Top 10 Traps of Handling Your Own Divorce Settlement

Many people want to negotiate their separation and divorce without using an attorney.  The reasons typically revolve around saving money and/or the fear of evil attorneys creating an unnecessary fight.

I am all for people resolving their own disputes whenever possible.  But, in divorce, there are traps waiting for people who want to do it themselves.  Here is a list of 10 the most common traps:

1. Failing to account for capital gains taxes

A lot of people just divide up assets or debts without regard to this issue.  This can provide a nasty surprise if capital gains taxes reduce the value of the assets that seemed “equal” when you agreed on them.

2. Failing to structure financial terms to avoid taxes

Giving money or assets to your ex-spouse can bring on tax liability.  Withdrawing retirement funds can trigger tax liability.  Divorce situations can be excluded from some kinds of taxes, but only if handled correctly.

3. Retirement account division

Dividing these accounts is complicated.  There are federal, state and/or tax laws that must be satisfied to avoid bad surprises down the road.  Special orders from a court may be required to divide up a retirement account.  Also, planning for what happens if the owner of the retirement account dies after separation, but before the account is divided is complex, but crucial.

 4.    Small business and family business ownership

Small business and family owned businesses present special considerations for a divorcing family.  Failing to properly address these issues can lead to future problems with ownership, liability on business debts and other issues impacting the business.

 5. Planning for income changes in support obligations

I have talked to many people who tell me that they handled their own separation agreement and agreed to pay “x” dollars a month but now cannot pay it because they lost a job or took a pay cut.  This is a great way to end up in court and financial trouble.

6.      Agreeing to obligations that are not legally required

You may inadvertently agree to do things that no court could require.

 7.     Agreeing to things that are not enforceable

You may depend on your spouse’s agreement to do something only to later discover that you cannot actually require them to do it under the law of your state.

 8.     Failing to formalize your agreements properly

Creating a legally enforceable divorce settlement agreement in North Carolina is not as simple as a handshake or even a just a written signed agreement.  If it is not done correctly, your agreements may fail.

 9.      Agreeing to numbers without budgeting or planning

Too many people agree to financial arrangements without having the slightest idea of how those arrangements play out long term, or sometimes even short term.

 10.     Failing to structure spousal support for tax purposes

There are very specific tax laws and state laws that apply to spousal support payments.  Failing to structure spousal support payments appropriately can lead to surprising tax and legal ramifications years after you thought your divorce was put to bed.

 If you are facing separation or divorce, then consider consulting a qualified family law attorney before you finalize an agreement.  An ounce of prevention is often worth a pound of cure.

The Echo of Divorce

I heard the phrase “the echo of war” for the first time this week.  An expert on Chechnya was discussing the Boston Marathon bombings as a possible “echo” of the military conflict in Chechnya that began almost 20 years ago, the Iraq Wars or the war in Afghanistan.


That got me to thinking about the “echo of divorce”.  These military conflicts, this expert explained, created resentments, hard feelings and explosive emotions among some Muslims.  Once created, these volatile feelings were very hard to contain.  So, years after these conflicts began, we may have heard an echo of them in a most unexpected place.


Divorce is simply another form of conflict.  It too has an echo. 


And, the echo of divorce can also be heard decades after the fact and in very unexpected places.


The echo of divorce can be heard in your children’s emotional well-being, school performance, future romantic relationships, and adulthood.


It can be heard in your family life, financial future, your future romantic relationships, your emotional well-being and friendships.


It can be heard in your place of worship, job, school, and social circles.


It can be heard at holidays, birthdays, graduations, weddings, delivery rooms and custody exchanges. 


But, once an echo is created, it is difficult to control.  Just as no one could have foreseen the events in Boston, you will have trouble predicting when and where the echoes of your divorce will sound. 


The good news is that you can largely control the sound and volume of the echo of your divorce.  In my experience, noisy divorces create louder, longer more negative echoes.  Quieter divorces create lower volume, shorter and more positive echoes.


Determining the echo of your divorce starts with finding a divorce process that reduces anger, animosity and acrimony in favor of respectful dialogue. Diplomacy over combat. It proceeds by not wasting time on argument, but instead invests your valuable time and money in problem solving.  It finishes not by crowning the “last man standing”, but in a dignified de-merger of two whole individuals. 


Decide early on what kind of echo you want your divorce to have, and choose your divorce process accordingly.  Otherwise, you may be dealing with unpleasant echoes for a long time.

Bright Spots Are Key to Divorcing Well

Did you know that humans are psychologically predisposed to notice and dwell on problems instead of solutions? 

