Parties frequently approach divorce with partial information or misinformation about the law of domestic relations in North Carolina. Family, friends, and other well-meaning non-lawyer advisors often provide bad advice. There are several issues that come up repeatedly. Outlined below is one possible “top ten” of such issues.
Abandonment
Individuals are sometimes concerned because they want to separate from their spouse, but they have heard that if they leave the marital home they will be accused of abandonment. They don’t know what that means, but it sounds bad. The folklore of divorce in North Carolina still contains vestiges of the old law that required a finding of fault to obtain a divorce and in order for there to be grounds for an award of alimony. Abandonment was a fault ground. Marital misconduct is still a factor that can be considered in an alimony award, but fault is no longer the central consideration in divorce cases generally. When people express concern about “abandonment,” they may be expressing concern about several possible issues.
Custody
Abandonment is not technically an issue in custody matters. However, where one spouse leaves the marital home and the children remain in the home, a concern arises in the traditional divorce process that an unintended status quo may be created around the custody arrangement. As a practical matter, a working status quo can sometimes be hard to overcome in a later custody hearing. So the spouse leaving the home may be advised not to leave the home and the children if he or she desires a different long-term custody arrangement.
This situation creates a dilemma for the leaving spouse. He or she needs to get out of the marital home because of the psychological discomfort of remaining, but if he or she simply leaves the custody of the children with the spouse remaining in the home, this custody arrangement may be hard to overcome months later at a custody hearing. On the other hand, the leaving spouse doesn’t wish to disrupt the lives of the children or risk a confrontation over the children in the process of separating. In a traditional adversarial setting, there is often no good option for the dilemma.
When advising a client about the risks of leaving the marital home when children are involved, and absent domestic violence or abuse, a collaborative attorney will typically suggest that the parties enter into the collaborative process prior to any unilateral action to leave the marital home. If the parties enter into a collaborative agreement, the risk of establishing a prejudicial status quo is greatly reduced, because the attorneys will work with the parents to establish a co-parenting plan acceptable to both parents. When the spouse moving out of the home leaves after entering the collaborative process, even though it is prior to reaching an agreement around the co-parenting plan, there will be a greatly reduced risk that a status quo is being established that would be prejudicial to the leaving spouse.
Alimony
Abandonment remains a relevant concept in the law of alimony, although its significance is much reduced. Abandonment is one of the fault grounds that can be used as a factor by a judge in establishing alimony. Abandonment is defined as bringing the cohabitation to an end: (1) without the intent to renew it, (2) without the consent of the other spouse, and (3) without substantial provocation.
In responding to concerns about abandonment in this context, it can be helpful to consider whether alimony itself is even an issue for a particular couple. If neither spouse is a dependant spouse or for some reason alimony is not significant, then, obviously, a concern about how abandonment will affect alimony is irrelevant.
If alimony may be an issue, then avoiding the charge of abandonment in the collaborative context revolves around getting a mutual agreement that separation is by consent. This may mean “catching up” the spouse who is getting “left” (and who does not want the other spouse to go) with the reality that the marriage is ending. These conversations between the couple about the need for a separation are the realm of family and divorce counselors and psychologists. When the decision to separate is mutual, even if one of the spouses would prefer not to separate, then there is no abandonment. More importantly, the collaborative process has started on the right foot. Reaching a mutually satisfactory separation agreement will be much easier, than if one spouse unilateral leaves the home.
Reentry to marital home
Another consideration when one spouse “abandons” or leaves the marital home is the spouse’s inability to then reenter the marital home. In an adversarial context, this can be a significant issue. The remaining spouse has the right change the locks and to bar the leaving spouse from re-entry into the home. The leaving spouse loses control over the personal property in the home until a court resolution. This situation creates leverage in traditional negotiations, and changing the locks may even be recommended by traditional attorneys in order to obtain a negotiating advantage. It also creates the alternative situation where the spouse leaving the house is advised to back the moving van up to the house and empty it while the other spouse is at work -- not a good beginning to a collaborative case.
A person considering a move from the marital home should understand the negative impact on being able to reenter without permission. On the other hand, it is generally not a problem in the collaborative process for the couple to agree on how they will share access to the marital home if decisions are made by mutual agreement from the beginning. Problems typically arise only when one or the other spouse takes unilateral actions, without letting the other spouse know, or when spouses are encouraged to take actions to seek to get an unfair advantage over the other.
