THE FALLACY OF FINAL SAY

 The vast majority of divorce cases in New York are settled. In cases where there are minor children, the most common custody provision is joint custody. Joint custody means that the parents of the child will consult each other regarding the major decisions affecting that child. However, a concept has crept into the matrimonial practice that has poisoned the idea of joint custody. That concept is known as “final say.”

Final say is frequently inserted in marital settlement agreements where there is joint custody. It provides that if the parties cannot agree on a major decision involving their child, one parent will have the right to make the decision. In essence, final say gives the favored party the right to force a decision involving their child on the unfavored party. By giving one party the right to make a unilateral decision involving the child, the concept of joint custody is effectively transformed into de facto sole custody.

Sometimes attorneys tried to ameliorate the harsh effects of final say by dividing decisions involving the child into spheres of influence. Under this scenario, one party would have the right to have final say on medical decisions for the child, while the other party would have final say on educational decisions for the child. Other spheres of influence include religious decisions, extracurricular activity decisions, and others. While this approach may make the concept of final say more palatable, it still flies in the face of the concept of joint custody. Giving one party the right to make unilateral decisions involving important aspects of the child’s life is not a fair way to make decisions concerning a child.

Sometimes, when the issue of final say becomes contentious, attorneys insert language stating that the parents will follow the recommendation of an involved third-party. For instance, for medical decision, the parties will agree to follow the recommendation of the child’s pediatrician. For an educational decision, the parties will agree to follow the recommendation of the child’s teacher, guidance counselor or principal. The problem with this approach is that it invests a third-party stranger with the power to make an important decision regarding the parties child. This effectively removes the parents from making a decision involving their own child. This is not in any child’s best interests.

The Appellate Division, Second Department, has approved the use of fair say provisions in a number of reported decisions. In Prohaszka v. Prohaszka, 103 A.D.3d 617 (2d Dept. 2013), the appellate court approved an award of joint custody to two somewhat antagonistic parents. The court further affirmed that the mother would have final say on all decisions involving the children, but added a requirement that the mother consult with the father before making the decision (a requirement of joint custody in any event). In Batista v. Falcon, 148 A.D.3d 698 (2d Dept. 2017) the Appellate Division affirmed a lower court decision awarding the parents joint custody but giving final say to the mother on all decisions concerning the child.

I suggest that the concept of final say should not be used in a marital settlement agreement. Both parents were able to make decisions involving their child together prior to the divorce action. There is no reason they should not do so once they are divorced. By eliminating one party having final say, the parties are compelled to legitimately negotiate with each other towards a consensus. If the decision is truly monumental, either party can apply to a court for determination of the issue.

THE ATTORNEY CLIENT PRIVILEGE IS IN THE NEWS

Given the recent raid on attorney Michael Cohen’s office and home, the issue of attorney-client privilege is very much in the news. The purpose of the privilege is to encourage truthful and frank communications between an attorney and his or her client. Generally, any communications between lawyer and client are privileged and cannot be disclosed to a third party. The privilege applies in divorce actions in New York State.

There are, however, some issues with the privilege. The biggest issue is waiver of the privilege, particularly inadvertent waiver. Frequently when a prospective client appears at a lawyer’s office  for an interview, he or she will bring along a parent, friend or other supportive person. Unfortunately, having a third party present during the conversation with the lawyer is a waiver of the privilege. Only the lawyer and client can be in the room.  The support person has to remain outside.

Is important to understand that the privilege only covers legal advice. Accordingly, conversations between the attorney and the client regarding other issues are not subject to the privilege and   disclosure can be compelled.  Another exception to the privilege is the “crime fraud” exception, which does not permit the privilege to perpetrate a crime. This is the exception alleged in the Michael Cohen case.

Is important to preserve the attorney client privilege, right from the initial interview. In that way, the client and lawyer can have informative, truthful discussions without any fear of disclosure.

I LOVE YOU, BUT I NEED YOU TO SIGN THIS...

One of the most difficult issues in family law is the negotiation of a prenuptial agreement. Prenuptial agreements are used to change the outcome in the event of a divorce. They were frequently used when there is a family business or children from a prior marriage.

The prenuptial agreement can provide that a certain asset will remain separate in the event of divorce. The problem is with when marital funds are used to maintain or add on to the separate asset. Prenuptial agreements can also provide for lump sums in lieu of equitable distribution and can alter amounts due under the maintenance statute.

The negotiation of a prenuptial agreement can become very emotional. It takes a cool head to navigate these waters and ultimately reach an agreement that both parties find acceptable.

