Manhattan divorce attorney Lisa Zeiderman is today's guest. Unfortunately, the beginning of the year is when many people begin thinking about divorce. Lisa is CDFA, or Certified Divorce Financial Analyst. She has the training to help you through the legal aspects of your divorce, but she can also help a client determine how assets may be divided up, and how to financial plan for their future post-divorce. This can be a valuable asset during a very emotional time.
Paula asks what constitutes separate property versus marital property. Lisa explains, and shows us the valuable of a prenuptial agreement, or even a post-nuptial agreement in some cases. One of the big financial pitfalls in marriage is intermingling of financial assets- that can really complicate a settlement, especially without a prior agreement in place.
Next, Paula and Lisa talk about debt. In what cases would you be responsible for your partner's debt after a divorce?
We cover the documents you should have, if possible, prior to meeting with a divorce attorney. And Lisa also explains what you should look for in a divorce attorney. You want someone who's going to be honest with you, and that you connect with. And we also spend some time on the discovery process - how exactly a divorce works.
To reach Lisa:
Website: https://lisazeiderman.com/
Email: LZ@mzw-law.com
To reach Paula:
Website: https://paulachristine.com/
Email: Paula@PaulaChristine.com
Paula: Welcome to Beyond the Paycheck. I'm Paula Christine. Stop living paycheck to paycheck and start living the life you dream about by taking control of your money. I can provide you with the knowledge and the tools. It's up to you to make the commitment to put them into practice. Usually around this time of year, after the first of the year, we see a lot of people considering divorce.
And so I've asked Lisa Zeiderman, who is a divorce attorney out of Manhattan to talk to us about divorce and some of the first things you need to do when you're considering a divorce. Welcome, Lisa.
Lisa: Thanks, Paula. Great to be here.
Paula: Let's say I really wanted a divorce, but I'm not sure how I'm gonna survive. I don't know if I can, , afford to live on my own. I don't know how I'm gonna take care of my kids, so how do I know what I'm entitled to?
Lisa: The first thing somebody probably should do is speak to several attorneys, certainly at least one with a consultation, to find out what they may be entitled to. While an attorney can't tell them exactly without a lot of information and sometimes discovery, et cetera, they can give them some idea of what they may be entitled to.
So that's a good starting place. Another thing to do is perhaps that they meet with a financial advisor to understand what their expenses are and what their monthly nut is, so that they can understand what it is that they need.
Paula: So you're also a CDFA, so I'll let you go ahead and explain what that is, which I think.
I'm just gonna say the word awesome because it's great that you understand the finance part of it and the law part of it at the same time. So go ahead and explain what a CDFA is because I used one when I was going through a divorce, even though I'm a financial planner, because I didn't wanna look at things emotionally. I wanted to look at them logically.
Lisa: So I think that exactly sums up what a CDFA does. It's a certified divorce financial analyst and I have a specific certification in order to do that work. So in addition to being an attorney, I actually have taken courses to aid in determining maybe how somebody financially divides up their assets, what support they may need, and what their life might look like years down the road if they receive a certain amount of spousal support, child support, and how they may be able to split up their assets to tax, effectuate themselves in a better.
And I think you just used the word emotional. A lot of people and a lot of clients get very emotional, for example, about the marital residence and about keeping the marital residents not just for themselves, but sometimes for their children. And that may not be necessarily the best financial move to make.
And so that is one of the things that we tackle as a CDFA, and certainly during my practice as an attorney. We also talk about the marital residence and whether we should sell it and whether there will be cap gains, whether you would be better off renting, whether you would be better off purchasing a different house, et cetera.
So those are all the kinds of things that a CDFA does. One other that comes off the top of my head is, for example, there are sometimes different types of IRAs. There may be a Roth IRA and a regular IRA. The Roth IRA, you've already paid taxes on. So that may be advantageous to take the Roth IRA instead of other IRAs.
So all of these assets are not necessarily apples to apples, sometimes they're apples to oranges, and you really need to look behind the assets and see what some of the tax issues are.
