Divorce Rich with Jacki Roessler, CDFA
Welcome to the Divorce Rich Podcast! Join your host, highly sought-after speaker and experienced Certified Divorce Financial Analyst, Jacki Roessler, CDFA in this engaging and down to earth show. Along with her guests, Jacki offers clear and detailed advice to improve your financial decisions before, during and after divorce so you can survive divorce rich! New episodes are posted every Thursday! You can reach Jacki through her Michigan-based firm, Roessler Divorce Consulting, located at 600 S. Adams, Suite 300, Birmingham, MI 48009 or by email at jacqueline@roesslerdivorce.com.
Divorce Rich with Jacki Roessler, CDFA
Separate vs. Marital Property with Divorce Attorney Alisa Peskin-Shepherd
Dividing property during a divorce can be a contentious topic for many couples. Today our guest is Family Law Attorney and Mediator Alisa Peskin-Shepherd. Alisa specializes in looking at what is presented to her as well as what is possible while practicing family law and conflict resolution. She will share her best practices for those navigating property issues during divorce.
Resources:
- Find more information on Alisa Peskin-Shepherd, click HERE.
- To schedule an intro Zoom or phone call with Jacki, CLICK HERE
Visit us at https://www.roesslerdivorce.com/ to learn more about Jacki's practice and to find valuable resources for your case.
Welcome to the Divorce Rich Podcast. I'm your host, jackie Ressler. I've been a certified divorce financial analyst for 28 years helping clients and their attorneys navigate the often complex and confusing financial issues in divorce. If you're in the process of, or considering divorce, now is the time for you to take a deep breath and give yourself permission to find clarity on the financial issues you're facing.
Speaker 2:Rich means many things to many people. I believe the best definition of being rich is someone who has access to many resources.
Speaker 1:Along with my guests on this podcast, I will be bringing you a wide variety of information so that you can make sound and informed financial decisions for your financial future.
Speaker 2:Hi, this is Jackie Ressler. Welcome to the Divorce Rich Podcast. This is one of our legacy episodes. It's an episode from my previous podcast and I'm very glad that I get to repost it here. It has such good information and I was able to interview a Michigan family law attorney, elisa Peskin-Shepard, on the issue of separate versus marital property, which is very confusing. There's a lot of gray and she provided some fantastic information, so I hope you enjoy. Hi everyone, welcome back Today. This is Jackie Ressler and I am very excited to welcome family law attorney and mediator Alisa Peskin-Shepard. Alisa is an amazing family law attorney. She has a very unique approach to family law and, again, I feel very lucky that we are able to tap into her brain to get some important information on the topic that we're covering today. So welcome, alisa. Thank you, jackie.
Speaker 3:I'm so happy to be here with you today. I always love talking with you. We always have fun together.
Speaker 2:Yes, that is absolutely true. Can you tell our audience a little bit about how your approach to family law is different?
Speaker 3:possibilities could be. So when I'm talking to a client I don't pigeonhole them into a certain hole and say this is the only option you have. I like for my clients to be able to know what all of their options are in how they can go about getting divorced, because there are different ways and also I try to bring in more innovative ideas. So one of the more innovative approaches I'm taking right now is training that I've been doing in the insight approach to conflict resolution, where I'm more curious about what my client's concerns and worries are. So that's just a whole nother approach and we could probably do a whole nother.
Speaker 1:Yes, we should.
Speaker 3:It's just part of not being afraid to look at new ways to handle this very difficult time in people's lives and try to make it better for them. I think that that is definitely unique.
Speaker 2:In the years that I've been working in this arena, I think that very often, attorneys who are as experienced as you are sometimes get into a rut of this is how I always do it and not thinking about new ways and new approaches to resolution. So I absolutely agree that that is unique. The topic that I wanted to discuss with you today and pick your brain about is property. So, just for our audience, we are discussing property in Michigan and although there might be crossover similarities in other states, every state is a little bit different in how it treats property. So that's just a disclaimer for anybody listening. Can you start us off by talking a little bit about property and divorce in Michigan and what is marital property and what is separate property? So, just starting off with the basics, sure.
