Seven Common Mistakes After the Decree Has Been Entered
Once the divorce decree has been entered and your client is officially divorced, a lawyer’s job is not done. It is important that we provide our clients with the proper advice for post-decree clean-up and finish the job of separating two lives. This can be difficult for attorneys, as this is not the fun part of litigation. And, it difficult for clients because they either believe that they are done with Court and do not have the burden of the divorce over their heads, or they just want to start living their new life.
However, you and your client will quickly realize a decree does not end the divorce process, only the marriage. There are still steps that need to be taken to follow through with the settlement agreement or the Orders of the Court. The quicker you help your client through these steps, the better you guarantee that things are not forgotten and then have to be addressed months, or even years down, the road.
This list is not exhaustive, but it is some of the most common mistakes made by clients and attorneys once a decree has been entered. Some of these mistakes have the potential of creating litigation down the road.
Mistake #1 - Transfer of Title - Clients are often awarded vehicles or real property and then offered little or no direction on what that means or what needs to happen to effectuate the award in a decree or settlement agreement. If you do not advise your clients on the transfer process, at the time of the sale of the property, they will have to track down their ex-spouse and hope that the ex-spouse willing to cooperate for the sale of property.
Vehicles can be trickier, if you are a title owner, you could potentially be held liable in the event of an auto accident that causes bodily injury or property damage. If you have a client who does not understand that they need to transfer title as soon as possible, your client could be held liable years down the road.
It is important when your client is awarded property, that you execute deeds to effectuate the transfer in addition to the settlement agreement or the divorce decree. Your client needs to have clear title. Ideally, these will all be prepared and ready for execution at the same time. If not, then your settlement agreement and your decree must require each spouse to cooperate to execute all reasonably necessary documents as soon as practicable and specify consequences for the uncooperative spouse. You should also inquire of your register of deeds or county clerk whether you can make your decree “in recordable form.”
Mistake #2 Updating Your Estate Plan – Divorce is also the time to review your estate plan. Kentucky law revokes “any disposition or appointment of property made by the will to the former spouse, any provision conferring a general or special power of appointment on the former spouse, and any nomination of the former spouse as executor, trustee, conservator or guardian, unless the will expressly provides otherwise.” KRS 394.092. The statute goes on to provide that property that would have passed to the former spouse by will now passes as if the former spouse predeceased the decedent. Put simply, Kentucky law basically “removes” the former spouse from your will, unless you expressly provide otherwise.
There is a good chance that your client has named their ex-spouse to administer their estate, to receive property, to oversee their funeral or to make important medical decisions. Failure to advise your client that these issues need to be examined could result in their property passing to unintended beneficiaries or could leave your client without a testator for their estate plan.
KRS 394.092 only applies to a last will and testament and may not apply to a medical directive, power of attorney, or living trusts. It is imperative as attorneys to advise our clients to update their estate plan after the entry of the decree to avoid the potential of litigation concerning your client’s estate.
Mistake #3 – Beneficiaries – After the entry of the decree, clients need to be informed that changing beneficiaries of life insurance, retirement accounts, or other financial accounts should be a priority. A named designated beneficiary is entitled to proceeds from life insurance and retirement accounts, even if such beneficiary is the ex-spouse of the policy or account owner. Most of these accounts are contracts between the owner of the account and the company itself. There is no statute that prevents the passing of this property to an ex-spouse as there is for wills.
Failing to advise clients to examine beneficiaries could result in the retirement account or other financial account awarded to your client in a divorce suddenly passing to a former spouse because they are still a named beneficiary. In order to assist your clients in changing beneficiaries you may need to provide them a certified copy of their decree. It may not be necessary, but could be helpful if they have limited rights to modify their beneficiary.
Mistake #4 – Explaining Court Orders – It is easy to send a client’s court orders to them and expect the client to understand what the Court is requiring them to do. A majority of clients do not understand what the Court is ordering or how to practically obey the Court order. In order to avoid your client potentially being held in contempt of court, it is important to explain what the Court is requiring of them in plain language that your client will understand.
A good example of confusion that can result with a court order, or agreement, is when there is an order to alternate the tax exemption with Mom having every even year and Dad having every odd year. The issue that can result from this type of language is that we file our odd tax year returns in even years and we file our even tax year returns in odd years. It could help to explain to the client which tax return they actually get to claim the child.
