Latest / Marci talks money (and life) / Understanding the Financial Side of Divorce with Keith M. Nathanson
Transcript
- Marci Grossman (00:11.885) This is Marci Talks, Money and Life. I am Money Marci, and I am thrilled to introduce my guest today, my friend, Attorney Keith Nathanson. Keith practices family law, bankruptcy, litigation, and collections from his office in Southfield, Michigan. Keith is a guy you call when you need legal help. More specifically, he works with collections for both corporations and individuals, credit report and credit score issues, prenups, divorce, custody, parenting time, guardianship, and a whole bunch of lawyer stuff. But with no further ado, here's Keith. Keith Nathanson (00:58.03) Hey, hi everybody. Marci Grossman (01:06.827) So of course, because this is a financial podcast, I am...more interested in any of your financial areas and you cover so many things I'm probably going to have to have you back a few times so that we don't cover everything shallow and I'd like to go a little bit deeper. Keith Nathanson (01:20.332) It works for me. I love to talk, especially if people are listening. Even if people aren't listening, I love to talk anyway, so all good. Marci Grossman (01:28.481) So if you were to say, what are you in the mood to talk about today of your financial aspects of your legal practice? What interests you today? Spin the wheel. Keith Nathanson (01:38.45) The financial ramifications of a divorce might be good place to start. Marci Grossman (01:52.48) That sounds great. So when two people decide, we're done with the marriage, obviously they want to have different attorneys represent them. So one of them comes to you. What goes from there? They knock on your door and say, hey, I want a divorce. Keith Nathanson (02:13.366) So I guess it kind of starts if they both come to me because Michigan recently has started something called collaborative divorces. So if they agree on everything, you can actually collaboratively file a divorce and it sort of minimizes the conflict, well, it's supposed to anyway, and it allows one lawyer to kind of act as the document preparer. Personally, I don't like them because it puts lawyers in a precarious position. If that breaks down, then the lawyer will find himself or herself kind of in the middle of who they represent. And really they can't represent either because you can't really pick a side in that instance. So if we set aside the collaborative divorces for a minute, just talk about when somebody comes and wants to get a divorce. We really don't talk about the causes for the divorce because Michigan has what are called no fault divorces. So for purposes getting the divorce itself, you don't have to prove any sort of fault. So it minimizes the conflict between the parties and you don't have to throw things out there. He said this, she did this, he was mean, she was mean, he cheated, she cheated. That stuff doesn't apply. And when you come into a divorce, really the out of the gate, when you file it where the division of property and debts starts is at a 50-50 mark. And the fault can kind of push that one way or the other because at the end of the day the court has to make what's called an equitable division of property, meaning equitable meaning fair. And the court can adjust that fairness or that equity depending on the situation. So it doesn't usually get pushed very far. People come in often times with unrealistic expectations of, you know, I want 90 % and I want the other side to leave with their tennis shoes and $5 and that's all they get and I get everything else. Never have seen it happen, probably never will see it happen. So we operate from that premise that it's going to be a 50-50 split. And sometimes that division is just as difficult as separating the people in the divorce and separating emotionally as well. Marci Grossman (04:42.881) Now, what is the impact on that 50-50 if one spouse came into the marriage with significantly more assets or one spouse earns significantly more income? Keith Nathanson (04:55.798) So when you come into the marriage with assets, so if you bring a house into a divorce and the house has a value of, they'll just make up a number, $100,000 when you walk in to the marriage. If you own that house prior to the marriage, that first 100,000 out of the house, if it's worth 300 now, comes out off the top and goes back to the person who brought it in. However, if someone brings a home into the marriage and then or assets in the marriage and kind of co-mingles it with everything else in the marriage then typically you're going to go back to that 50-50 if you use the money or the assets in the marital estate and not segregated them. I mean a good example would be is if you have a trust and you come in with a trust that your parents gave you and you take the money from the trust and you throw it in a joint bank account and 10 years later you want to get a divorce and you say wait a second I want that money I brought in from the trust well you've mixed it all up in the pot of goo that's the marital estate you can't separate anymore. But if I keep that