How does that play into divorce?


This phenomenon is explored in Switch:  How to Change Things When Change is Hard.    The Heath brothers wrote this book to give people a user-friendly paradigm for changing habits and dynamics between people and within organizations.


The book discusses research indicating that humans are more attuned to negative than positive experiences in almost every area that has been studied.  


They suggest that the best way to overcome this challenge is to look for the “bright spots”.  Bright spots are places or times when things went well.  The skill is to not focus on the times that things went poorly, but to focus on the times when things went well


It is, in essence, the difference between learning what to do, instead of what not to do.


Why would a divorce attorney care and what good would it do for you?


I spend a lot of time helping clients learn to change unhealthy dynamics with their spouse and sometimes even their kids.  We have to help them resolve issues that have likely been causing argument for years, and may have even led to the divorce itself:  Parenting differences, money differences, communication problems, etc…


But, even in really difficult cases, the spouses are able to have calm, respectful, productive conversations about something.  Those conversations are the bright spots for families in a divorce.


So, the key is to look at those good conversations and figure out what goes right in them.   Then, we can try to duplicate the things that make those conversations go well. 


All too often, attorneys and clients focus on the problems.  In my experience, that doesn’t get you very far.


It’s the focus on what’s working (no matter how small or how hard you have to look) that really helps. 


If you are facing a divorce, and conflict between you and your spouse is a problem, then try to find a bright spot.  Find a conversation or topic that you don’t fight about. Figure out why that conversation went well.  Then try to duplicate that in your next difficult conversation. 


In divorce, finding the bright spots will help pull you toward the positive changes that you both want to see in your lives.  

Can I Be Common Law Married in North Carolina?

Well, that is a fine question.  The answer is both yes and no.  (In law school, you learn to literally speak out of both sides of your mouth at the same time.  Usually, it is a third year course. That’s a joke. Sort of.) 


First, it is important to understand what is meant by the term “common law marriage”.  Common law marriage is simply stated a state government recognizing a couple as married after they have lived as though they were husband and wife for some period of time.  It is different than a traditional marriage in that it does not require the licensing and ceremonies typically required to get married under the law.


North Carolina does not recognize couples as being married under a common law marriage theory.  So, if you live in North Carolina, then no matter how long you live like a husband and wife, without a marriage license and ceremony, you will not be considered married by North Carolina.


But, there is a big loophole to this rule.  Other states do recognize common law marriage.  And, North Carolina does recognize common law marriages created in other states.


This issue was recently discussed again by the North Carolina Court of Appeals.  The Court of Appeals reaffirmed that while a common law marriage could not be created in North Carolina, this state would recognize a common law marriage created in a state where common law marriage is legal.


So, if you lived in a state that recognizes common law marriage and met the common law marriage requirements of that state, and then moved to North Carolina, then this state should recognize you as married.   


If there is a dispute as to whether you are common law married under the laws of another state, the North Carolina court has to apply the laws of that state to determine if you are considered married in this state.  For instance, in the most recent Court of Appeals opinion on this topic, the North Carolina court had to apply the law of Texas to determine whether the couple qualified as common law married under Texas’s rules before they moved to North Carolina.


So, why does this matter?  If your common law marriage from another state is found to be valid, then you can be divorced in North Carolina and you can utilize the laws regarding equitable distribution and spousal support. But, this state’s divorce, equitable distribution and spousal support laws do not apply if a common law marriage was not valid in another state.  

If you have questions about whether you can be considered married under the law of another state, consult a family law attorney in North Carolina, or in the other state, to get more information.  

The Truth About Pre-Nups

The recent New York case striking down a pre-nuptial (aka “pre-marital” or “pre-nup”) agreement may scare some people who have signed or are thinking of creating pre-nups in North Carolina.


So, let’s get the facts out there before this story causes pandelerium (I know that is not really a word, but Jeff Foxworthy made it up and I like it):


North Carolina allows pre-nups and has adopted laws to specifically deal with pre-nups (NCGS 52B for the curious and/or nerdy).  In this state, a pre-nup must be written and signed by both parties. 


A pre-nup can deal with a wide range of legal issues in the event of divorce.  However, there are some important limits to what it can control.  A pre-nup cannot control child support in a divorce, cannot control property held as Tenants by the Entirety and cannot control a spouse’s rights in certain kinds of retirement plans. 


