It all stemmed from a highly publicized battle over career assets which made the cover of Fortune magazine in 1988. Lorna and Gary Wendt were married for 32 years. He was the CEO of GE Capital; she was the “corporate wife.” At the time of the divorce, he declared the marital estate to be worth $21 million and offered her $8 million as her share. She balked, saying that the estate was worth $100 million. Her counter to him was that she wanted $50 million or half.
Lorna Wendt’s position was that her husband’s future pension benefits and stock options had been earned during their marriage. She argued that her contribution as the homemaker and later, wife of the CEO, enabled him to rise through the ranks to the top of an international organization. Her husband didn’t agree.
In the early years of their marriage, she had worked to support them while he attended Harvard Business School. They moved often while she handled the details of the household and took care of him and their two children. When he became CEO, she was expected to entertain often and extravagantly as his position required. She felt she was a 50-50 partner in the marriage and the accumulation of all assets.
The Wendt case broke through the long-held belief that “enough is enough” – that a spouse deserved enough to maintain her lifestyle – nothing more. In a landmark decision, the judge awarded her $20 million – far less than the $50 million she had requested, but far more than the $8 million her husband initially offered.
Oprah’s staff called me and asked if I would take part in a debate on Oprah’s show between the positions “enough is enough” vs. “half.” They wanted me to take the position that “enough is enough” and I had to turn them down explaining that I believe in the 50/50 division of assets. Oh well!
Monday, March 26, 2007
Sunday, March 18, 2007
10 Most Common Money Mistakes in Divorce
For a Free report "10 Most Common Money Mistakes in Divorce," go to www.DollarsAndCentsOfDivorce.com.
Health insurance after divorce
In the traditional marriage where the husband is the main wage earner, one concern is maintaining health insurance for the ex-wife after divorce.
It is not uncommon for women over 40 years of age to develop severe health problems. Some become almost uninsurable, at least at a reasonable cost. This is a real concern where, all of a sudden, they are on their own and responsible for acquiring health insurance.
The Older Women’s League (OWL) worked hard to get the Consolidated Omnibus Budget Reconciliation Act (COBRA) law passed in 1986. It allows women to continue to get health insurance from their ex-husband’s company if it has at least 20 employees, for three years after the divorce. The normal COBRA provision states that, if an employee is fired or leaves a job, he or she can get health insurance from that company for 18 months. However, in a divorce, it is extended to 3 years or 36 months.
Linda and Bob are getting divorced. Assume that Linda decides to continue health insurance under COBRA from Bob’s company. Linda must pay the premium as agreed. If she misses a premium payment, the health insurance company can drop her and they do not need to reinstate her. So, she must pay that premium on time. Typically, Linda will not get the discounted group rate but will be charged the full rate. It is important to shop for health insurance, even though the COBRA provision may supply a quick solution to health care coverage, it may not be the best. It may be purchased at a lesser cost somewhere else.
Linda should shop for health insurance because if she can match the rate from Bob's company or get a lower premium with another company, she should buy her own. Then if something happens, as long as she pays her premiums, she is covered. Otherwise, at the end of three years, COBRA drops her, and then she has to start shopping for her own insurance. By that time, she might be uninsurable and not able to find insurance at a decent cost.
It is not uncommon for women over 40 years of age to develop severe health problems. Some become almost uninsurable, at least at a reasonable cost. This is a real concern where, all of a sudden, they are on their own and responsible for acquiring health insurance.
The Older Women’s League (OWL) worked hard to get the Consolidated Omnibus Budget Reconciliation Act (COBRA) law passed in 1986. It allows women to continue to get health insurance from their ex-husband’s company if it has at least 20 employees, for three years after the divorce. The normal COBRA provision states that, if an employee is fired or leaves a job, he or she can get health insurance from that company for 18 months. However, in a divorce, it is extended to 3 years or 36 months.
