USA – CALIFORNIA Trends and Developments Contributed by: Jennifer Jordan McCall and Paul Fraidenburgh, Pillsbury Winthrop Shaw Pittman LLP
have helped to reach a settlement, which may still occur during the appeals process. The importance of a prenuptial agreement A related sensitive topic is a prenuptial agreement, which is important, particularly in a first marriage with young and inexperienced parties. First, the full disclosure required by the prenuptial agreement will enlighten both parties as to whether the other one has substantial assets and whether they are liquid, and the extent of existing debt owed by the other per - son. Next, the process of writing the prenuptial agree - ment requires both parties to communicate about the amount they wish to leave each other upon death, the method for paying expenses during marriage, and how assets will be divided in the event of divorce. The prenuptial agreement starts the couple on a path of direct – hopefully respectful – communication, and will also reveal each party’s approach to money; if too aggressive or one-sided, that may be a red flag. Note that the prenuptial agreement is essential in the event of a divorce. Certain states, such as California, can require extreme reallocation of assets (in California, 50/50 for community property – all earnings during marriage, and income (50% of the difference between the spouses, potentially for life). To ensure the pre - nuptial agreement is valid, each party must be rep - resented by their own local matrimonial attorney and the agreement must reflect the nuances of the law of the state of the marriage. For example, in California, to be valid, it may be prudent to limit, but not try to entirely eliminate, the term during which the higher- earning spouse must pay the lower-earning spouse after a divorce. Similar limitations apply in Florida and other states. Boundaries To be effective, estate and trust planning works best as a team effort. In order to succeed, a subtle but essential component is for the beneficiary to be able to adequately advocate for themselves in order to develop healthy “boundaries” both inter-generation - ally and between spouses. For example, a wealthy client may acquiesce and give a demanding spouse money or interest in their resi - dence because they think it is “easier” to do so, and because they want a companion. However, in the long
run, giving in when it is against one’s true wishes can lead to bad – or even dangerous – outcomes, includ - ing being taken advantage of multiple times by others who want money and are not genuinely caring for the client. Conversely, if the client can receive appropriate training to have strong self-esteem and set boundaries in terms of what they can and cannot provide for their spouse, or even children, they will have a more genu - ine – and, consequently, more fulfilling – relationship, as opposed to feeling as though they are providing the services of a bank or – even worse – are a victim. Professional advice should be regularly implemented to help clients develop the ability to self-advocate and navigate challenging relationships. Examples of how a lack of self-esteem can become self-destructive are discussed below in the context of the Conservatorship Proceeding and Nursing Home considerations. Litigation and dispute resolution Frequently, the issues discussed above can lead to an actual court case. When this happens, it is essen - tial that the client obtain skilled advice not just from litigators but also from savvy trust and estate lawyers who can offer strategic advice as early as possible in the proceedings. Preparation for negotiations If possible, it is a good idea to speak with the different constituents prior to the designated time for a “meet and confer” opportunity for settlement. They should be encouraged to communicate what they really want. Quite often, a party will be diverted by ancillary con - siderations, thereby obfuscating the real issue, and if one can ask them to say what will make them happy/ what their goal is, it will be possible to resolve the issues more quickly. Quantify the different outcomes A key aspect of preparation for negotiations is to pre - pare calculations well in advance of the scheduled settlement meeting, reflecting the different net mon - etary results to the parties, depending on the different potential outcomes of the negotiations. An essential component of this is the impact of taxes – both income and/or estate, gift or GST – on their net recovery. However, quite often, litigators and matrimonial law - yers are not experts at preparing tax calculations.
624 CHAMBERS.COM
Powered by FlippingBook