Negotiating Leverage
Occasionally, spouses are asked to leave the marital residence by the other spouse, and they wonder if it is okay to agree to the request. Traditionally, the spouse asked to leave might be advised by his or her lawyer not to agree to move out, because it’s clear that this is something the other spouse wants, and it can used as leverage in negotiations about other matters. So the lawyer’s client refuses to move out until the other spouse agrees to something in exchange.
In the collaborative process, spouses are not advised to refuse a request in order to obtain bargaining leverage. That tactic is part of positional bargaining, rather than interest-based negotiation. Instead, spouses are directed to consider whether they have an objection to the request to move out, and if so, what underlying interests or needs of theirs are blocking their willingness to comply. If there is nothing objectionable to them about moving out, then the conversations in the collaborative process can begin with the logistics of the move. If the spouse does find something objectionable about moving out, then the collaborative process incorporates the interest-based negotiations around how the parties will physically separate. In any event, a party would not be advised to refuse a request in order “leverage” an exchange of demands.
Linking custody and support
The impact of the child custody arrangement on the amount one party will have to pay in child support is an important consideration in traditional family matters. For instance, a custody arrangement that provides that a parent will have 122 or fewer overnights during the year with the children means that the child support calculation will be based on Worksheet A of the North Carolina Child Support Guidelines. Worksheet A is used to calculate the amount of child support assuming that one parent has sole custody. If the custody arrangement provides that each parent has at least 123 or more overnights, then the child support calculation will be based on Worksheet B. Worksheet B is used to calculate the amount of child support assuming that the parents have joint custody. The child support obligation can be significantly different under these two worksheets.
In the collaborative process, there is no necessary link between the co-parenting arrangement and how the parties will meet the cash flow needs of the two households. For some couples, the term “child support” may not come up in the discussion of how the couple will meet the expenses of the two households, until it’s time to draft the agreement or consider optimizing the tax implications. For other couples, it may make more sense to consider more directly how the children’s expenses will impact the financial viability of one or the other household. In any event, the child support calculation under the Guidelines is simply more information for the couple to consider in the discussions.
Even more pernicious in the traditional approach is the advice sometimes given to one of the spouses to demand sole custody of the children merely to position the negotiations, even though they do not really wish to limit the other parent’s access to the children. Bluffing and using the children as negotiating leverage is not part of the collaborative process.
Support and Unreported Income
Income is an important factor in determining support, both for children and a spouse. When one spouse is self-employed, the other spouse may suspect that the other spouse is under-reporting income to the IRS. The reality in both the collaborative process and in the traditional process is that it often simply is not cost effective to try and verify, through some type of forensic accounting investigation, whether the income reported on the spouse’s federal tax return includes all income.
When one spouse merely suspects that the other spouse is underreporting, a delicate situation arises in the collaborative process. Obviously, if the attorney for the self-employed spouse determines that the spouse is, in fact, not disclosing all of his income, and he refuses to disclose it, then the attorney has an obligation to withdraw and terminate the process. If, however, the self-employed spouse maintains that all of his income is disclosed on his tax return, then the spouse who suspects underreporting will have to decide whether to move forward using the income stated in tax returns, or whether to try and negotiate some type of forensic accounting investigation to verify the income, or whether to terminate the collaborative process and move into litigation, or some other option. The spouse who suspects underreporting must balance and weigh her various interests in fairness and justice, her need to be economically secure, her ongoing working relationship with the other spouse, and other concerns specific to her. In many cases, her interests and needs can be met even when there is some uncertainty as to the amount of income the other spouse is earning.
Alimony and Illicit Sexual Behavior
Adultery or “illicit sexual behavior” prior to separation is a bar to alimony if committed by the dependent spouse. On the other hand, alimony is automatic if the supporting spouse commits adultery or illicit sexual behavior. This emphasis on wrongdoing and punishment in the North Carolina alimony law can create problems for the collaborative process.
In other states, it might be relatively easy to agree among collaborative attorneys that an undisclosed extramarital affair is in the nature of “personal” information that, unlike financial information, need not be disclosed as part of the full disclosure provision of the collaborative law agreement. As long as everyone knows that unknown affairs are not part of the full-disclosure expectation, parties could make a rational decision whether they wanted to enter the process with this understanding. In North Carolina, however, an affair can have dramatic economic repercussions under the law. An affair therefore is arguably information that crosses the line into information that must be disclosed as part of the full disclosure process. Collaborative practice groups in North Carolina therefore have to decide whether a secret affair can be kept secret in the process. There seem to be arguments on both sides of the issue.