Speaker 3:So when a client comes in, what we're looking at is we are trying to determine what is the marital estate. So to do that, we have to look at all of the property that both couples own or have, whether it's titled in one person's name or another person or the other person's name, or jointly held. We want to know what are all the assets that you have, and marital property is generally understood to be property that is earned or acquired during the marriage, whereas separate property is generally understood to be property that was brought into the marriage or inherited or gifted during the marriage, are inherited or gifted during the marriage. So the marital estate is going to encompass what is marital and that separate property is going to be generally off the table. But there are, of course, different ways that we have to look at that. When people are getting divorced.
Speaker 2:We have to look at that when people are getting divorced. So when you say off the table whatever is in the marital estate, how is that typically divided in our state Right.
Speaker 3:So in Michigan, property that was earned or acquired during the marriage and, being marital property, will generally be divided equally 50-50. Will generally be divided equally 50-50. That is to say, not that each asset is divided in half, but the marital estate as a whole. Each party should leave the marriage with 50% of that marital estate.
Speaker 2:Okay, and so as far as the, I know that there are outliers and exceptions, that maybe it doesn't always end up quite 50-50, but let's just say for our purpose today that the marital estate is going to be divided 50-50. Are there any circumstances where property that would be considered separate property could also be divided when parties get divorced?
Speaker 3:Yes, definitely. So you know, I guess, talking in legal terms, we try to classify property right Is it marital or is it separate? And if it's separate property, we look at it. Should we reclassify it for any reason into being part of the marital estate? So reasons that we might reclassify separate property as being part of the marital estate could be that it was an asset that was commingled with marital assets. Or if there is an increase in the value of that separate property, then that's another reason why that separate property would be part of the marital estate.
Speaker 2:Other reason why that separate property would be part of the marital estate. Okay, so let me give you this fact pattern and you tell me what you think. And again, I know that the line between separate and marital can be gray it's not always so black and white, so I'm not going to hold you to your answer. But let's say you have a long-term marriage, so a couple that comes to they've been married for 20 years and someone got an inheritance 10 years ago and that inheritance has been kept completely separate. Would there ever be any reason that the spouse who isn't the co-owner of the inheritance to invade that separate property? Or is that completely off the table? There's no way that that could be addressed. And the reason I asked that question and I think I could come up with a lot of different scenarios is that sometimes when clients go in to interview attorneys, they walk away with the impression that it's a yes or no answer and so it. Just in this particular situation, would there ever be a reason to invade that separate property?
Speaker 3:Yes. So if I can, just let me just clarify that with the example that you're giving because that person who inherited that property kept it separate and did not commingle it with any marital assets. That is pretty black and white that that is separate property, so it's classified as separate. And the question of invasion invading separate property, which is something that we can do in Michigan we can invade separate property when there is a need. The marital estate is not sufficient to provide for both parties or for the other party. And also we can invade if there's been an increase or an appreciation of that asset and the non-holder of that property did something to contribute or improve that separate property.
Speaker 2:Okay, so maybe, for example let's say it's a house what would be an example of property that the non-owning spouse does to make the property increase?
Speaker 3:that could deem that either commingled or cause a reason for invasion, Right that's a good example because if you might buy a house before you get married and let's say you're 25 years old, then you get married, three years later you're 28. So years old, then you get married, three years later you're 28. So that house, when you're in your forties and getting divorced if you're still in the same house I would look at has the appreciation and the value of the house. So from the time that you know party A bought the house and three years later it had some may have had some appreciation and value, but what was the value of the house on the day that they got married house and three years later it had some may have had some appreciation and value, but what was the value of the house on the day that they got married? And then what is the value of the house on the day they're getting divorced or when they're going through their divorce? That appreciation would be considered marital property. Okay, that those three years you know. So whether we would invade those three years is questionable right, it's just three years and whether there would be a need and we would look at the specific facts. So that's the appreciation that is part of the marital estate.
Speaker 3:In a different example, let's say the person had the house for a much longer period of time before they got married. Let's say the person had the house for 10 or 15 years and then the couple were only married for 5 or 10 years. Is there a reason to consider part of the value of the house before the couple got married a marital asset? Or really, what you asked me before is if it was an inherited asset, right? Let's say that one of the parties inherited that asset. So some of the things that could go towards invading it, based on if the other spouse helped to improve the house, made mortgage payments, did the decorating, did the yard work and did something active to help increase the value of the house, that would be a reason again to invade that asset as a whole. If it was not classified, and no part of it was classified as being marital, does that make sense?
