Many people believe that the spouse who plans before a divorce gains an upper hand. Sometimes.
Certain types of divorce planning can be beneficial. But other types can backfire. For instance, if one senses that a divorce may be imminent, acceptable divorce planning includes gathering information vital to understanding the income and marital estate. Often, an experienced divorce lawyer can lead you on the path to finding a marital counselor or an individual counselor and help you scope out your rights.
Any lawyer who has been in the trenches has war-stories involving unacceptable divorce planning where one might seek to hide assets or income. There are defenses against a spouse who you think is planning for a divorce.
Is there divorce planning that you are in favor of?
Yes. Illinois divorce law has changed with the adoption of maintenance guidelines. There are exceptions to these guidelines. But they generally apply if the combined gross income is less than $500,000. The presumed length of maintenance increases with each anniversary date of the marriage. This is measured to the date of the filing of the divorce petition. The major presumptive leap in the length of maintenance is once a marriage is 20-years long. With 20+ year marriages, the Illinois guidelines provide that maintenance is indefinite (or for the length of the marriage)—if one otherwise qualifies for maintenance. Illinois public policy should not encourage divorce filings. Yet, if a marriage is truly rocky, the law encourages one who would have to pay maintenance to file before the 20-year anniversary.
Happy anniversary, indeed!
Is divorce planning like estate planning?
Not really. Estate planning is proper. Estate planning often encompasses 1) projecting and providing for the needs of those who have been financially dependent on you, 2) designating those who should be your beneficiaries and 3) trying to avoid estate taxes. This is proper. Divorce planning, however, when done for less than good-faith purposes can be an attempt to deny the other spouse is entitled to.
Do you mean that people actually plan their divorce years ahead?
I’ve seen it. A problem with improper divorce planning is that if one is caught at it, the divorcing spouse loses credibility. Any trial lawyer knows that credibility is perhaps the most important ingredient to fair treatment by the trial court.
What are typical divorce planning strategies?
Removal of Financial Documents
These financial papers include:
- income tax returns
- financial statements
- stock brokerage account documents
- banking statements
- life insurance policies
- retirement benefit statements
- expense account statements
Obtaining digital copies of such papers and storing these in a secure place helps if the marriage is on the rocks.
Reducing Income
If the spouse is in business for himself or herself or can control his income (for example, commissions), divorce planning often includes a purposeful income reduction. Family lawyers refer to this as SIDS or RAIDS (sudden income deficiency syndrome or income deficiency that is recently acquired). Yet if this is demonstrated (as stated above) one risks losing credibility and can backfire.
Hiding Income
Sometimes the owner of a business or professional practice tries to hide income or submits income tax returns that understate his or her income. Ethical divorce lawyers will have no part of improper divorce planning.
Hiding Property
Properties owned by the spouse may be transferred to others—usually relatives such as a mother or a sister. Sometimes assets are transferred to close friends. This is done at one’s peril. Depending on the timing of the transfer, it can be attacked under through a lawsuit under the Uniform Fraudulent Transfer Act or a dissipation claim.
Sometimes, shortly before the divorce cash deposits are made in a custodial or trust account in the child’s name. In other cases, large 529 plans are established. If this is normal behavior during the marriage, it’s proper. Otherwise, an individual loses credibility by removing significant assets from the marital estate. Doing so may be a dissipation of marital property. (See our Dissipation Q&A).
Order of Protection
If your spouse believes there may be contested litigation involving the children, one might try to gain an advantage by seeking an order of protection. Orders of protection can be obtained, in the first instance, without notice to you. Divorce lawyers often give the admonition that a spouse might try to provoke an incident (name calling, harassment, etc.) that will be a basis for the order of protection. Protect yourself by walking away from such a confrontation. Whether or not one should pursue an order of protection should have nothing to do with whether there is the perception of gaining an upper hand in the divorce. All too often, I have seen the attempts to obtain orders of protection backfire when sought for the wrong reasons.
How do I guard against divorce planning?
It is surprising how many spouses don’t know the basics of the family’s finances. This includes information such as how much the spouse earns, whether there’s a retirement plan, and what the couple is worth. In good marriages, the spouses freely share this information. In other marriages, a spouse may be in the dark regarding large swaths of information concerning the family finances. The best safeguard against divorce planning is an awareness of the family’s financial situation. This involves insisting on being a partner involving the family finances.
Here are some tips:
- If you sense a divorce is coming, or you’re involved in one, obtain a digital copy of the significant financial papers you can find. But first consult with a lawyer to address the sort of documents that are important.
- If available, check your spouse’s phone bills, credit card statements. They give you clues to your spouse’s activities. But remember, starting in 2016, Illinois became a pure no-fault state. So traditional “grounds” for divorce no longer exist.
- If there’s a safety deposit box, you can subpoena a record of who entered the box and when. The records will not, however, tell you what’s in the box, or what’s been removed.
- Financial statements submitted by a spouse to a bank, usually in connection with a loan, are an excellent source of information. Often a loan applicant will put on a financial face that is as good as possible when he or she seeks a loan.
- Keeping a good credit rating is important. In cases where there is a mortgage on the marital residence, the settlement agreement or judgment usually requires a spouse to refinance the house within a certain time frame after the divorce.
- Don’t attempt reconciliation if you have solid reasons to know that your spouse is engaging in improper divorce planning without going through counseling and insisting on financial transparency.