Persons who have discovered that their spouse has had an affair may be devastated and angry. It’s important to understand that the ability to “ruin” an unfaithful spouse in court because of an affair is often over-estimated, despite what well-meaning friends and family may suggest. Beware also of lawyers who promise to “take the offending spouse apart.” They are posturing to be retained. The reality is that an affair is given much less weight than the relative financial needs of the spouses by the vast majority of judges in North Carolina.
In the collaborative process, a spouse devastated by an affair will be encouraged to do the necessary grief work outside the collaborative process. Using angry language that blames, accuses, judges, or finds fault during the negotiations will be self-defeating in the collaborative process. Trying to use the affair to induce guilt or shame generally backfires and makes it harder for the “innocent” spouse to get what they want out of the negotiations. People whose spouses have had an affair will typically require extra help in moving beyond the pain and in negotiating effectively. It may be appropriate to consider bringing a counselor or psychologist into the collaborative process.
Timing of absolute divorce—marital settlement agreement first
Claims for alimony and equitable distribution are barred in North Carolina if not brought prior to the entry of a judgment of absolute divorce. So long as claims for alimony and equitable distribution are pending, however, the entry of a divorce judgment does not affect the claims. Since in collaborative law cases, claims are not typically filed in court and would not be pending when a divorce judgment is entered, it is important to understand that the Marital Settlement Agreement should be signed prior to obtaining the divorce decree in order to avoid prejudicing some claims.
As a rule, collaborative attorneys will want to delay even filing the complaint for absolute divorce until after the Settlement Agreement has been signed. Otherwise, a pending complaint for absolute divorce could pressure a party to sign an agreement or be forced to file claims for alimony and equitable distribution in order to preserve the claims.
Equitable Distribution—Date of Separation (or not)
With the filing of an Equitable Distribution complaint in court, the parties are required to begin the process of sharing financial information by court affidavit. The affidavits are consistent with North Carolina law in requesting property values as of the date of separation. Thus, in traditional equitable distribution negotiations, the attorneys nearly always focus on establishing the value of all marital property as of the date of separation.
In the collaborative process, no Equitable Distribution action is filed, and there is nothing to require that the parties establish values as of the date of separation. Depending on how the couple is handling their finances after separation, the date of separation can be a highly arbitrary date, and one that adds needless complexity to the valuation exercise. In many collaborative cases, the parties elect to place values on the marital property based either on information that is most easily obtainable or on the date it will actually be divided. It’s not always necessary to adhere to the highly technical property classification and valuation rules of the statutes. The couple can value the property at whatever amount they agree as of whatever date they agree. Often couples will simply discuss current values and divide the property accordingly.
Alienation of Affections and Criminal Conversation
North Carolina continues to permit the old common law claims of alienation of affections and criminal conversation. Someone with whom a spouse has had an affair can be sued for causing the dissolution of the marriage. The threat of such claims is often used as leverage in traditional negotiations. Such threats are inconsistent with the collaborative process.
It is also prudent to keep these claims in mind when drafting the Marital Settlement Agreement so as to include a waiver of third-party claims when necessary.
Qualified Plans, QDROs, and IRAs
The division of retirement benefits as an incident to divorce under ERISA and the Internal Revenue Code can be quite complicated. It is important to have legal help in dividing a Qualified Retirement Plans (401(k) Plans and Pension Plans for instance). An attorney will need to draft a Qualified Domestic Relations Order.
IRAs are not Qualified Plans. They have their own rules for how they can be divided incident to a divorce. Generally, IRAs are much easier to divide. It is not necessary to obtain a QDRO.
Basic tax implications of payments characterized as alimony or child support
Unless a separation agreement specifically states that alimony is not taxable to the payee spouse nor deductible by the payor-spouse, alimony is taxed to the payee and can be deducted by the payor. Generally, in the collaborative process, couples will wish to optimize the tax savings available through the alimony deduction and then share the savings in some way. In other words, if the couple is considered a single economic unit, and the payor spouse is in a higher tax bracket, then total taxes will be reduced by deducting the alimony from the payor spouse’s income, even though the payee spouse will be taxed on the income. The funds made available by minimizing taxes for the couple as a unit can then be shared as the parties agree.
Conclusion
Discussed in the article are ten of the most frequently encountered legal issues during separation and divorce. There are many more. The collaborative process is unique in providing divorcing couples with full and complete legal help, while avoiding the adversarial court system and a highly competitive negotiation model.