A pre-nup cannot contain provisions that are contrary to the public policy of this state.  For instance, a pre-nup probably cannot contain terms by which a couple agrees to get divorced at a date or event in the future because North Carolina’s public policy is to support marriage, and discourage divorce.


Pre-nups are enforceable in North Carolina.  So, it is generally difficult to get out from under a pre-nup’s terms when you get divorced.  To get out of a pre-nup, a spouse has to show that either they did not execute the agreement voluntarily (more than “I had my reservations…”), or a that the agreement is extremely unfair (not just a little) and that the other spouse failed to disclose something important in negotiating the pre-nup.  It is important to note that if everything was disclosed prior to signing the pre-nup, then it likely does not matter how unfair the pre-nup may be.  It will still be enforced. 


It is important for both parties to understand the uses and limitations of a pre-nup prior to signing the agreement.  If spouses understand them well going in, then they are much less likely to experience surprises like the one chronicled in the Today Show story. 


If you are interested in pre-nups or post-martial agreements (for people who are married and want to stay married but want to make decisions in advance about what would happen if they divorce), then Collaborative Divorce is an ideally suited process for arriving at your agreement without damaging the relationship.  

What North Korea Can Teach You About Divorce

In 1950, North Korea and South Korea got into a fight about their divorce.  North Korea’s divorce attorneys’ (their political leaders, generals and the Soviet Union) strategy for the divorce was to send 75,000 armed troops over the border to work out the divorce.


Feeling threatened, South Korea’s divorce attorneys (their own political leaders, generals and the United States) responded in kind.


After three years of fighting (and tens of thousands of deaths) that did not resolve the divorce, North Korea and South Korea figured out that their fighting had not gotten them anywhere and reached a settlement called an “armistice”.


Flash forward to now.  For 60 years, the divorced countries have been fighting a cold war.  There is a demilitarized zone (“DMZ”) lying between their borders that neither country occupies.  But, each country has built up a large force on their side of this zone and maintained it for 60 years. 


During those 60 years there have been countless insults, threats, missile tests, shots fired across the DMZ and crises in which all out war was contemplated.  It has been an uneasy peace.


So, you ask, what does this have to do with you? 


If you are looking at a divorce, one tactic available to you is the North Korea option:  Garner a massive force and launch an all out war on your spouse to try to resolve the disputes.  Like North Korea, you may find that after years of combat, you are no better off, but tired of fighting.  You may both win some battles, but nobody is winning the war. And, you may find that the best you can do after all of that fighting is to create a DMZ of your own; an area where you don’t actively fight, but you aren’t actively seeking peace.  Typically, your kids, friends and other important people live in this area. 


Further, it is fairly common for the North Korean option to lead to events like those of today, when one of you finally forgets what the war cost you, rejects your tenuous peace and picks another legal fight. 


After 60 years, North Korea is in the same position it was when it all started, and nothing has improved.  Their ex-spouse, South Korea, still occupies the vast majority of their energy, money and efforts.  They are still embroiled in the same arguments they had 60 years ago.  They have not actually resolved anything; they have just taken a break from the active fighting, while continuing to devote their time, energy and money to arguing with their ex-spouse. 


And, now, today, 60 years later, they are reinvigorating the fight that they got themselves into so long ago.


If you are considering a separation and divorce, give some long hard thought to whether you want to employ the North Korea option.  If you think that situation has worked out well for them, then by all means move forward.  But, if you see the futility in that strategy, and the destruction that got them nowhere, then give some thought to diplomacy in your divorce.  Look into Collaborative Divorce and mediation.

Why You Should Care How Other People Get Divorced

Divorce affects us all, whether it is our divorce or not.  And, ugly bitter divorces impact us all far more severely than amicable, respectful divorces.  We all stand to benefit if other people handle their divorces better.   

Ugly divorces impact us in very real, practical, every day ways.  For instance, consider these scenarios:

Your child’s teacher is getting divorced.  Their spouse is the breadwinner and has told them that they refuse to help out financially.  And, the spouse has filed a custody action seeking sole custody of their children. How well do you think that teacher is focusing on your child with that kind of threat hanging over their head?  Is your child getting the attention they need for those end of year tests?  Is that teacher so stressed that they are short with your child in class?  Are they so distracted that they are not noticing that your child is slowly falling behind in class?  Did they forget to nominate your child for that award that would look great on a college application?

Your neighbors are getting a divorce. They fight over custody of the kids.  They each approach you to testify for them.  One wants you to testify about the Christmas parties where their spouse drank too much in front of the kids.  The other wants you to testify about the time their spouse cursed at the kids in front of everybody.  You get a subpoena to appear in court to testify.  You have to take the day off for court, the one day that you have to be at work because the President of your company wants to hear the update on your ongoing project work.  