Contrary to popular belief, it is difficult to set aside a prenuptial agreement. Where there has been full financial disclosure, and both sides had attorneys, it is very difficult to set aside the agreement. However, if there was no financial disclosure, a lack of meaningful negotiation or no attorney review, it is possible to set aside a prenuptial agreement. Courts strictly construe such agreements, and if an issue is not addressed in the agreement it will be decided under applicable New York State law.

Since the prenuptial agreement can control your financial future, it should be approached carefully. Any party enter entering such an agreement should absolutely have competent matrimonial counsel.

THE END OF ALIMONY AS WE KNOW IT

For 75 years, alimony (also called maintenance) has been tax deductible to the payor and taxable income to the recipient. That is, the person paying alimony to an ex-spouse got to deduct it on his or her income tax returns, and the person receiving it had to declare it as income on his or her returns and pay taxes on it.  That all changed last Christmas, when President Trump signed the Tax Cuts and Jobs Act (“TCJA”).

Effective January 1, 2019, alimony will no longer be deductible. For agreements signed prior to that date, it remains deductible.

The practical effect of this change will make it harder to settle divorce actions. Typically, the fact that the payments were deductible softened the monetary blow to the paying party. Now, however, that carrot is gone.

It will be interesting to see how this plays out in New York.  The legislature recently amended the maintenance statute to provide for a formula for paying maintenance. Implicit in that formula was the fact that maintenance would be deductible. Now that it will not be, the legislature may have to revisit the formula.  Even if it does not however, the trial court has the option to deviate from the formula and consider the tax aspects.

THE FALSE PROMISE OF MEDIATION

Mediation is one of those things that sounds good, but is difficult in practice. Countless times I have interviewed people on the verge of divorce who expressed a desire to avoid the cost of litigation by mediating their dispute.

The problem with mediation  starts with the mediator. There are no licensing requirements to be a divorce mediator. One would think that at a minimum, the mediator would be familiar with New York divorce law so that it could be applied to the parties situation. That is not always the case. I have seen many mediated agreements that flatly fail to comply with the law and are basically useless.

Mediation assumes that both sides are committed to resolving the case in an amicable fashion. That is not always true, as divorce is not only a financial process but an emotional one as well. Many times I've seen parties waste thousands of dollars in mediation only to give up without an agreement. This happens when one party is angry or wants to “win” in the mediation.

Finally, there is the ethical issue. Occasionally, the mediator drafts the separation agreement once an agreement in principle is reached. Although the mediator claims he or she is not representing either party, there are always small issues that can go either way.

A better approach is collaborative divorce. In this process, both sides retain their own lawyers with the express understanding that the process is to resolve the dispute. Both lawyers agree that if settlement talks break down, neither will represent their client in the forthcoming litigation. Each side therefore gets unbiased advice, and can make an informed decision on whether to settle their dispute.

The bottom line is that if you are going to try divorce mediation, proceed very carefully. While it can work, many times you will end up in litigation anyway.

AVVO RULED UNETHICAL BY NEW YORK STATE BAR

AVVO.COM, the popular attorney referral service, is in trouble in New York State. The New York State Bar Association issued an opinion on August 8, 2017 that attorneys may not pay the marketing fee to Avvo, as it constitutes an impermissible payment for a recommendation. The opinion can be found at http://www.nysba.org/EthicsOpinion1132/.

Avvo rates attorneys on its website. Attorneys can sign up to receive Avvo referrals, but it they are retained by an Avvo referred client, they are required to pay a marketing fee to Avvo. The amount of the marketing fee varies with the amount the lawyer charges the client, with the fee being higher for higher priced legal work.

The New York State Bar opinion holds that the payment of the marketing fee to Avvo, is an illegal payment for a referral, in violation of Rule 7.2 of the New York State Rules of Professional Conduct. Other states, such as New Jersey, Ohio and Pennslyvania have made similar rulings. 

GETTING MONEY SMART

I often interview people who are about to get divorced that have absolutely no inking of their finances. They will tell me that their spouse “handles all the bills” and that they have no idea what money they have or where they have it. This is a significant disadvantage when entering a divorce.

Divorce in New York is strictly a financial process. Not knowing anything about your financial situation can allow the other spouse to liquidate or hide assets. If you are getting divorced or you think you may be headed to one, the smartest thing you can do is to get educated about your finances. Know in what institutions your accounts are located, and know the amounts. This includes retirement accounts and records of real estate purchases. Get and keep copies of statements and tax returns. If a divorce is imminent, keep the copies somewhere other than the marital residence, lest they disappear later on.

In short, forewarned is forearmed. Know your finances.