trust separate and I don't take that money and use it for the marital estate and keep it as my own I'm most likely going to walk out of the divorce with my trust money that I started with. Of course that gets muddled a little bit if the parties enter into a prenuptial agreement where contractually they agree that party one gets to keep their million dollars of things that they've brought into the marriage, they're gonna get to take their million dollars worth of things out of the marriage provided that the prenup is structured properly, has been maintained properly, and again, you don't have that commingling over the course of the marriage with respect to the assets. Marci Grossman (06:53.581) Now I know when I talk about wills that I tell people because of law changes and whatever else you should be updating your will every five years or so depending on what's been going on in your life because things change and the laws change and whatever else. But do prenups need to be updated when you say maintaining it? Keith Nathanson (07:14.203) No, typically if it is contractually sound when it's entered into, then it's a valid and binding contractual agreement between the parties. So somebody had a certain ball of assets prior to the marriage and they've sort of taken that out of play. With the prenup, that ball of assets is still out of play. If some of those assets have disappeared, okay, they're gone. They don't exist anymore. But I mean there things you need to do so if there's real property obviously you don't want to sell a piece of the pre-nup property and then take the proceeds from that and invest that into marital property because you run the risk of losing that protected status of the assets there. Prenups are really finicky thing that have to be done correctly on the front side. There are some check marks you have to hit when you draft and you execute and present a prenup to somebody before it's signed obviously they have to have the opportunity to take that document to their own lawyer who can look at it and tell them you yeah or nay it was great idea or terrible idea don't sign it Marci Grossman (08:29.677) Okay, so if you're getting divorced, you have different assets. You brought assets in, they have your name on them, and you don't mingle those assets. But while you're married, you have a joint account, and one of the spouses works or earns more than the other spouse. But everything goes into that shared account. So it doesn't matter if that shared account has whatever it has. Theoretically, it's going to get split in the middle. Keith Nathanson (08:56.726) Yeah, much the same as any other personal property or real property, even if one party works and the other doesn't, it's still considered marital property if it's accumulated or acquired during the marriage. Same would work for debt as well. Marci Grossman (09:12.287) And that goes for retirement assets, which are always in one name, so they're never commingled. Keith Nathanson (09:20.046) Right, typically those are divided including employer provided benefits such as a 401k or a Keogh or a pension or a profit sharing plan. So those are actually divided by a court order that gives one half of the contribution from party A to party B. But again, if you come into a marriage and you are 10 years into a 401k or 10 years into a pension and you're married for 10, the first 10 years prior to the marriage would belong to that person solely and just the division would be done to the second half or that other 10 years of accumulation into that retirement plan during the marriage. Marci Grossman (10:13.069) So you need accountants involved when you're doing the legals for divorce. Keith Nathanson (10:17.55) If the state warrants it, yes. Typically the court orders for managed plans like a 401k or a pension or profit sharing plan, there's a separate order that gets entered at the end of the case and then that order is actually served upon the plan administrator and it basically tells them what should be divided in the framework and they do all the numbers internally. Marci Grossman (10:44.909) Would you say most divorces you see are not necessarily amicable, but they're able to work through the things and find that division, or do they all find things to fight about? Keith Nathanson (10:58.7) So,I'm gonna give the lawyer an answer of it depends. It depends how much acrimony, how much conflict we start off with. I think that people start at a certain level of conflict and there are certain people who will magnify that conflict during the divorce. There are other people who will kind of start to move away and realize that they're going to be on their own and maybe they should let go of the anger because it doesn't really serve any purpose. And also money is always a big motivating factor because more fighting, more expensive divorce. More expensive divorce, less money at the end for the parties and eventually, you you wind up, I mean, there's a saying in the law business that the mark of a good settlement is when both parties walk away equally unhappy. You know, eventually you get to a point where the case