Your neighbors separate and hire litigation attorneys and start a lawsuit. Due to the cost of the fighting in court and attorneys fees, the couple has to sell their house.  The court orders the sale, and the house is sold for $30,000 less than the market price because the parties just want out.  You want to open an equity line on your home, but you can’t qualify because their short sale lowered the appraisal for your home.

Same scenario as above, but your kids are best friends with your neighbors’ kids.  They’ve lived next door to each other for 10 years, and have played together every day for 10 years.  Now, their best friends will be moving away.  Your kids are devastated and you have to drive 30 minutes round trip just so your kids can play with their best friends who used to live next door.

Your co-worker is getting divorced.  It’s ugly.  Their spouse is asking for thousands of dollars a month in alimony and/or child support.  Their retirement is going to be gutted.  They’ve been accused of abusing their children in an effort by their spouse to gain custody of the kids.  Social Services visited their home.  The two of you are in charge of a huge software development project.  They are so distracted that all they can think about is the divorce, whether they are going to lose their kids and how they will support themselves if they have to pay a large amount to their spouse.  Weeks go by and they’ve accomplished little to nothing on the software project.  Nonetheless, your reputation is on the line if the job doesn’t get done.  Guess who is going to be working all hours to pick up the slack?  You.  Guess who isn’t a huge fan of you working all hours?  Your spouse and kids.  Guess where there is new marital tension spreading like a virus?  Your house. 

You are a financial professional.  You manage investment and retirement accounts for families.  Your clients have $500,000 in investments with you.  Your clients separate and hire attorneys to get divorced.  They own businesses and have a complicated financial life.  By the time the trial is over, they have liquidated all but $50,000 of their investment with you to fund the litigation.  You’ve just lost $450,000 from your book of business.  And you know that 40-50% of your married clients are going to get divorced.

You are a therapist.  You’ve worked with a client for 10 years to help them with their depression and anxiety.  You’ve made a lot of progress in that time.  You finally think that they are going to turn the corner and live the life that they’ve told you they want to live.  Then their spouse drops the divorce bomb on them in the form of a lawsuit seeking sole custody, alimony and more than half of their assets.  The Complaint specifically mentions your client’s depression and anxiety as a reason to keep the kids from them.  Despite your best efforts, your client is set back years in their progress. 

Now compare that to a respectful divorce process where the parties are working together to find ways to make sure that they are both financially supported, that their kids get to continue their relationship with both of them, and that they sacrifice as little of their accumulated wealth as possible during the process.  They aren’t threatening each other.  They aren’t asking you to be a witness.  They aren’t impacting your work life. 

You have the ability to influence other couples by letting them know that an ugly divorce is not their only option.  Tell them that Collaborative Divorce and mediation allow people to divorce without destroying their lives, children and finances.  You may be saving yourself a lot of trouble.  

Kardashian Pregnancy Highlights Big Legal Issue


Medical College of Virginia (MCV) Hospital?__SQUARESPACE_CACHEVERSION=1357832809755″ alt=””/

As described in this article, Kardashian is pregnant with Kanye West’s baby (“I ain’t sayin’ she’s a gold digga”, right Kanye?). But the baby was conceived while she was still legally married to NBA semi-star Kris Humphries.  

In California, that means that the law will presume that Humphries is the biological father of the child, even though they all believe and/or know that West is the actual father. 

The law is the same in North Carolina.  In this state, the law presumes that any child born or conceived during the marriage is the biological father of the husband.  This is true regardless of whether the husband and wife are separated when the child is conceived. 

In fact, this is one of the strongest presumptions in North Carolina law and can be very difficult to overcome.  It takes both the cooperation and agreement of all parties and/or some legal wrangling to overcome this presumption.

In my experience, most people are stunned to find out that a child conceived after a separation by someone other than the mother’s husband is legally presumed to be the husband’s child.  Typically both the mother and the husband are shocked.  The biological father can be either upset or ecstatic, depending on his perspective. So, his cooperation may or may not be easy to obtain.

The reason for this law is that the public (often referred to as “the State” in legal writing) has an interest in making sure that there are as few illegitimate children as possible.  The public wants as many children as possible to be legally attached to two parents.  Historically, there was a social stigma to being an “illegitimate” child.  It seems that this stigma has greatly faded with changing social norms. 