Speaker 2:Yes, it does, and so, as I'm listening to you again, I'm reminded why this is such a complicated issue. Because it's so complicated. I hope that people that are listening to this episode, if there's one takeaway that I wish everyone could have, it would be that this is a very gray area and there aren't definitive answers always between what is separate and what is marital, and that's why it's really important to have those important conversations with your attorney. I was reading I love your blogs. I was reading a recent blog of yours on gray divorce, which is a phenomenon that I don't know if all of our listeners have heard of, so maybe you could explain a little bit about what that is. But I was reading your blog about how much more complicated separate versus marital property issues are in gray divorce, so can you talk a little bit about that?
Speaker 3:Yes, so first I'll explain a little bit about what a gray divorce is. Explain a little bit about what a gray divorce is. Gray divorce is a trend and a term that was coined probably 10 or 11 years ago when, unbeknownst to me, I was. A gray divorce. It doesn't mean somebody who's old it's not like people who are old, but it is older adults. So people who are 50 and older are seen as being people who are in a gray divorce, just because of the issues that we're dealing with.
Speaker 2:Once you're 50 and older, your children are usually older and maybe in college by that time we're looking at different issues, and so we've classified that category of adults in terms of great divorce Right, and I think, with the people living longer too, that we have a lot a larger percentage of people that are getting divorced are older people that might have been, in the past, satisfied to just well, I'm 70 or I'm in my late 60s and I'm just gonna suffer for the rest of my time. Feel differently about that now.
Speaker 3:Right, it definitely all became a trend because we are living longer, right, we are living a lot longer, and I used to describe it as divorce used to be seen as a virtual death, right. So I mean, I'm sorry, divorce is a virtual death and if you are going to get, you know why. Divorce at 60 or 65, when most people didn't live much past that in the old days. Now we get to live to our 80s, 90s, 100. A friend was talking to me about her relative who's 114 years old. Oh, my goodness, wow, yeah, but not married.
Speaker 2:That puts things in a different perspective. So how is it different? How do you I mean, do you see more separate property issues in gray divorce than you see for younger couples?
Speaker 3:I do, and that's in two categories of people. Those people have been married for a long time 40 years, 30, 40, 50 years, and also second marriages or third marriages. So that's another area. But in terms of the first category, where it's one marriage and now they've been married for 40 or 50 years and they're getting divorced, mostly in the retirement accounts, we see a lot of issues about separate property property, and I would also say that again, it's not black and white. Like you said earlier.
Speaker 3:For people who get married in their, let's say, in their early 20s but are getting divorced when they're in their 40s or 50s or 60s, I don't see as many separate property issues.
Speaker 3:It's mostly for people who got married let's say they were 28, 29 or in their 30s, had been working a number of years, maybe bought a house and then got married. Those are the cases where I see more separate property issues. For the gray divorce category, and when I'm talking about like, let's say, for instance, in a retirement account, somebody had been working for GM since they were 25, got married at 35. They had built up a good retirement by the time they were 35. Now they're 60 and getting divorced and they want credit for what they had accumulated prior to the divorce right what they had accumulated prior to the divorce, right Prior to the marriage. Because marital property is that property that is earned or acquired during the marriage. So sure, the 30 years that they were married, everything that grew during that time, would be considered marital. But those first 10 years that that person contributed to their retirement account is not marital, it's separate property.
Speaker 2:If that person is getting divorced and they want to claim, like you said, that everything that they had when they got married is their separate property that they should get a credit for and they don't have that account statement, it might be really difficult for them to find an account statement.
Speaker 3:Right.
Speaker 3:So we're talking about how we classify and how assets are looked at and what is the legal terminology. But in practicalities, if you don't have a statement from what the value of your account was and what the assets in your account were when you got married, you're going to have a very hard time proving. It's one thing to say, well, I had this, but we're talking in a court of law. You have to prove what you had and you have to show, be able to show the difference between what you had for 10 years and what it was on the date you got married and the growth of that property, the growth of that asset, the the, let's say you had, you know, $10,000 when you got married in your retirement account. Well, now you've been now, for the next 20 or 30 years, you've contributed and your account has grown to 400,000.
Speaker 3:So what is the value of that 10,000? Is it just $10,000? Which is something that used to be. You know, we used to think it was just $10,000. But over time, the trend is that we look at that $10,000 and many people want to try to determine what is the value of just that $10,000 now, 30 or 40 years later, when I'm getting divorced. That's what makes it really complicated and that's when you really need to bring in a financial expert to help you determine either what the value is, or is it even worth trying to figure it out. What do I need to figure it out? That's where your financial expert, that's where I would definitely bring in my financial expert.
