Posted On: June 29, 2010

Equitable Division and the Declining Real Estate Market

As we have discussed on previous blogs, Georgia is an equitable distribution state, which means that a division of marital assets does not have to be equal, but merely a fair division of property dependent on the particular circumstances of the case. A major asset to be divided in many cases is the marital home. The options for equitably dividing the marital home are complicated by the declining real estate market.

If neither wants to nor can afford to remain in the marital home, an option is for the parties to put the house on the market. In this case, the parties can work together with an agent, or alternate, with one party being in charge of the sale for 6 months and then the other party being in charge for the next 6 months. Of course, this option presupposes that the house will sell in a reasonable period of time, which, in this market, may not be the case. During the time the house is on the market, the parties will continue to be responsible for mortgage payments, etc., and must work out who will live in the house and pay utilities.

Another option is for one party to keep the house and refinance to take the other party’s name off the loan(s). This seems simple enough, but the refinancing party must be able to take on the entire loan. Since all of the marital assets will be split incident to the divorce, each party will most likely end up with only half of what the parties had as a married couple. In addition, in the case of dual income families, the parties likely qualified for the mortgage with combined incomes. Both of these issues may make it difficult for the party who wants to remain in the house to qualify to put the entire loan amount into his/her name.

Finally, no matter which option the parties choose or the judge orders, there is the very real possibility that the house is worth less than the amount owed on it. In this situation, the parties may be faced with the possibility of having to come to the table with money upon the sale of the house, or possibly foreclosing.

Posted On: June 22, 2010

Custody Modification in Military Family

The Court of Appeals recently addressed a custody modification in a military family. In Mitcham v. Spry, the parents’ divorce settlement agreement provided that the parties would have “joint legal and physical custody, with each parent having the minor child for six months and the custodial parent having final decision making authority.” Mitcham v. Spry, 300 Ga. App. 386 (2009). At the time of the divorce both parents were in the military, so they agreed that the child would reside with his paternal grandparents in Missouri during the parents’ periods of active duty. Id. at 387.

After both parents separated from the military, the father filed a Petition for Modification of Custody and the trial court found that there had been a material change in circumstances warranting a change of primary physical custody to the father. Id. at 388. The mother appealed, arguing that the grounds upon which the trial court relied were equally weighted and, thus, custody should remain the same.

Upon review of the transcript and record, the Georgia Court of Appeals affirmed the ruling of the trial court. The Court of Appeals reiterated that the trial court must look at the best interests of the child in determining custody, which they did in this case. The transcript did show that “the trial court acknowledged that both parties were fit and nurturing parents; that both had established a loving relationship with the child; and that since the time of the divorce, the parties had shared equal custody of the child.” Id. at 390. However, the trial court found that the father had a strong support system by living near his family, and that the child had developed a strong bond with the paternal grandparents from spending so much time there while his parents were deployed. Id. Under the circumstances, the Court of Appeals agreed that these facts tipped the scales in favor of the father and that the trial court did not abuse its discretion in awarding the father primary custody.

Posted On: June 1, 2010

Effect of Settlement Agreement on Estate after Death

Recently, the Georgia Court of Appeals heard a case where a divorce settlement agreement affected property in the estate of one of the parties after his death. In Frier v. Frier, the parties entered into a settlement agreement regarding distribution of their property, which notably stated that each party “shall have and receive any sums of money [in] their respective checking accounts, savings accounts, IRAs, retirement funds or accounts or other properties in their own individual names." Frier v. Frier, A09A1876; Frier v. Frier, A09A1877 (2010). The husband had previously established a 12 month certificate of deposit, which was payable to the wife upon his death. Id. at 2. After the execution of the settlement agreement but before the final divorce, the husband renewed the CD but did not change the wife as beneficiary. Id. The husband died shortly after the divorce was finalized and the wife alleged that, as beneficiary, she was entitled to the funds in the CD. Id.

Despite a challenge by the executor of the husband’s estate, who argued that the settlement agreement terminated the wife’s rights as a payable on death payee, the Georgia Court of Appeals held in favor of the wife. The Court stated that though the wife “relinquished the interest she may have had in the account by virtue of her marriage,” the settlement agreement language was not sufficiently broad so as to waive “her right to payment from the POD account as the death beneficiary specified by [the husband] when he created the account and so remaining on the day he died.” Id. at 4.

In this case, the facts are not clear whether the husband intended to remove his ex-wife as beneficiary. Either way, it is a lesson to those going through a divorce of how important it is to make sure your settlement agreement addresses all assets clearly and to check and/or change the beneficiaries of any accounts you may have to prevent unintended consequences.