the court does not deduct the value of the $84,000 second lien on that property. It finds that WIFE has established by clear and convincing evidence that the lien is not a community obligation. The money was received by HUSBAND alone. HUSBAND alone had the ability to explain what happened to the proceeds of the loan, and has failed to do so. After observing the parties' demeanor in testifying, the court finds HUSBAND expended these proceeds in a manner that was not intended to, and did not, benefit the community."

Husband filed a motion to alter or amend the decree requesting that the court value the residence at $8,000 - an amount reflecting the fair market value minus any and all of the liens and encumbrances obtained by the parties during the marriage. The court denied Husband's motion.

Husband first argues that the trial court erred in finding that the second lien secured by the marital residence was not a community obligation. The Court of Appeals found no error stating:

"Husband submitted a statement indicating that the balance on the line of credit was $83,096 as of March 2007. Husband only testified that the line of credit was opened prior to February 2007, and that he wanted the value of the residence to reflect the two liens that were secured by the house. Wife testified that she was not aware of what the funds from the line of credit were used for. Wife also testified that she did not believe that the line of credit should be included in reducing the equity in the property. Based on the above, the trial court did not err in finding that that Wife overcame the presumption that the second lien was a community obligation."

Bottom line, credibility counts!  What Judge Hegyi obviously concluded was that the Husband tried to pull a "fast one" and was caught without an explanation as to where the money went.  The Court of Appeals agreed.  The moral of this case can be summed up as follows: "if it smells funny, something probably stinks" or if you prefer, "where there is smoke there is usually fire".
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Searching for Hidden Assets at Divorce

How to find property your spouse may be concealing when you divorce.

This list includes common ways in which a spouse may undervalue or disguise marital assets:

  • Antiques, artwork, hobby equipment, gun collections, and tools that are overlooked or undervalued. Look for antique furnishings, original paintings, or collector-level carpets at the office.
  • Income that is unreported on tax returns and financial statements.
  • Cash kept in the form of travelers' checks. You may be able to find these by tracing bank account deposits and withdrawals.
  • A custodial account set up in the name of a child, using the child's Social Security number.
  • Investment in certificate "bearer" municipal bonds or Series EE Savings Bonds. These do not appear on account statements because they are not registered with the IRS. (The government is phasing out these bonds, realizing that it is losing a lot of money.)
  • Collusion with an employer to delay bonuses, stock options, or raises until a time when the asset would be considered separate property.
  • Debt repayment to a friend for a phony debt.
  • Expenses paid for a girlfriend or boyfriend, such as gifts, travel, rent, or tuition for college or classes.
  • Retirement accounts that your spouse never tells you about.

In addition, business owners may try to hide assets in these ways:

  • Skimming cash from the business.
  • Salary payments to a nonexistent employee, with checks that will be voided after the divorce.
  • Money paid from the business to someone close -- such as a father, mother, girlfriend, or boyfriend -- for services that were never actually rendered (asuming the money is given back to your spouse after the divorce is final).
  • A delay in signing long-term business contracts until after the divorce. Although this may seem like smart planning, if the intent is to lower the value of the business, it is considered hiding assets.

When you're looking for these items, you may have difficulty finding them or getting the proof you need to show they exist. Formal discovery procedures through litigation may help. For instance, you could take the deposition (legal interview) of your spouse's boss or payroll supervisor. But you may also need to hire a forensic accountant or a private investigator. (A forensic accountant is an accountant who is trained to look into accounting practices in order to gather evidence that can be used in court.) Usually an attorney can refer you to these specialists.

Document Your Finances Before Filing for Divorce

If you suspect that your spouse may attempt to hide assets, it's best to start investigating your household and business finances before initiating divorce proceedings. Make copies of important documents such as tax returns from the past several years, bank account statements, pay stubs, and any other documents that reflect joint assets or debts. Keep copies of these documents outside the home if you're still living with your spouse or partner.

Copyright © 2006 Nolo

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