No. 2021-CA-0667-MR

Jefferson Circuit Court

Leslie and Janice Geralds negotiated a property settlement agreement through a collaborative divorce process.  The property settlement agreement awarded Mrs. Geralds 40.62% of Mr. Geralds’ retirement plan.  Several years following the entry of the decree and property settlement agreement, Mr. Geralds retired and signed a noncompete agreement.  As a result, he received additional funds from his company that were not previously addressed in the divorce proceedings.  Thereafter, Mrs. Geralds moved to reopen their case as she believed the additional funds were part of the retirement plan and that she was entitled to receive a portion of those funds pursuant to the parties’ property settlement agreement. Mr. Geralds disagreed, claiming the additional funds were not part of the retirement plan, but rather, new income from him signing the noncompete agreement.

The trial court found that Mrs. Geralds was rightfully entitled to reopen the case because Mr. Geralds did not inform her of the additional funds he was receiving.  Further, the trial court determined the additional funds were in fact part of the retirement plan and that Mrs. Geralds was entitled to a portion of said funds.  Attorney’s fees were also awarded to Mrs. Geralds.  A timely appeal followed.

The Court of Appeals affirmed the trial court, in part, that CR 60.02(d) applied to this case and that Mr. Geralds intentionally did not disclose the additional funds.  By not doing so, the Court emphasized “[f]ailing to disclose assets to the court and [Mrs. Geralds] can be considered fraud affecting the proceedings,” thereby meeting a situation justifying reopening the case.  However, the Court disagreed with the trial court in that the additional funds were not part of Mr. Geralds’ retirement plan, but rather, funds he received after executing the noncompete agreement.  Therefore, the Court did not agree Mrs. Geralds was entitled to a portion of these funds because the funds were not marital property.  Finally, the Court reversed and remanded the case to address the attorney’s fee issue to determine if Mrs. Geralds was entitled to attorney’s fees in reopening the case due to Mr. Geralds failing to disclose an asset during the collaborative divorce proceeding and an unrelated hearing following his retirement.

Caitlin P. Kidd, Esq.

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Oldham Circuit Court

Wade B. Lewis and Laura R. Fulkerson, after a tumultuous relationship, filed a petition for dissolution of marriage on April 3, 2013. During the process, a key dispute was the gift status of a trust established in 2009, titled the Laura Renee Fulkerson (“LRF”) Trust. While Wade stated the trust was established for estate planning purposes only, Laura argued it was a gift from Wade and that he gave her exclusive control of its contents. The family court barred the trust’s drafting attorney, Ed Lowry, from testifying on the dispute. After hearing testimony from only Wade and Laura, the family court ruled that the LRF Trust was a gift. The final decision was appealed, and the Court determined that the testimony from Lowry would have been crucial for the gift status analysis. Accordingly, the Court vacated that portion of the final ruling and remanded it further proceedings.

On remand, an evidentiary hearing was held for Lowry’s testimony, this time in front of a different judge due to the prior judge’s retirement. Nevertheless, the family court continued to hold the LRF Trust as Laura’s non-marital asset, finding Lowry’s testimony “could not shed light on the actual intent of the parties” at the trust’s creation. Instead, the Court found that Wade’s habit of making financial gifts as a means of reducing difficulties in his marriage, alongside other factors, was substantial evidence that the trust was a gift. Again, Wade appealed, arguing that the family court failed to apply the clear and convincing evidence standard to Laura’s gift claim.

Ultimately, the Court found no error in the family court’s conclusion. While admitting that the matter was a “close call”, the Court heavily emphasized that the there was “no deficit of nuance and complexity” in the family court’s analysis, having gone through two bouts of fact-finding and having two different judges rule in Laura’s favor. Therefore, Wade’s claim of clear error was unfounded, and the family court’s order was affirmed.

K. Spencer Pierson

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Contrast that with a community property state, where normally everything is divided 50/50. Indiana is a hybrid of those two. It’s what’s called a marital pot state. So, in Indiana, everything you own goes into a pot, and the question that’s asked is, “Why shouldn’t we divide all of this 50/50?” In that specific case, the person who wanted out of the marriage did not want to leave without half of those assets, and so we’ve sometimes advised people to establish a new residence for purposes of divorce in order to avail themselves of more advantageous laws and protect their assets.