Speaker 2:And that is, I've certainly had a lot of cases like that. In fact, I've had a case or two with you like that. Yes, you have.
Speaker 2:Where that was an issue and that again becomes such a gray area because it all depends on what kind of records you can get your hands on and if you can see how the money was invested. If it just sat in a bank account and earned a little bit of interest, that's really easy because then you can say, okay, this account earned 3% interest and it was never moved. Most people are moving their money around inside of their 401ks, inside of their retirement accounts, and they're not leaving it just in one position. So then it becomes a lot trickier to trace what part of the earnings that accrued during the marriage were actually attributable to that initial dollar amount. And that's where I see cases end up in arbitration or really sometimes more contentious issues.
Speaker 2:And a good financial expert and a good attorney like you will tell a client whether or not it's worthwhile to even go down that route, because sometimes it's not.
Speaker 2:But for some clients I have a case right now where it is absolutely worthwhile. We're talking about a difference of several hundred thousand dollars between what my client wants to call part of the marital estate and what the other side does. So in that situation it's worthwhile to spend the money to have an expert to back up your claim, but for some cases it's not. And I think that's where it goes back again to you being an attorney that has a unique approach to family law, and I know that you do a lot of collaborative casework and in that context people can agree to things that are not necessarily something that they can maybe point to the legal source of this asset, or I mean again, that's what makes family law so complicated and why it's wonderful to have an attorney like you who's willing to look at things in more than one way. So how would a collaborative case be different in a separate property issue, do you think, than in a traditional litigated case?
Speaker 3:So in a few ways, I think One way would be, first of all, like the discussion that the couple would be able to have about. We can talk about in a collaborative approach, in a collaborative law case, what the law says. But we always tell our clients but that doesn't mean that you have to follow what the law says. So they might not have to go as in-depth in trying to determine what was the value of that asset at the time they got married and what is it worth now. They might not have to go as in-depth because they can reach an agreement together by looking at the entire marital estate and looking at what each party's needs are and what they need in retirement.
Speaker 3:So, while we're not necessarily while we're talking about, maybe not following the law exactly, you can hear in terms of the way I'm talking about it, we're still using the same words, right? We're still looking at it in terms of need. So if it's separate, right, maybe there's going to be an invasion of if we were in court looking at an invasion argument and it might be more contentious versus in a collaborative argument conference room. We're looking at we are still looking at the needs of the parties and not so focused on what was mine is mine, and what is yours is ours, kind of thing Right, that's true, and so it can save people a lot of money.
Speaker 3:It definitely can save people a lot of money and because in the collaborative law process we already have that financial expert involved Right, and that person is a neutral, not for one side or the other, and doing really what's best for the family.
Speaker 2:Right, and there's also a sense I think of reasonableness has more to do with it than in communication, and so I do collaborative work and traditional litigated type work and I know you do as well. I love collaborative cases because people's families walk away more intact when a collaborative case is done. But I think that sometimes people feel like, if they have these separate property issues, that they're not appropriate for collaborative, and then that's not necessarily the case.
Speaker 3:That's not the case. I have a case now where there's a large separate estate and I've had cases in the past that have also had separate property where the couple did not see that separate property the same way it was inherited property. I think this is really where the collaborative process can really be helpful. If somebody has a large inheritance and they've counted on it during the marriage to use for retirement, in a court of law, so long as that party has kept it separate and not commingled it with marital assets, it's going to be seen still as separate, regardless of the fact that the couple was relying on it for their retirement.
Speaker 3:It's certainly an argument to make for invasion, but it's a very difficult argument to make, whereas you know, I, I then switch into my collaborative mode and my collaborative mindset and I and it really is how I look at it.
Speaker 3:I mean I, I think, for I think you need to look at how that inherited property was classified or characterized by the couple during the marriage.
Speaker 3:So you know, anytime you have to argue something in a court of law, you're taking a huge risk and you're going to spend a lot of money defending your position Versus in a collaborative process, you're still going to bring the same arguments forward, but the conversation is so different because you're not pitted against each other, so you may end up in the same place, but the feelings that you have and how you get there are going to be different. There may be someplace else to make up for it. In the case the collaborative case I have right now where they have the couple has a large marital estate and one party has a large separate inherited estate. So if, in looking at it, there's an imbalance in you know, let's say, income, but we were able to look at, look at it both ways, you know, like if and not only looking at it both ways, but without bringing in that separate property that's generating cashflow with that, would the other party, who's not the holder of the separate property, still be okay?