is mediated or it goes to trial or it's facilitated or there's a flurry of settlement offers back and forth and most of the time people get to the point where they're, you know, they're unhappy and they feel the other side's about as unhappy as they are and they realize that they need to just end it and go away. Marci Grossman (12:20.117) Okay, so the best divorce is the lawyers make the least amount of money? Keith Nathanson (12:24.302) Well, it depends on your definition of best. Not best for me, I mean, to effectuate the divorce, yes, the less fighting and the quicker you can get on your way and live your life, the better off you're going to be. Marci Grossman (12:40.437) I have to imagine when people get to that point of wanting a divorce, there's a lot of negative feelings. They are one or both of them very much ready to move on. So it's probably hard sometimes to get them past that anger to the point of understanding, well, this is affecting the dollars you're going to walk away with too. That you can fight to get a bigger percentage, but it will be of a smaller pie. Keith Nathanson (13:27.838) Correct and I'm really, the percentages just don't vary that much you're talking so for a small divorce estate another five percent, if that nets you another ten thousand dollars and you've had to spend $30,000 in attorney fees to get it, what's the sense? So, I mean, really, I think a lot of it depends on what brings them to the divorce. What's the, well, there are many things, and it's not just one thing that happens one time, but there's usually a trigger event or a catalyst that ultimately brings them to say enough is enough for them. They reach their breaking point, I guess. Marci Grossman (14:21.421) Okay, and obviously if you don't have kids or your kids are grown-ups, it's got to be easier than if you have children under 18 that you're still responsible for when the divorce occurs. Keith Nathanson (14:33.134) It's definitely much easier. mean, having the kids just adds another layer of complexity with custody and parenting time and vacations and child support and who pays for what and when. Pile that on top of trying to divide up your assets and debts and it definitely makes it more complicated. A lot of times that's a lot of the source of the conflict in the divorce. It's less about the money and more about the kids. Marci Grossman (15:06.655) or the dog or the whatever. Keith Nathanson (15:09.026) Sometimes, sometimes, or the silverware set. Marci Grossman (15:15.533) I, from an accounting standpoint, because that's my background and that's my personality and who I am, I look at it and it's like, what can I do to maximize the dollars I get, irregardless of you? So this is what I need, this is what's reasonable for me to have and what I'm reasonably gonna get. It's not worth the time and the effort to get such a small return, but I imagine it's hard to get people to hear that. Keith Nathanson (15:51.842) Yeah, well you are of a rare breed because people do not ever perform that logical analysis. You cannot use the words divorce and logic, generally, in the same sentence. Marci Grossman (16:05.023) I imagine not. As I said, I'm not divorced, so I haven't had to go through that, getting through that emotional part of what that is. Do people come back often to restate their custody, parenting time, or the money that you get for the divorce, the continuing money when you have the custody of the children? Keith Nathanson (16:32.942) So when you get a divorce and you get the final paperwork, the property settlement is final. It's a done deal that you get what you get, you give what you give, you assume the liabilities that you assume. Custody and parenting time and support are always subject to change if there's a change in circumstances. Thankfully, the law usually or for the most part recognizes that and allows people to come back when those changes happen. So depending on the ages of the kids, you're going to be in a much different situation if you've got a couple of preschoolers. I mean, the situation kind of shifts to something else when they start school and then they get to be teenagers or preteen or they get to be seven or nine years old and sports are in the mix. Now you're shifting into another lane and then they get to be teenagers, you know, that's a whole other thing, all on its own and then they get to be towards the end of high school, they become these semi-independent sort of adults and the situation changes again. Typically those are the things that people will come back for when there's those changes. In Michigan, under the law, I'm pretty sure it's statewide, I know for sure it's Oakland County, you're entitled to have your support automatically reviewed every two years. So the support can change based on the number of overnights, if your divorce papers say that you're to get a certain amount, but you're only using 60 % of that and that's the way it's been for three years. Or if the payers income goes up or down or the recipients income goes up or down. Those are all situations where there'll be a change in circumstance or if the health