In a situation where somebody has inherited a lot of money and wants to protect it, Kentucky has a much more favorable law to get that back than Indiana does. Indiana would put the money in a pot and say, “Why shouldn’t each party share half?” It’s important, therefore, for each person to know their state’s unique laws about property and debt division.

For people with children, there are, obviously, some interstate issues that come up, as well as questions regarding how maintenance and alimony will be calculated. Kentucky is a fairly generous alimony state. We got an alimony award for one client who was only married for a year and a half, whereas that is very rare in Indiana, where alimony doesn’t really exist. There are very limited ways to get maintenance in Indiana. If I have a client who is disabled and has been in a 30-year marriage, it is advantageous for her to have residence in Kentucky and let that issue be decided there instead of in Indiana, where there’s not much law to support that type of claim.

When it comes to the issues of dividing property and debt and figuring out alimony and maintenance, there’s also the issue of attorney’s fees. If you have one partner making significantly more than the other, states have different rules about who pays for the divorce. So, even if you don’t have children, if you are living right next to another state or you are potentially going to be living somewhere else, you need to think about how that will look.

There’s another story that comes to mind. A couple here did not have any children, and the husband really wanted to be out in California to live the rest of his life. He met with an attorney who wasn’t well-versed in interstate matters and who told him they’d file here. His divorce ended up taking two years, time during which he was not living in the place he wanted to be. Many of his issues could have been avoided if he’d gone ahead and moved and filed there.

We also see a lot of cases where, sadly, one spouse does not wish to file. Either they don’t want to get divorced or they have religious beliefs that prevent them from doing so. Whether they want the divorce or not, they should still plan for their future because the divorce will affect their belongings, their assets, and their very livelihood going forward. If a potential relocation may change how things get divided, the spouse needs to get on top of that and not wait until it’s too late. Once the case gets filed, it’s very hard to get it moved, as a general rule.

For more information on Division of Assets & Debts And Alimony, an initial consultation is your next best step. Goldberg Simpson is proud to have a robust family law practice with clients licensed in both Indiana and Kentucky.

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In Kentucky, all assets acquired during the marriage are presumed to be marital property and subject to equitable division. It does not matter which spouse holds title to a marital asset. Thus, money earned by one spouse during the marriage and deposited into his or her separate bank account is presumed to be marital property subject to equitable division.

There are exceptions when one spouse receives a gift or inheritance during the marriage, when one spouse owned an asset before the marriage, or when commingling of non-marital assets with marital assets has occurred. In these cases, the property titled in the name of one spouse may not be subject to equitable division. This determination can be complex, so it is important to consult with an experienced family law attorney.

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The general rule in Kentucky is that student loan debt incurred during the marriage is the nonmarital debt of the party receiving the educational benefit associated with the loan, and the debt should be assigned to that party. Combs v. Ousley, 2007-CA-001552-MR, 2009 WL 276506, *3 (Ky. App. Feb. 6, 2009). To the extent that the proceeds of the loan were used to provide for family expenses, however, some portion of the debt may be marital debt. This is a fact-intensive inquiry, and it is important to discuss your unique circumstances with an experienced family law attorney.

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To determine if a debt is marital or non-marital, courts look to the following factors:

(1) who received the benefits for which the debt was incurred;

(2) the extent of participation of each party in incurring the debt;

(3) whether the debt was incurred to acquire assets that are designated as marital

     property;

(4) whether the debt was necessary to provide for the maintenance and support of      

     the family; and

(5) the economic status of each party. Where one party has a much higher earning

     potential than the other, the court may assign the debt to the party who has the

     ability to pay.

The court will consider all the circumstances surrounding the debt, and no one factor is determinative. Thus, the division of debts is often complex, and it is important to consult with an experienced family law attorney.

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Those present at the deposition normally include the parties (who have a right to attend all depositions), the parties’ attorneys, and the person being deposed. A court reporter is also present to administer an oath and make a written transcript. If a non-party is the person being deposed, they may also have their attorney present.

Most depositions have two purposes. One purpose is to learn what knowledge a party or non-party witness possesses about your case and to explore anticipated testimony in advance of a hearing or trial. Another purpose of conducting a deposition is to preserve a witness’ testimony so that it can be used later to attack the witness’ credibility at trial if they are not truthful.

Even if you do not anticipate that your case will go to trial, depositions can be a valuable tool for obtaining information that could help to facilitate settlement negotiations or enhance your bargaining position.