Linda and Bob are getting divorced. Assume that Linda decides to continue health insurance under COBRA from Bob’s company. Linda must pay the premium as agreed. If she misses a premium payment, the health insurance company can drop her and they do not need to reinstate her. So, she must pay that premium on time. Typically, Linda will not get the discounted group rate but will be charged the full rate. It is important to shop for health insurance, even though the COBRA provision may supply a quick solution to health care coverage, it may not be the best. It may be purchased at a lesser cost somewhere else.
Linda should shop for health insurance because if she can match the rate from Bob's company or get a lower premium with another company, she should buy her own. Then if something happens, as long as she pays her premiums, she is covered. Otherwise, at the end of three years, COBRA drops her, and then she has to start shopping for her own insurance. By that time, she might be uninsurable and not able to find insurance at a decent cost.
Sunday, March 11, 2007
Finding Hidden Assets in a Divorce
There are many ways that assets can be hidden in an impending divorce. Following are a few to be aware of:
1. Financial statements to acquire a loan: Any loans from lending institutions require sworn financial statements to be filled out. In most cases, the borrower is trying to impress the lending institution with the extent of assets and may exaggerate these. Looking at these statements may show valuations substantially greater than what is now claimed.
2. Deferred salary increase, uncollected bonus, or commissions: It is always a good idea to check with the spouse’s employer to determine whether a salary increase is overdue, when it will be forthcoming, and how much it is. Employers are sometimes sympathetic to their divorcing employees and willing to bend the rules slightly to defer salary increases, bonuses, or commissions in order to suppress apparent income.
3. Income tax refunds: It is possible to over-withhold taxes from earned income so that there will be a refund coming that noone knows about or has thought about! This is especially effective if the divorce is final before the refund comes in the mail. Then, the recipient of the refund doesn’t feel obligated to share that information or the refund.
4. Cash transaction: One spouse may be in work where cash is paid. Such cash payments are rarely reported on the income-tax return, but if you know of such income in the past and can subpoena current information, it will help in proving available income in excess of that shown on the income-tax returns.
5. Children’s bank accounts: Frequently, a spouse who wishes to hide money will open a custodial account in the name of a child. Deposits and withdrawals are made without any intent that the child has use of the account except in case of the spouse’s death.
6. Phony income-tax returns: When the divorce has been filed, some spouses are inclined to alter the copies of their previously filed income-tax returns to hide or adjust pertinent financial information. If you have reason to believe that furnished copies have been altered, ask for copies of jointly filed returns directly from Internal Revenue Service.
7. Phony loans or debts: To keep cash from being divided, a spouse may sometimes attempt to bury the money with a phony loan to a cooperative friend or relative. The loan may be tied up with a long-term note so as to remove this money from consideration at settlement time.
8. “Friends” or other phonies on the payroll: If one spouse is in a position to control the payroll of a sole proprietorship, partnership, or closely held corporation, he or she may be paying salaries to a friend or relative who is not actually providing services commensurate with the compensation.
1. Financial statements to acquire a loan: Any loans from lending institutions require sworn financial statements to be filled out. In most cases, the borrower is trying to impress the lending institution with the extent of assets and may exaggerate these. Looking at these statements may show valuations substantially greater than what is now claimed.
2. Deferred salary increase, uncollected bonus, or commissions: It is always a good idea to check with the spouse’s employer to determine whether a salary increase is overdue, when it will be forthcoming, and how much it is. Employers are sometimes sympathetic to their divorcing employees and willing to bend the rules slightly to defer salary increases, bonuses, or commissions in order to suppress apparent income.
3. Income tax refunds: It is possible to over-withhold taxes from earned income so that there will be a refund coming that noone knows about or has thought about! This is especially effective if the divorce is final before the refund comes in the mail. Then, the recipient of the refund doesn’t feel obligated to share that information or the refund.
4. Cash transaction: One spouse may be in work where cash is paid. Such cash payments are rarely reported on the income-tax return, but if you know of such income in the past and can subpoena current information, it will help in proving available income in excess of that shown on the income-tax returns.