Paula: Yeah. Correct. I know that taking an IRA versus a taxable asset versus a tax-free asset is hugely different down the road.
But I liked one thing that you said when you talked about that you work with people not only today, but what their life's gonna look like in the future. And I think that's very important because a lot of people are like, you just wanna get outta this marriage. What am I gonna have to live on? WHen you really have to think about the future and how that's gonna look for you.
Lisa: And we also sometimes introduce our clients to financial advisors who will pull out their expenses and figure out what it is it that they need, what it would look like during their retirement, what it will look like when they're even aged 95 years old. If they were to earn a certain amount of money, if they were to get a certain amount of spouse support, a certain amount of child support, and what their expenses look like.
So we collaborate with different professionals to do that. And it's important to understand that, particularly I think for women who are not working or men who are not working at the moment when they come into our offices, what is it that they're going to actually do to make their expenses and to save for their retirement?
Paula: And you don't think about that stuff. I mean, you really don't. You just want out of the marriage. So what is the difference between when we're talking about assets, marital property, and separate property?
Lisa: So this is a topic near and dear to my heart because I see so many people who actually don't understand the difference between this.
So separate property is property that you came into the marriage with. You had it prior to the marriage, and as of the date you said "I do." Those were your assets. We'll talk about what you need to do to make sure that they maintain their separate property identity in a second. But separate property can also be, for example, inheritances or gifts that you receive during the marriage.
If you and your spouse receive those gifts, for example, from your family, they will not necessarily be separate property because they were given to both of you. So that is something that's very important for families to recognize as well when they give a gift to their son and maybe daughter-in-law or vice versa, what are they actually doing?
Are they creating separate property? Are they maintaining their separate property identity or are they making a gift to both parties? That's very important to keep in mind and what we see many times is people come into my office and they say, I have all these accounts in my name, and this is my. And I say, no, no, no, no.
That's not necessarily true. That is money that you earned during the marriage, and that is called marital property. Monies that you earned during the marriage and you accumulated, or marital property monies that you earned prior to the marriage and accumulated are your separate property. And to maintain separate property in New York, for example, you have the burden of showing that you kept your separate property separate and apart from your marital property and did not commingle the separate property and the marital property.
That's very complicated for people to understand and unfortunately we don't have this educational system, which provides people before they get married to understand what their separate property and their marital property will look like. So many times people can come into the marriage with significant assets and then combine it or commingle it with monies that they earned during the marriage, and then they have lost their separate property identity.
and they may not get that separate property credit.
Paula: Okay. So, I'm divorced. So if I want to remarry, which I hope to one day, how do I protect myself, the assets that I have going into that?
Lisa: So the most certain way to do that is to actually have a prenup before you get married. We are a big advocates of prenups because they build certainty and transparency.
And so what you would do, Paula, is you would actually hopefully go to an attorney and have someone draft a prenup for you. And that person would list all of the assets that you now have, show the statements, and then basically say in the prenup that all of these assets are now Paula's, then you would put them to the side.
You wouldn't use them cuz if you use them. If you spend them, they're no longer useful in terms of separate property. You've spent them. But if you actually, for example, took some of those assets and you purchased a new house, the prenup would provide the assets that you had pre your marriage in the prenup would then become, still maintain its separate property identity and would become a separate property credit.
So a prenup is the best way to deal with this.
Paula: So what if I didn't do a prenup? Is there anything I can do after the fact?
Lisa: Yes. Well, it depends how far after the fact we are. But let's just say you don't do a prenup and you get married. And you have, I'm just gonna use an example. $500,000 worth of assets and they are in three different bank accounts.
Just take those three different bank accounts, put them to the side, and now when you're earning during the marriage, put the money thing you are earning during the marriage in a different account. Just let the others be by themselves, essentially earning interest. Just let them sit or earn interest, but do not mix the two.
Do not mix your marital earnings. Your new spouse's, marital earnings, or anything else with the monies that you came into the marriage with. It's very hard for people to do that though. They tend not to do that, and so prenup really builds a certainty that is much easier to deal with.