Speaker 2:And Right, so you're able to look at all the areas where money comes into play as a whole and see how it impacts the whole settlement. So, whether that's spousal support, it doesn't have to be so clear cut that this is separate property that we're invading. It could be as long as, like you said, looking at the whole picture.
Speaker 3:Right. And one thing that we didn't talk about yet in terms of separate property becoming part of the marital estate and I don't want to miss this and I talked about the growth was passive or active. Take a retirement account, for instance again A retirement account that you bring into the marriage, that you don't touch and just let grow passively during the marriage. It will be pretty clear that that's a separate asset. But if you are contributing to that account and you are actively making trades in stock and making changes to that asset, the character of that asset could change from separate to marital. Character of that asset could change from separate to marital. So we have to also look at not just improvements, but also passive versus reactive growth.
Speaker 3:Well, now we're really getting into the complicated part of this, but it's important that it's another aspect of how we have to look at the property?
Speaker 2:Absolutely it is, and oftentimes the person who is during the marriage not privy to the account statements they may not know if there's been passive or active growth. And there are also arguments, as you know, about what is passive and what is active. If you hire a manager to manage the account for you, is that and it increases quite a lot were you passive even though there was active management, and how does that interplay? So I personally find this topic to be really interesting. It is, but it's very complex and it's one of those things where clients say to me I think we're just gonna handle our divorce ourselves. And this issue, which is becoming so much more prevalent, is something that people need to educate themselves about.
Speaker 3:Right and nothing is black and white. So I had a case with a very short-term marriage and there was not commingling of the husband's retirement and investment accounts. But those accounts grew tremendously during the marriage, not through any activity of his own, simply because it was good market time and really good investments and it was managed by a money manager and he didn't call up and say do this trade and do that trade. But we ended up arbitrating that case and the arbitrator found that the growth in that three or four years was marital.
Speaker 2:Right, absolutely. I had a case like that years ago that went to trial and went to the Court of Appeals, and it was a case where the husband had worked at General Motors for his entire career, his wife passed away and he got remarried and he got remarried, was married for only five years the last five years of his career and it was during a market upswing, and so the account had increased by about $500,000 in that short period of time, which was a large percentage of the overall account, and my client was the wife and we ended up winning on that and she did receive half of the total increase. But I think it could have gone either way, because, even though we don't have any statutes that specifically talk about how to differentiate separate versus marital, there's a lot of case law that is relied upon that can go one way or the other way.
Speaker 3:And we rely on case law. But in Michigan we don't have a lot of published cases, which is what sets the precedent In the family law cases. Most are unpublished, so that is another area that creates difficulty.
Speaker 2:Right, and I think, again, it just goes back to and many of our conversations always lead back to collaborative as an option. But in collaborative, you can talk about these things, everyone's in the room together and you could say well, these are the reasons why this should be maybe considered marital and these are the reasons why it should maybe be considered separate. What does everybody else feel about that? But again, having all of that transparency about the issues I think really empowers people to make that they're part of the decision for themselves, rather than turning it over to a judge or an arbitrator to decide and letting your lawyers just argue about it. Right, right, well, this was such amazing information. I really appreciate all of your time and your insight.
Speaker 2:I am going to in the show notes, I'm going to put a link to information about collaborative and I'm also going to put a link to your blog post, because I think there's some really valuable nuggets of information for people that have questions, that are considering divorce and just want to gather information. So I will do that. Is there anything that we didn't cover, that you really feel like we needed to cover? What you?
Speaker 3:said just before about people being able to make informed decision and being part of that process. Not leaving it to a judge does empower the people who are getting divorced, and you know it all depends on how you look at divorce. Is it just the end of a stage of your life and you're transitioning into a new stage and you can leave the marriage knowing that you know it had a good 25-year run? Or, you know, are you going to leave with all this animosity and anger and fight about every last asset?
Speaker 2:You always have choices to make Excellent point. Thank you so much.
Speaker 3:Elisa.
Speaker 1:You are welcome. Thank you for having me. Thank you so much for taking time out of your day to listen to Divorce Rich Podcast. If you like this podcast, please follow us on Apple or anywhere that you download podcasts and share this link with any friends or family that you think might benefit from this information.
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