Frack me! What You Need to Know Before You Begin the Stages of Divorce… Specifically, the Equitable Distribution of Marital Property in a Divorce Property Settlement Agreement
During Harold Hamm’s divorce process, those first words were undoubtedly uttered. Especially in relation to to the issue of an equitable distribution of marital property in the parties’ divorce property settlement agreement. More Clampett than Rockefeller, Mr. Hamm is a product of the American dream. The son of Oklahoma sharecroppers, Hamm grew up picking cotton alongside his twelve siblings. Fast forward a few decades and Hamm is the second most desirable bachelor with the initials HH. That is, if you’re looking to be the client of a sugar daddy older than your grandpa.
Today, Hamm is head of the most successful domestic oil drilling company. And since Hamm’s second marriage hit the skids, his blushing bride, Sue Ann, is well aware of this. She is arguing that her man’s $17.2 billion stake in the operation is up for grabs in their family court case. Coppola couldn’t write a screenplay as juicy as the stages of divorce and the equitable distribution of marital property as it exists in this case. It’s a prime example of the dangers of an emotional divorce. Divorce stages vary but usually begin with the emotional stage of grief. This can lead to feeling anger and, eventually, acceptance.
In this case, the emotional stage to feel anger is lasting just a wee a bit longer than normal. The problem with letting emotions into the mix is that a divorce spouse faces many more trials (no pun intended) which then forms court litigation styles, often causing the process to become more adversarial than necessary. Of course, some couples divorce legally in an amicable manner; their issues mediated by a third party. The Hamms? Not so much.
Lesson #1: Don’t Rely on Florida Divorce Forms for an Explanation of What Happens in an Equitable Distribution of Marital Property During the Divorce Process
State laws differ in the law property is distributed under. Some law states that all assets and liabilities are the spouses community property. Like Florida, the magnate’s home state of Oklahoma is an equitable distribution divorce state. In mapping out the stages of divorce, the court analyzes the parties assets and debts to decide if they are marital property. This is necessary to decide what marital property each party gets according to the courts family forms. Simple enough, right?
Maybe if today is opposite day. Zing! Sorry, I’ve loved that phrase since 4th grade and just can’t seem to quit it. Sike is also on the list, obviously ending in four e’s. But, I digress.
Anyway, a wrench is usually thrown into the family law formula and divorce papers when the value of a non-marital asset is enhanced during a marriage. Florida lawyers will tell you that the equitable distribution of marital property a spouse receives is harder to calculate when this occurs.
Lesson # 2: Only a Divorce Lawyer in Florida Can Fully Explain the Stages of Divorce when Working Towards a Divorce Property Settlement Agreement
A Palm Beach County family court then decides whether or not the marital spouse labor expended on the non-marital asset directly led to its appreciation. This marriage marital property calculation goes beyond Florida divorce forms. If appreciation occurs as a result of marital effort, the enhancement in value of non-marital property may transform it into a marital asset. This is different from passive appreciation, where the value increases due to factors outside of a party’s direct control. For example, market fluctuations. Most importantly, passive appreciation isn’t a marital asset.
The burden of proving marital appreciation for equitable distribution purposes lies with the party asserting that a portion of the non-marital property is, in fact, due to active appreciation. If they do, that increase in value becomes part of the equitable distribution of marital property portion of a divorce property settlement agreement.
Lesson #3: Look Beyond Florida Divorce Forms to Statutes to Really Understand how Marital Property is Split in the Divorce Process
Florida Statute 61.075 deals with the equitable distribution of marital property and provides several factors for the court to consider during the Florida divorce process. Florida attorneys know this can be a complicated process when trying to reach a divorce property settlement agreement. This framework of requirements for the division of marital property is as follows:
- Each spouse’s contribution to the marriage. This includes contributions to the care and education of the children and services as homemaker.
- The economic circumstances of the parties.
- Duration of the marriage.
- Any interruption of personal careers or educational opportunities of either party.
- The contribution of one spouse to the personal career or educational opportunity of the other spouse.
- The desirability of retaining any property marriage intact and free from any claim or interference by the other party.
- Contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both marital and non-marital assets.
- The desirability of retaining the marital home as a residence for any dependent child of the marriage, or any other party.
- The intentional dissipation, waste, depletion, or destruction of marital assets after the filing of the petition for dissolution of marriage or within 2 years prior.
- Any other factors necessary to do equity and justice between the parties.