Paula: People tend not to do it cuz I don't think they know not to do that.
Lisa: I think that it's partly that they don't know not to do it, but it also just happens. Right. you have, for example, you're purchasing a home or a car, or you need monies in the joint account to pay for something, right? And all of a sudden the money starts to move and you move what is your separate property into a joint account and you say, okay, I'm only doing this temporarily, then I'm gonna put it back.
But temporarily turns out to be, you know, six years from now and we're facing a divorce and we never moved it. And monies went in and out of these accounts, and now you've co-mingled the monies. So I think it's not just that everybody doesn't know to do it. But I think it also, people they're married and they stop thinking that way.
They stop worrying about their separate property because they believe that their marriage, rightly so, will last forever. They're in love, and they wanna help their spouse and they wanna help their, partnership and so they tend to then commingle the monies.
Paula: Yeah, that makes sense. Ideally, when you're getting married, you think it's forever?
Lisa: Of course, sometimes it just doesn't work that way.
Paula: So that was about assets. What happens with debt? Let's say that in our marriage we accumulate debt, but let's say it's all in my soon-to-be ex's name. Am I still responsible for that?
Lisa: So it depends, right? Let's just say that one of the spouses came into the marriage with large school loan debt. If the parties don't have a prenup and if that debt gets paid down during the marriage, there is actually case law that says we're not gonna go re-look at that. We're not going to reallocate it. If, however, the parties had a prenup and they said all the school loan debt that you have is your obligation, then the other person would be covered and not be responsible for the school loan debt.
The same thing would happen, for example, and it's actually a common problem. You talked about remarriage, where let's just say I am divorced and I get remarried, but I have a spousal support obligation to my prior spouse. Well, that's debt, essentially, and now I'm paying it from marital funds. If I haven't actually contracted in a prenup to make that my obligation, then likely it's going to become our obligation, meaning that there won't be any credit for the other spouse for the fact that I've paid it down for marital monies. So debt is definitely something to consider.
Paula: So I was talking with a woman yesterday and she asked me that question about debt. Her ex-spouse has accumulated like $60,000 in credit card debt. None of it's in her name. It's all in his name. If they divorce, is she responsible for that? Because it all happened while they were married. It allwas accumulated while they were married.
Lisa: Okay. So I just wanna be sure all of the debt was accumulated during their marriage together.
Paula: Correct.
Lisa: And they are still married.
Paula: But it's not in her name.
Lisa: Okay. In New York. And I would guess in many states that would be marital debt. And she would have an obligation.
The question would be, what is her obligation? So in states that have community property where everything is 50/50, it may be that she's 50% responsible. In New York, we look at everything equitably, meaning that everything isn't 50/50 necessarily. The assets aren't split 50/50, and nor is the debt necessarily.
But unless there's a wasteful dissipation, meaning that the debt was caused by gambling o. Use of drugs or by out of the marriage, sexual romantic relationships. Traveling with someone other than your spouse, et cetera, in a romantic type of way, other than a business kind of situation, then that may be considered a wasteful dissipation of assets.
So it really depends on what the debt was nd what it actually was for.
Paula: So you can't control what somebody else does. The liability after that would be, it just doesn't seem fair. They can go and do whatever they want and accumulate a ton of debt, and yet you're still responsible.
Lisa: So I'm gonna say, and I hate to be like a broken record, but prenup, prenup, prenup, right?
But in all seriousness, if your spouse, and this comes up a lot, if you and your spouse have different spending habits, and your spouse thinks it's perfectly fine to accumulate debt, and this is something that you are staying up at night, then you need to have a discussion with your spouse. In some states, if you haven't entered into a prenup, you could also enter into a postnuptial agreement whereby you say, you know, I wanna stay married to you, but your spending, and my spending we're in two different universes here.
And I am not going to absorb your debt. You wanna go out every night and absorb that debt and have fancy dinners, et cetera. That's great. I'm happy for you to do it, but I need a post-nuptial agreement that's going to say, I'm not responsible for your debt. So there are ways to deal with this, and of course, if your spending is that different and you're not on the same page, then it may be time, unfortunately to have a bigger discussion either with a financial advisor or frankly a divorce attorney.