However, there is also a strong financial purpose behind the law.  The public (i.e. taxpayers) does not want to financially support children if it can find a father to support the child.  Since every parent in this state has a legal obligation to financially support their children (unfortunately, the law does not and cannot require emotional or actual parenting support), the public tries very hard to find a father for children. 

While new laws enacted in 2012 make it a little bit easier for husbands to fight against this assumption, it remains a very powerful law. 

The bottom line is that married individuals need to be very careful about conceiving children between separation and the entry of a divorce.  Conceiving during this time period creates very serious consequences, usually of the unintended variety. 


How are Collaborative Divorce Attorneys Different?

Frequently, people think of all divorce attorneys as being the same.  Most people assume that we all do the same thing, the same way.  In fact, most people I come across assume that all divorce attorneys are out for blood and live to take everything we possibly can (kids, money, houses, hope, joy, the will to carry on, the right to breathe, etc…) away from the other spouse so that our client can have it.  

I’ve met some of those attorneys.  Their mentality is designed to fit a divorce in court where fighting is the way to a resolution. But, luckily for families that are looking at the very real possibility of a divorce, not all attorneys fit this bill. 

Here are some important ways that Collaborative Divorce attorneys are similar to traditional divorce attorneys:

  • They have all graduated from the same law schools and passed the same Bar Exams
  • They all have the same license to practice law
  • They are familiar with the statutes and case decisions that may influence your case
  • Most currently do, or have practiced in traditional divorce cases prior to adopting the Collaborative Divorce negotiation process
  • They can draft Separation Agreements, Consent Orders and other documents necessary to formalize a divorce agreement
  • They can represent you in getting an actual divorce judgment from the court

But, obviously, there are differences.  So, here are some of the most important ones:

  • Collaborative attorneys are specially trained to administer and carry out the Collaborative Divorce negotiation process
  • Collaborative attorneys are trained to both listen and communicate differently than traditional attorneys
  • Collaborative Divorce attorneys are specifically trained to work with mental health professionals and financial neutrals to create the optimal divorce resolution for each individual family
  • Collaborative attorneys are specially trained to identify and manage (but not treat) the emotional issues in a divorce, instead of ignoring them or making them worse
  • Collaborative Divorce attorneys, by law in North Carolina, cannot go to court with you once you have begun the Collaborative Divorce Process (except for obtaining an actual divorce judgment).
  • Collaborative Divorce attorneys believe that the best way to get their client what they need is to also work towards getting their client’s spouse what that spouse needs
  • Collaborative attorneys will not threaten, leverage, coerce or demean your spouse or their attorney
  • Collaborative Divorce attorneys do not look for “evidence” to “nail somebody to the wall”; they look for data to help clients make informed decisions
  • Collaborative attorneys work with an eye toward preserving the family’s financial resources in the divorce, not just one person’s
  • Collaborative attorneys work with the goal of preserving the family’s ability to function effectively after the divorce, especially when children are involved

There are other important differences between traditional divorce attorneys and Collaborative Divorce attorneys.  But, these lists should give you a good summary of how working with a Collaborative Divorce attorney is different than working with a traditional divorce attorney 

If you want to learn more about the differences between Collaborative Divorce and a traditional divorce, contact me or call me at 919-573-4860.  

Making Divorce Decisions in the Face of Uncertainty

“How Do I Know if I’m Making the Right Decision?”

This is one of the most common dilemmas that people face in negotiating divorce, custody, alimony, equitable distribution and child support issues.  In fact, the fear of making the wrong decision can paralyze people and prevent them from making any decisions.  

In my last blog post, I talked about the negative impact of indecision.  The fear of making the wrong decision is one powerful fear that feeds indecision. 

However, in a divorce context or any other, making decisions in the face of uncertainty it is critical. 

The fact of the matter is that there are poor, better and best decisions.  But, there are rarely right and wrong decisions.  There are great decisions that turn out poorly and terrible decisions that work out well.  No one has a crystal ball, and even the best analysis and prediction can be laid waste by future events.  Life, as they say, is uncertain. 

Nonetheless, decisions must be made.  The best way that I know to handle the discomfort of making difficult decisions in the face of uncertain outcomes is from the book Difficult Conversations by Douglas Stone, Bruce Patton and Sheila Heen of the Harvard Negotiation Project. 

These authors give the following advice: 

Don’t spend your time looking for the one right answer about what to do.  It’s not only a useless standard, it’s crippling.  Instead, hold as your goal to think clearly as you take on the task of making a considered choice.  That is as good as any of us can do.

That is tremendous advice in both divorce and life.