insurance premiums change that could impact the numbers too. Thankfully in Michigan our support is calculated according to a formula that's actually written into the statute. You literally take this formula just plug all the stuff in and it spits out a number. So for a CPA it's beautiful because you can predict what it's going to be. The court can always deviate if there's a reason, but I'd say better than 98 % of the time the court will follow the recommendations or what the guidelines actually state the support should be. Marci Grossman (19:15.297) Well, on the TV shows and whatever else, people are always hiding millions of dollars overseas or wherever, or the pricey artwork, or, how do you deal with that? Keith Nathanson (19:30.398) So here, when you file a case and the other side gets the paper served on them, we mandatorily require a form that requires you disclose all of your assets. I mean, when a divorce case proceeds, you have a phase of the case where it's discovery and you can send out interrogatories, which are questions for people to answer. say, know, where are your bank accounts? What are the numbers? What bank are they at? How much are there in them? You can ask them to produce documents and say, give me your last 12 months of bank statements. But ultimately, if someone hides something and doesn't disclose it, unless you find it, I mean, you can hire a private investigator, some type of person that'd kind of do an investigation to find it. But at least there's a remedy because if you knowingly conceal assets in context of a divorce and the other party finds out, they can come back to court and tell the judge they found an asset and the judge has the discretion to award the entirety of that asset to the other person and take it away completely. So that million dollars that's hidden in an offshore account, you find it a month after the divorce and come back to court, the judge will order that million dollars be turned over to you because you found it. Marci Grossman (20:53.853) wow, so it's a pretty steep game you're playing if you try to hide assets like that. Keith Nathanson (21:01.11) Yeah, and you sign things under oath too, so there's always the penalty of perjury, which is a nice little felony in Michigan. That can have a relatively negative impact on your life to get convicted of it. Marci Grossman (21:17.491) So you are a Michigan lawyer practicing predominantly in Oakland County. Do you have any idea if the laws regarding divorce are significantly different in other states or that's really so outside of your bailiwick you have no idea? Keith Nathanson (21:34.136) So I know a couple other states generally what they do. So California and Washington state are actually community property states. So it's very, very different from Michigan. Community property basically means that anything that comes into the marriage is automatically considered community property and subject to division in the estate. Even if you bring in your trust fund into the marriage, hence the need for prenuptial agreement. Generally, from what I know, most of the precepts that we use here are they're pretty universal. Most states are going to equitably divide property. We have a statute that defines 12 factors for awarding custody to parents. Other states have similar but somewhat different and have more factors or they're expounded a little bit. The court has a little bit more of analysis. Some have less so, you know, from what I say here only applies to Michigan. So your mileage definitely may vary if you're in another state listening to this. So your best advice is to either look up the statute or call a lawyer who does family law if you're considering a divorce in another state to kind of figure out financially where you stand based on your scenario. Marci Grossman (23:09.557) Okay. Do you have any divorce stories that you would be able to share with us? Obviously, any names totally changed, but anything that can happen that was so unique, is worth telling. Keith Nathanson (23:27.534) So I can tell you a quick couple just to illustrate how people just sometimes go out of their minds over insignificant things in a divorce. I had a divorce where the people were fighting over a set of IKEA silverware. I mean, off the shelf, like go there it's in the silverware department at IKEA and they were spending hundreds if not thousands of dollars arguing. They couldn't agree about anything, so this was one of the points of contention and I told the client I said enough just like stop with the silverware. I said if you stop fighting about the silverware I will credit you all the fees spent arguing about this silly IKEA silverware, and not only that I will personally drive to IKEA and buy you brand new in the box, a set of the same silverware if they have something better you could come with me and pick out something you like and she wasn't having it. She wanted to fight, so they continued to fight over the silverware so there that's story number one just about how crazed people get over things Story number two is a little bit better, worse. So I was involved in this super