Paula: It just doesn't seem fair. Okay, let's move on to a different subject. So I'm going to meet with you, or a financial planner. So what documents do I need to gather?
Lisa: So if you're meeting with me, what I always like to have is two or three years of tax returns if you have them. Some people won't have them, but if you have them, some sort of a spreadsheet of what you think your budget really is and what it constitutes.
So a list of all your expenses that you would have on a regular basis in a monthly way, meaning a yearly budget that is realistic, not a wishlist, and also not a new type of budget that you don't really have, and at least some general idea of what the income is for each of you, whether it be income that you are earning, bonuses, restricted stock units, options. All of that would be important to understand.
Paula: Let's say I can't find any of those documents. Let's say my spouse handles all the money and they keep those documents locked up or at their office. So what resources do I have?
Lisa: Well, sometimes you can tell me about your budget. Sometimes you can tell me about what you think the income is, and sometimes you can't tell me anything and you're just coming into my office and we are literally starting from scratch because you have either been shut out or maybe it wasn't really your job in the marriage to keep that information.
We start from scratch. We literally get ourselves into a position where we start the divorce action, and then we conduct discovery to understand what the income is, what the assets and liabilities are, and what the expenses slash lifestyle analysis is.
Paula: So in discovery, that's when you'll ask the questions. They'll have to provide the documents, but what if you think someone is hiding money?
Lisa: That's again about discovery. So when we actually conduct discovery, we ask for a host of documents. Sometimes we go back as far back as five years. If you have a separate property claim, I obviously will go back further because sometimes your separate property claims actually go back further.
And in New York, it is your burden to trace your own separate property. But in addition to the discovery, then once we get the documents, we go through the documents with a very fine tooth comb and try to understand what other assets there may be. You know, if we see transfers that don't make sense, if we see charges that don't make sense, we're going to ask for further documentation.
And then once we've collected all the documents, including tax returns, et cetera, then we will also conduct what we call depositions, which is questions that are asked under oath, about the documentation, about the assets and liabilities. Keep in mind that we also ask for a financial statement. We have something called net worth statement in New York, and they are exchanged at the very beginning of a divorce.
Each one of you list the expenses that you have on a monthly basis, the assets and the liabilities. So that's a starting place. Now, I will say there have been cases where those documents are almost blank when I get them from a spouse. Then I have to go through the whole discovery process. And I do recall being in a deposition once, and I had already found millions and millions of dollars that existed that were not on the statement of net worth.
And I had turned to the person who I was asking questions under oath and I said, how did you think that I was going to discover the five or 10 million that you didn't put down your net worth statement? And he said to me, you'll just keep doing what you do now. You'll just keep discovering and asking questions.
Now in New York, there's a heavy penalty for that because a lot of those times, those people who are dilatory and obstruct the discovery process as that person did will pay for the other spouse's legal fees and expert fees if necessary.
Paula: Wow. Millions of dollars. Oh my God. That would be awesome to find.
Lisa: Yes, it would be awesome to find.
Paula: Too bad. I didn't find that when I was going through my divorce. That would've been incredible.
Lisa: It's not always there. Right? Okay. So we also have clients who sometimes come into us and say, I'm sure that he's hiding something, or I'm sure she's hiding something. Sometimes there's nothing being hidden.
You might feel that way, but sometimes there just is nothing being hidden. But sometimes there are, and we do discover assets. I will tell you that we work very collaboratively with forensic accounting firms, with financial advisors. And going through those documents, we often find things like cryptocurrency, for example, that may not have been revealed, or partnership interests that may not have been discovered had we not gone through the documents or bank accounts.
So doing the discovery process is very important. Taking somebody's net worth statement at face value is not what I would recommend.
Paula: Great advice. Even what we were just talking about, and I know I've been through a divorce and the prenups, the post ups, the discoveries. You know, it's even overwhelming for me even though I've gone through it, and it's definitely an emotional time.