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The parties entered into a marital settlement agreement, which was incorporated into a Decree of Dissolution of Marriage entered on June 27, 2012. The parties amended the agreement and a supplemental decree was entered on March 6, 2013. In 2017, the parties revisited the issue of Husband’s retirement accounts. A QDRO was prepared and filed with the Court on January 20, 2018. The Court entered an agreed Order, which stated that the valuation date of the retirement account for purposes of division was July 20, 2012. The Agreed Order further stated that the parties agreed to use Husband’s retirement plan for the equalization of assets, and that Wife was “to receive $26,790 additional monies to equalize the marital assets.” The parties did not agree whether Wife was entitled to receive gains and losses on her equalization portion of $26,290. The trial court found that the parties reached an agreement that Wife was entitled to a fixed amount representing asset equalization and that the court could not order a new sum resulting from either gains or losses. Wife appealed.

The Court of Appeals affirmed the trial court’s decision holding that the QDRO did not allow for Wife’s equalization payment to be subject to gains or losses. The parties agreed to a sum certain for Wife’s share of Husband’s retirement account and the parties’ documents were silent regarding gains and losses of this asset.

Digested by Emily T. Cecconi

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Advantages of divorce law arbitration include:

• The ability of participants to decide who will be their judge. Parties can select an arbitrator with particular expertise, such as business valuation, retirement plans, tax, nonmarital tracing issues, mental health, etc.
• More privacy.
• Quicker trial dates and pre-arbitration conferences, which also may result in less expense and tension.
• Swiftness of decision making.
• Less formal.
• The arbitrator has all the time you need to put on your case.

Disadvantages voiced by some include:

• Perception that there cannot be binding child custody decisions. (Maybe but not necessarily true; usually are subject to trial de novo if the court concludes the award is contrary to a child’s best interest.)
• Beliefs that parties are not protected by rules permitting discovery and required financial disclosure. Under the Uniform Arbitration Act mechanisms for disclosure are provided. In the arbitration agreements, parties may have the arbitrator supervise the discovery, or the parties may complete discovery and then arbitrate.
• Fears that the arbitrator will be able to ignore the law. While an arbitrator’s mistake of law does not generally provide a basis for refusing to confirm an award, the parties can agree that the arbitrator will be bound by the substantive law of the state.
• Inability of the arbitrator to enforce an award. Awards are tendered to the court and after confirming the award, all remedies for enforcement are available in court as with any other judgment.
• The parties must pay for the arbitrator’s time

Of special note in Kentucky is the 2010 depublished Campbell v. Campbell case and its dicta on the constitutionality of divorce arbitration. 2006-CA-001803-MR (Ky. App. 2010). The Supreme Court of Kentucky, as well as the state’s Appellate Courts continue to compare arbitration to other types of binding contracts and note a legislative preference for arbitration. Agreements to arbitrate and the subsequent arbitration award are upheld, as long as they conform to basic contracting principals and the KUAA guidelines.  Family law practitioners should discuss the risks of arbitrating family law matters with their clients keeping the Campbell case in mind.

This is an update by Elizabeth M. Howell of a blog post “THE ADVANTAGES AND DISADVANTAGES OF DIVORCE ARBITRATION” originally written by Diana L. Skaggs in October 2006.

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What is arbitration? The American Bar Association describes arbitration as “a private process where disputing parties agree that one or several individuals can make a decision about the dispute after receiving evidence and hearing arguments.” Thus, arbitration is something to consider when privacy is important, or when an arbitrator with a particular expertise would be especially helpful.

Arbitration requires an agreement to arbitrate that fixes the power of the arbitrator, the degree of trial court and appellate review, compensation of the arbitrator, and the discovery process. Unlike mediation, arbitration requires a “court-like” hearing. The arbitration hearing is generally more informal than a court trial, but the proceedings are recorded and result in a written order tendered by the arbitrator to the trial court judge along with findings of fact and conclusions of law. As with motions to alter, amend or vacate, parties to the arbitration may move for amendment within the time set out in the arbitration agreement.

Arbitration awards may be more difficult to appeal, except for child related matters, than trial court judgments, depending upon the agreement of the parties within the arbitration agreement.

This is an update by Elizabeth M. Howell of a blog post “HOW DIVORCE ARBITRATION WORKS” originally written by Diana L. Skaggs in October 2006.

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