contentious divorce where the parties couldn't get along. I mean, they couldn't agree that this is their right hand or that today is Saturday. They would fight about it. They had, the divorce was going on and on and on. I mean, they couldn't be in the same room together. And so we wound up going to the court over a bird. And I can't remember whether it was a cockatoo or a parrot or I don't remember. It was a tropical bird, a big beautiful bird. Wound up getting an order that said that the husband had to turn over the bird to the wife. They couldn't figure out where to turn it over. So, you know just like like a showdown at the Okay corral we agreed to meet the courthouse steps in front front of Oakland County Courthouse building at noon. So I was near the entrance with the client and the other lawyer walked up with her client and these people got within 200 feet of each other and she started yelling at him. And I could see in his hand that he had a paper bag, large paper bag about this big and I thought to myself this is not gonna end well. This is definitely not going to end well. And they started yelling at each other and yelling at each other. They got a little closer. She started with where's my effing bird? I want my effing bird and he responded back with F you you're a bitch and a whole bunch of other expletives. They got closer and closer. She said you were supposed to bring my effing bird where's my effing bird and he's got a paper bag in his hands I thought god he killed the bird and says gonna hand her a dead bird and we're gonna have have something gone. He goes you want your bird here's your bird and he proceeded to open the bag and off went the bird. Flew away so this tropical bird went off into the horizon, at which point, I don't know who charged who, they started wrestling and throwing punches and then a few seconds, I don't know, I got into that thing where, you know, when you're stressed, you have time dilation. It felt like, you know, like three hours, it probably was like 20 seconds. The Oakland County Sheriff came out and pried them apart and promptly arrested both of them. Which, you know, ties into really good another adage that, you know, I mean, I kind of have tell as a joke to to new lawyers that I mentor, but, you know, it's kind of half true. So it's the three rules of successful law practice. So, you know, rule number one is that get your money up front. Rule number two is that the client goes to jail, the attorney goes to lunch. And rule number three, of course, is get your money up front. So, you know, it kind of ties in. And for those of you out there who wondering, I got my money up front, so all good. And I did go to lunch, so. Marci Grossman (27:59.437) I have to imagine that the party that released the bird had additional charges or something against them. Keith Nathanson (28:13.816) Who knows? I haven't told you that story before. Marci Grossman (28:16.877) It sounds familiar, though I have to say I didn't know if it was going to be a dead bird or a free bird. Keith Nathanson (28:23.582) Yeah, that's just two of many. I've been doing this for 35 years, so my tiny little nugget of a brain is just filled with war stories. Marci Grossman (28:35.839) Right, but I have to imagine that, you know, someone says, okay, you get the plate, and then they go and break the plate, that there is some fine, some penalty, whatever, but with both of them getting arrested. I feel bad for the bird because this is not a tropical climate here in Michigan. Keith Nathanson (28:57.282) Yeah, the whereabouts of the bird are still unknown to this day. Marci Grossman (29:00.971) Right, and if it's a parrot, could be fairly long-lived. And I don't know how long a cockatoo lives, but parrots live pretty long. Keith Nathanson (29:10.38) Yeah, well, who knows? Fate unknown of the bird. Parties eventually got divorced. They're probably still fighting to this day. Thankfully, I'm not involved. Marci Grossman (29:21.749) When you started practicing law, did you think you'd be handling divorce in these types of manners or did you have a different kind of plan in place? Keith Nathanson (29:31.629) So my original plan out of law school was to take the patent bar because I have a very, well as you know, very strong science background, well for those of you don't know, so I have a double bachelor's in genetics and cellular molecular biology and way back in the days before electricity when I went to college, you know we used to have to scribe everything on a stone tablet because Marci Grossman (29:58.493) FYI, he's much older than I am. Keith Nathanson (30:00.77) Yeah, because paper hadn't even been invented yet. Eventually they invented the printing press and things got a little easier. But back then, I got out of college right at the cusp of bioengineering. I like right on the forefront of computers and bioengineering. And so I originally planned to take the patent bar and I was really had my mindset that I would go write patents for pharmaceutical companies and bioengineering firms. Although I don't think many existed at that time, but I kind of had an idea