So if I'm getting a divorce, how do I educate myself? Who do I reach out to first? What is your best recommendation?
Lisa: So I think the first thing you need to find is an attorney that you can trust because it's very hard to educate yourself on an entire divorce process. It's taken years and years of experience, right?
To be able to run a case essentially. You can Google and you can ask questions and you can ask your friends, but the fact is, what you should be finding is a divorced attorney that you can trust, that you feel has your back, who has a team of people who also will be working with your attorney, other attorneys perhaps, or paralegals, et cetera.
So that you have a whole team that's going to be actually dealing with your divorce. And then on top of that, that attorney likely will have other sources for you. As I said, a financial advisor, a forensic accountant, somebody who can value a business, for example, a business interest. So all of those things are really important and that should be your first stop is figuring out who your attorney is going to be.
Paula: Great advice. I know I interviewed a couple attorneys when I was going through my divorce. I just seemed to connect with the one that I chose.
Lisa: Yes.
Paula: I just had that feeling that he was gonna do what was in my best interest and provide me with great advice and he really did. So he was a great attorney for me.
Lisa: That's what you want. You want somebody who you feel really comfortable with. It's like going to the doctor, right? You're not going to be able to google necessarily what disease you have or what medications you should have. And sometimes, frankly, the Googling doesn't really help, right? You've Googled this or that, but you've gotten it wrong.
You know, the other day I had an accountant, it was actually one of my clients' accountants, who sent us information about maintenance calculations. And in New York we have a statute and there are maintenance calculations. And that was great, except the maintenance calculations that he performed were incorrect because he didn't understand how to perform the maintenance calculations.
So it's really important that you get somebody who is knowledgeable, who understands the law, and also who will give you the straight story. So I think what people frankly like about me is I am very honest about what your outcome is likely to be. If things are going wrong, I tell you things are going wrong. If things need to change, I'm going to tell you.
When you're sitting in my office, I'm going to give you the straight story. It may not be the best story, but it's gonna be what I really think.
Paula: Well, I think giving everybody this straight story, I mean, you have to be. Again, we know it's emotional, but you really have to really understand what it's gonna look like.
Lisa, if you were looking for an attorney, what would you look for?
Lisa: I would look for a person who was going to give me a realistic projection of what was going to happen. I am not looking for and would not be looking for an attorney to tell me what I wanna hear. It's just, as I said, like going to the doctor. You don't always get good news at the doctor.
I am not a good news attorney, for example, I tell you what it's going to look like. I can't always predict. I don't have a crystal ball. Things change and I tell you that too, by the way. But the fact is there's some range that I can usually give to a potential client and I'm not there during that first consultation or the second, or frankly, throughout the entire case, to tellt the client what they wanna hear. I tell the client what they need to hear.
Paula: Yeah, I do that too. As a financial planner, you have to be honest and realistic with someone so that they truly understand if they're gonna be able to accomplish that goal. It doesn't do any good just to tell them what they wanna hear.
Lisa: And That's correct. And you know, sometimes people come to my consultation and then they leave and I then meet them again. Two years later, they come back into my office and I say, okay, what happened? Well, I went to this attorney and you were right and they told me this. And so I went with them and now it's turning out to be like this.
And look, that's fine. People have to choose the attorney that they want to choose. Again, it shouldn't be about what they wanna hear. They're going to a professional to get advice and to hear what the realistic projection is.
Paula: Lisa, you have shared such great information, such valuable knowledge that you have.
It was a pleasure talking with you today. If someone would like to get a hold of you, how would they reach you?
Lisa: So, the best place to reach me is through my website, where I also have a blog. It's lisazeiderman.com. They can also email me at lz@mzw-law.com or call 914- 455-1000.
So if you're considering a divorce I'm probably not the person to reach out to.
Paula: Please reach out to a attorney in your area and of course, if you're in New York, please reach out to Lisa. But if you have any questions about your finances, please reach out to me by my website or email. My website is paulachristine.com or my email is paula@paulachristine.com.