Another area of Court orders that clients may not understand is deadlines. Court’s often order things to be done in a number of days rather than by a specific date. Your client may not understand when the actual deadline may be without an explanation that 30 days from the entry of the order is a specific date and what needs to be done before that specific date.
Taking the time to breakdown a Court order and explaining what is required of your client or what they can expect by a certain date can save a lot of litigation later.
Mistake #5 – Payments to Former Spouse - In many decrees, the Court has made an award of property to one spouse or the other that can result in an equalization payment from one spouse to the other, or the Court has ordered monthly payments from one spouse to the other for child support or maintenance. It is important to advise our clients when these payments are actually due, the amount of these payments and how to pay these payments to their former spouse.
Above all clients must understand that no payments to a former spouse should be made in cash, ever. These payments are generally not traceable and could result in your client back before a judge trying to prove that payments were made without any supporting documentation. It is important with the transfer of any money, for whatever reason, that your client has proof that the transfer took place and that their former spouse received the payment.
Item #6 – Failure to Divide Retirement Accounts Promptly - If you are entitled to a share of your spouse’s retirement account and the account is ERISA-covered, your settlement agreement or your decree cannot help you. ERISA applies to most private tax-qualified pension, profit sharing, and stock bonus plans, including defined benefit pension plans, 401(k) plans, money purchase pension plans, and employee stock ownership (ESOP) plans. If ERISA applies to the account, then the plan administrator cannot alienate and divide the account unless and only as provided in a qualified domestic relations order (QDRO). It is also important to advise your client to not cash in the retirement account in order to divide the account, this could result in huge financial tax implications for which your client may be solely responsible.
A QDRO is a court order that creates or recognizes the existence of an alternate payee's (the other spouse) rights to receive all or a portion of the account benefits. The QDRO requires specific information, which at a minimum must include, the name and the last known address for the payee and the alternate payee, the amount or percentage to pay the alternate payee, the manner of payment, the number or duration of payments and each plan to which the order applies.
Generally, there is not a default QDRO and the plan administrator is the determining factor if the Order qualifies under ERISA and their own requirements. Essentially, the plan administrator has more power than a state court judge in these situations. It is not unheard of that attorneys and plan administrators go back and forth over the course of many months revising the QDRO to meet the plan administrator’s requirements. The best way to avoid this back and forth is to work with the administrator early in the case and to work with them in a timely manner after the entry of the decree to make sure their requirements have not changed. Most plan administrators have a sample QDRO that they will send to you, if requested.
If possible, have the administrator review and pre-approve the QDRO before you submit it to the court for entry. This may speed up the approval process and help effectuate the division of the retirement account.
If your client does not want to incur any additional fees in preparing the QDRO, it is imperative to advise them to not put off getting a QDRO in place. Waiting to divide the retirement accounts can have huge implications in the future, especially if one spouse, many years down the road, liquidates an account that should have been divided or, due to the financial markets, there is less money in the account than one spouse was supposed to receive.
Mistake #7 – Failing to Fix Decrees – With the introduction of word processing software it has become easier and quicker to turn out documents that eventually become orders of the Court. It is possible that the Court made a mistake in drafting a decree, maybe the Court switched Petitioner for Respondent, or maybe there is poor wording in a decree awarding property. These are all excuses for an ambiguous divorce decree. You may be able to read the decree, shortly after trial, and know exactly what the Judge meant to do, but you cannot rely on agreeing the judge’s meaning in order to move forward, as it may become an issue in the future.
Suddenly, it’s years after the decree and issues have arisen. If those errors have not been fixed, it can result in needless litigation. The judge that issued the decree may no longer be a judge and you may have to explain to a new judge what the old judge really meant. It is also possible that third parties may not be privy to any agreement of what a judge meant in a decree, and the ex-spouse could, years later, not agree with your client anymore.
If the decree has a typo or is in any way ambiguous, fix it immediately, while the case is still fresh in the minds of you and your judge. It is possible to do this by agreement with opposing counsel, or by filing a motion pursuant to Ky. R. Civ. P. 60.01 or 60.02 to correct the decree. You can explain to the judge why you think the decree has a typo or is ambiguous and what you think the decree should really provide.
While this is not an exhaustive list of mistakes that could be made after the decree is entered, it is an effort to show that it is important to review the decree and orders of the Court with your client and advise them on what the order means for them and how it will affect their lives. Having this simple conversation with your client can save your client from going back to Court and give them the ability to move on with their lives.