of what I wanted to do. But I got talked out of that and went into a firm where we did and bankruptcy work so I just kind of got you know and I had been clerking there anyway so just kind of dove right in and dove into the fray. And here I am decades later still still in the fray it explains you know why all the hair is missing here the you know this this is like stress baldness I like to call it Marci Grossman (31:06.157) You do know I'm only sharing this as audio, you could tell people you had a full head of hair and nobody would know the difference. Keith Nathanson (31:13.298) yeah, okay. I have a full head of hair. That is not true, but I would like you all to imagine me with a full head of hair, because if you guys all envision it, then of course my hair will grow back. Marci Grossman (31:24.843) Well, you regularly get mistaken for Jason Momoa, so, I mean... Keith Nathanson (31:28.268) Yeah, exactly. Not so much. Marci Grossman (31:34.113) Well, but you've made a nice living doing this and it is certainly a service that is needed. And so you do good things for people who need you in a very stressful time in their lives. Keith Nathanson (31:49.294) That's true and probably within the last, I don't know, decade or decade and a half, I've come to realize that while ethically I have an obligation to my clients, also concurrently in divorce cases where there are children, I really feel that I have an ethical obligation to make sure that the kids are okay, or as okay as I can facilitate during the divorce and getting the people to the other side. Really that's the thing that has really begun to concern me. You know, over that period of time, maybe it's been 20 years, I don't even know how long. So I kind of, while I fulfill my ethical duty to the client, I always keep, you know, half an eye focused on the kids as well because they're really the ones who suffer the ramification of all the negative goo that happens in a divorce. Marci Grossman (32:53.853) That's important and there's so much value in what you do. It would be lovely if we could wave our wand and everyone only married the perfect person for them and there were never any divorces and fortunately there'd still be a whole lot of law for you to practice. But we can't change that. The best we can do is the best we can for all the parties involved in it. Keith Nathanson (33:19.596) No, that's true. Marriage is a fragile thing. It is a fragile spinning wheel that you need to constantly put energy into to keep it spinning. If I just, you know, wax about this for a second, I think that maybe people lose sight of that over long term marriages or sometimes not even that long term, they lose sight of it that marriage is not just a self-perpetuating thing that just keeps going on its own. It's not like a cart you push and it rolls forever. You've to continue to put some energy to keep pushing it forwards, otherwise eventually it stops rolling. Marci Grossman (34:07.863) Do you ever have people start divorce and then realize that maybe they should be doing counseling or should be having these conversations with each other? Keith Nathanson (34:18.732) really depends. know, it's hit or miss. Some have tried counseling ahead of time. Some just, by the time they get to the point where they get to my front door of my office, they don't want to even consider it. I do, you know, based upon what I hear from people, I do recommend, you know, that they get some individual counseling because at the end of the day, you know, there's no negative stigma associated with it. And if it's somebody that you can talk to, who's not judgmental, who will listen to you and allow you to kind of work through it all and get you to a better place, then why not? That's kind of my latest take on therapy. And of course, with kids better than 90 % of the time, I would say almost 100 % of the time, I will recommend that the parents get the kids into some kind of therapy or counseling so that the kids have a neutral party that they can, once they establish some type of rapport or trust with, they can express themselves freely without judgment. Marci Grossman (35:28.237) I really appreciate your time here. For my audience, Keith is an attorney located in Southfield, Michigan. What is your company name? Keith Nathanson (35:41.77) it's Keith M Nathanson PLLC. Marci Grossman (35:44.799) Okay, what we've given today is a conversation about finances and things that might be considerations in divorce, but this is not in any way legal advice. This is for educational purposes, and if you are in a divorce, considering divorce, whatever, you need to talk to a lawyer about your particular situation. And of course, if that's where you happen to be, you may want to call Keith. I appreciate your time here to give us your wisdom and I look forward to having you again to talk about some other aspects where law and finances intersect. Keith Nathanson (36:25.196) Be happy to do it. It's always a pleasure to get to talk to you. Marci Grossman (36:29.489) you say the kindest things. And to all my listeners, thank you so much for being here. You got this. See ya.