In the practice of Family Law, it is the attorney’s duty to inform clients of all reasonably evident legal issues or problems and to surpass his scope of representation when necessary, including recommending consultations with other professionals, such as Forensic Accountants. Falling within this sphere of responsibility includes advising clients concerning the potential of double dipping and how to prevent its potential, should the client wish to do so.
In re Marriage of White (1987)
192 Cal. App. 3d 1022 {237 Cal. Rptr. 764}
Background
Bernice and Dewitt were married for 23 years. For 17 of those years, Dewitt was employed by the City of Los Angeles and was earning rights to a pension. Bernice owned a beauty shop. The couple purchased a home in 1964, separated in 1977, and Dewitt soon thereafter filed for marriage dissolution.
At the 1978 trial, Dewitt’s pension was valued at $97,500. Their home value after encumbrances was determined to be $42,000. The beauty shop suffered a net loss in 1977 of $2,300 and was valued at just $2,000. Bernice closed the business three years later.
The parties rejected the trial court’s recommendation and instead stipulated to divide the community property so that Dewitt was awarded all rights, title and interest in his pension and Bernice received the home. In 1983, Dewitt suffered a job-related injury, began receiving disability and soon thereafter retired. In January, 1984, Dewitt started drawing pension benefits of $1,540 per month. Then, in the spring of 1985, Dewitt stopped paying spousal support. Subsequently, Bernice obtained a writ for payment of arrearages and levied Dewitt’s pension income. Dewitt then filed an order to show cause to terminate spousal support arguing that Bernice had exchanged all rights to his retirement in exchange for the family home. Bernice then claimed that Social Security was her only source of income and requested an increase in support. At the order to show cause in October of 1985, Dewitt’s monthly net income had increased, due to the pension, disability and Social Security, to $2,348. Bernice was able to substantiate that her financial situation had remained unchanged.
Bernice argued that the trial court abused its discretion by failing to consider Dewitt’s monthly income from his pension for the purpose of determining his ability to pay spousal support. Additionally, she claimed that her financial situation warranted an increase in her award. The Appeals Court ruled that the reduction of Bernice’s award of spousal support improperly exempted Dewitt’s monthly pension payments from consideration in determining his ability to pay. As a result, the trial court’s decision was reversed and Dewitt was ordered to pay increased support from his pension despite being awarded full possession of this asset by the trial court.
The Case of Smith versus
Jones & Jones, LLP**
In the malpractice action against the firm of Jones & Jones, LLP, Simon Smith alleged that the firm breached the Attorney Standard of Care for Family Law practitioners. Nine specific issues were addressed in this case. We will discuss two, both of which involved the need for a Forensic Accountant: Responsibility to include a Marital Standard of Living in the Marital Settlement Agreement and failure to place a cap on spousal support.
Background
Simon Smith was a top executive for a Fortune 500 company. He had enjoyed a lucrative compensation package that included a substantial base salary and stock options, which equated to nearly one million dollars per year. The attorneys of his marital dissolution case had negotiated a settlement agreement that included the other party receiving ownership of the matrimonial home and Mr. Smith retaining full ownership of his stock options. Unfortunately, soon thereafter, Mr. Smith lost his job. Per the findings of In re Marriage of White, if the Marital Settlement Agreement does not stipulate for income to be excludable, the recipient of spousal support could successfully demand payment from any income source that was received by the payor. There was no such exclusion in the Smith’s Marital Settlement Agreement for spousal support. Responsibility to Include Marital Standard of Living in the Marital Settlement Agreement The Marital Standard of Living is one of the most significant factors courts consider when establishing permanent spousal support. Failure to set an upper limit on support based on the MSOL leaves open the possibility of increasing spousal support obligations.
Unfortunately, Jones & Jones failed to even consider the Marital Standard of Living. Thus, they failed to meet the standard of competence expected from Family Law practitioners. Since there was no cap, spousal support could exceed the amount determined at the trial to be equitable.