Lesson #4: Once Marital Property is Divided During the Divorce Process, it’s a Done Deal because a Divorce Property Settlement Agreement Can’t be Modified
Back to the Hamms. Due to their highly charged emotions, the one-time life partners are now at each others throats as their stages of divorce play out for the world to see. And boy oh boy, their property settlement divorce is one for the books. The Mrs. claims that the company’s success is a direct result of her ex’s entrepreneurial genius. Of course, she thinks he’s a dirty snake, but hey, anything to make the business a part of their equitable distribution of marital property. Clearly, her success or failure to prove this will make a world of difference to the parties’ marriage marital divorce property settlement agreement.
Meanwhile, Hamm is shouting from the rooftops that he’s no Miss Cleo. His defense is that it would have been impossible to have predicted the Middle East turmoil that caused oil prices to increase. Hamm takes the same line with other things outside his control, like the invention of fracking that sent profits through the roof. Meanwhile, Continental’s shareholders are in a state of limbo as their CEO’s control of the company is in question. Hmm, too bad the board didn’t read my last blog post.
Lesson #5: As a Divorce Lawyer in Florida, I Can Assure You that Leopards Don’t Change their Spots… Especially During the Divorce Process
Perhaps the most interesting part of the story dates back to 1987 when Hamm’s first wife filed for divorce based on allegations of adultery. Specifically, an office liaison with one of Continental’s attorneys, a decade her spouse’s junior. One short year later, the magnate and his former counsel/mistress found themselves in Vegas legitimizing their relationship with an exchange of vows. Who was this surreptitious seductress? You guessed it. Sue Ann Hamm, his former second wife and current equitable distribution adversary. Looks like old Harry’s got 100 problems and karma might just be one….
Don’t Prolong the Stages of Divorce Because of a Failure to Understand the Mechanics of a Divorce Property Settlement Agreement
In today’s entrepreneurial society, one spouse often has his or her own business. Consequently, it’s wise to know the basics of how a closely held company is valued during the divorce process. Unfortunately, Florida divorce forms don’t share this information. Again, this is extremely important because a divorce property settlement agreement can’t be modified.
There are three main ways to value a business:
- Income Approach
- Net Asset Approach
- Market Approach
Income Approach Basics by Jordan Gerber, Esq., Divorce Lawyer in Florida
When someone buys a business, they want to know the income capacity of a company and its ability to spin-off cash flows. Hence, the income approach relies on future income or cash flow. The stream of income is then transformed into a single monetary amount. This is based on the perceived risk of the business, or allowable personal risk that the investor would take on. When a business is profitable, the income approach provides the highest value by using a multiple of earnings. It’s useful for businesses with stable, predictable cash flows and earnings. Especially when future results are expected to be different from the results taken during the stages of divorce. There are several other strengths of using this approach during the divorce process:
- It’s a simplified approach that arrives at an easily determined value.
- It doesn’t generally rely on future projected income.
- The use of earnings or cash flow is possible.
- It effectively takes a value of assets and relies on return on investment.
Alternatively, there can be disadvantages of this approach:
- Income may be artificially reduced, lowering value.
- Reliance on past earnings ignores future growth.
- It overlooks the value of tangible or intangible assets.
- Projected income may be invalid. Unforeseen future events could cause inaccurate results.
The Market Approach to Value a Business for a Divorce Settlement Agreement
This approach is used in the divorce process when people get lazy and want to speed through the stages of divorce as quickly as possible. It assumes that the value of a business can be determined by reference to reasonably comparable public companies. With this approach, you find a similar business that’s been recently sold. It must conduct the same type of business, be of a similar size, and operate in a similar location. There are, however, certain advantages to this approach:
- Actual data is used and can be independently obtained and verified.
- It’s simple to apply and easy to explain.
- It doesn’t use projections and, thereby, provides less speculation.
Florida Divorce Forms and the Net Asset Approach
Although the net asset approach is most common way to value a business for a divorce property settlement agreement in this state, Florida divorce forms don’t mention it. This book value approach is based on the economic worth of a company’s assets minus its liabilities.
In conclusion, ascertaining the value of a closely held corporation for purposes of equitable distribution can make the divorce process tedious and costly. Furthermore, you only get one shot. Because of this, it’s absolutely imperative to have a smart, crafty South Florida Family Law attorney in your corner to ensure you get what you rightfully deserve.
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Boca Raton Divorce Family Law Attorneys Practice Areas Include:
Florida Prenuptial Agreement
Post Marital Agreement
Simplified Dissolution of Marriage
High Net Worth Divorce
Florida Alimony Laws
Equitable Distribution Of Marital Property
Divorce Property Settlement Agreement
Legal Separation Agreement
Division of Property
Dissipation of Marital Assets
Modification of Alimony Payments
Florida Modification of Child Support
Modification Of Child Custody In Florida
Florida Child Support Enforcement