5. Children’s bank accounts: Frequently, a spouse who wishes to hide money will open a custodial account in the name of a child. Deposits and withdrawals are made without any intent that the child has use of the account except in case of the spouse’s death.
6. Phony income-tax returns: When the divorce has been filed, some spouses are inclined to alter the copies of their previously filed income-tax returns to hide or adjust pertinent financial information. If you have reason to believe that furnished copies have been altered, ask for copies of jointly filed returns directly from Internal Revenue Service.
7. Phony loans or debts: To keep cash from being divided, a spouse may sometimes attempt to bury the money with a phony loan to a cooperative friend or relative. The loan may be tied up with a long-term note so as to remove this money from consideration at settlement time.
8. “Friends” or other phonies on the payroll: If one spouse is in a position to control the payroll of a sole proprietorship, partnership, or closely held corporation, he or she may be paying salaries to a friend or relative who is not actually providing services commensurate with the compensation.
Sunday, March 4, 2007
More on TIPS
Many of the TIPS on this blog are taken from the books "Survival Manual for Women in Divorce" and "Survival Manual for Men in Divorce." You may find these books at www.FDAdivorce.com.
How divorce affects Social Security benefits
If a couple has been married for 10 years or longer and they get divorced, the wife is entitled to half the husband’s Social Security provided certain provisions are met.
Since this rule does not diminish the amount the husband receives at retirement, he usually doesn’t worry about this.
Assume the husband will get $750 a month when he retires. If they have been married 10 years or longer, she would be able to get $375 (one-half of the husband’s benefit) at age 65.
What if he gets remarried? If he is married to his second wife for 10 years and they get divorced, Wife #2 gets $375, Wife #1 gets $375, and he still gets $750. His limit is four wives! As long as he is married to each one for 10 years or longer, they each get half of his Social Security benefit.
What if the wife gets remarried? If she is married at retirement time, she looks to her current husband for her benefit. But if she has been married to Husband #2 for 10 years and they get divorced, she is entitled to half of Husband #1’s benefits or half of Husband #2 benefits or her own, whichever is higher. She has a choice.
What if they get divorced and he dies? The ex-wife is entitled to widow’s benefits.
A widow’s remarriage after age 60 will not prevent her from being entitled to widow’s benefits on her prior deceased husband’s earnings.
Example: Assume that Maude’s first husband died. At age 58, she met a wonderful widower and wanted to get remarried but she realized that she would lose her entitlement to all of the deceased spouse’s Social Security benefits when she turned age 60. This may explain why many senior citizens are living together unmarried until after age 60.
Since this rule does not diminish the amount the husband receives at retirement, he usually doesn’t worry about this.
Assume the husband will get $750 a month when he retires. If they have been married 10 years or longer, she would be able to get $375 (one-half of the husband’s benefit) at age 65.
What if he gets remarried? If he is married to his second wife for 10 years and they get divorced, Wife #2 gets $375, Wife #1 gets $375, and he still gets $750. His limit is four wives! As long as he is married to each one for 10 years or longer, they each get half of his Social Security benefit.
What if the wife gets remarried? If she is married at retirement time, she looks to her current husband for her benefit. But if she has been married to Husband #2 for 10 years and they get divorced, she is entitled to half of Husband #1’s benefits or half of Husband #2 benefits or her own, whichever is higher. She has a choice.
What if they get divorced and he dies? The ex-wife is entitled to widow’s benefits.
A widow’s remarriage after age 60 will not prevent her from being entitled to widow’s benefits on her prior deceased husband’s earnings.
Example: Assume that Maude’s first husband died. At age 58, she met a wonderful widower and wanted to get remarried but she realized that she would lose her entitlement to all of the deceased spouse’s Social Security benefits when she turned age 60. This may explain why many senior citizens are living together unmarried until after age 60.
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