Are California Divorce Laws Bad for Marital Health?

Published in Huffington Post, 2/10/11.

In the US, every state has a different set of divorce laws about distributing assets between ex-husband and ex-wife.  So if you get divorced in California you may end up with a very different financial settlement than if you had divorced in Massachusetts.

“Community Property”  laws v. “Equitable Property” jurisdictions
California and 7 other states (Arizona, Idaho, Nevada, Texas, New Mexico, Louisiana, Washington, and Wisconsin) are so-called “community property” states, having adopted community property laws.  Two other jurisdictions, Alaska and Puerto Rico, are “opt in” states, whereby spouses can elect into community property treatment. The community property states are primarily in the West and are based on the Mexican legal system, which was derived from Spanish law. 

Simply stated, in community property states, all income earned (and debts accrued) during the marriage are considered “community property” – property belonging to both spouses.  Community property includes the portion of retirement accounts accruing during marriage, and all property acquired during the marriage.

In a community property jurisdiction, premarital property and property gifted to a spouse or inherited will be considered “separate property”.  This separate property stays with the spouse in whose name it is titled if there is a divorce.  Alimony rules may soften these community property rules if the result is harsh.

Generally “community property” is divided equally upon divorce.  In some community property states, such as Texas, a court has the authority to decree an “equitable” distribution of community property which might be unequal.

Divorce in the other states generally falls under the “equitable property” regime.  Under this system, all property is divided on equitable principles, such as length of the marriage, opportunity for future acquisition, earnings potential, and other factors.  Premarital, gifted, or inherited property may also be included depending on the facts of each situation.  In other words, a Court has the discretion to do what it decides is fair. 

Differences in Divorce Rates
I have been intrigued by the reports of high divorce rates in certain states and low divorce rates in others.  In recent reports on the divorce rate [http://maritalmediation.com/2011/02/divorce-rates-according-to-the-wall-street-journal-and-cdc] among the states with the highest divorce rates are Nevada, Wyoming, and Idaho, three community property states.  California was not included in that study because it no longer provides public divorce statistics. However, earlier data and anecdotal information indicates that California also has a very high divorce rate and southern California may be the highest in the country.

The lowest divorce rates are in Massachusetts followed by the District of Columbia, Pennsylvania, New Jersey, Iowa and Illinois. These are all equitable distribution states.

Texas is a community property state with a medium divorce rate.  One distinctive aspect of Texas is its extremely restrictive rules on spousal support.  In Texas, no matter how long a couple is married, the party receiving alimony is limited to a maximum order of $2,500 per month for a three year duration and only if the marriage was 10 years or longer.  The courts limit the spousal support to the shortest possible time for the spouse to begin employment to provide for his or her “minimal reasonable needs”.

Although the equitable division of community property can sometimes mitigate the harsh application of this law, Texas may be the state which best personifies Tammy Wynette’s famous song, “Stand by Your Man” as a marriage principle for many women.  http://www.youtube.com/watch?v=DwBirf4BWew.

Do elimination of  “transaction costs”  increase incidence of divorce?
It makes one wonder why community property states tend to have high divorce rates, and why equitable distribution states tend to have lower divorce rates.

One of the reasons may be the “transaction costs” in divorce.  If divorce is very easy, divorce becomes more frequent.  If people know that they don’t have to share property, divorce is easier. 

Take, for example, a marriage in a community property state where one spouse owns a lot of premarital property or inherited property.  This wealthier spouse knows that they can leave the relationship with no personal financial impact because it’s separate property.  Maybe that’s why community property states tend to have higher divorce rates.

Consider the multiple marriages and divorces of many celebrities.  There may be huge transaction costs in their divorces, but they have enough money to start over in a new relationship without being financially hurt.  So a celebrity can leave their marriage easily, while someone less affluent may be stuck working it out with their spouse.  The less affluent couple may end up in a very good long-term marriage like the one Huey Lewis and The News sang about in the song, “Happy to be Stuck With You”.  http://www.youtube.com/watch?v=7Re30H83sIQ  . 

As the lyrics say:

And we’ve had our ins and outs, but that’s the way it’s supposed to be
We thought about giving up, but we could never stay away
Thought about breaking up, but now we know it’s much too late

Perhaps “being bound by all the rest, like the same phone number, all the same friends, and the same address” as Huey Lewis sings, is not enough to make for a viable marriage.  However, a marriage bound up with the familiarity of time, commitment, and affection is something worthy of aspiration.  That is not to say that long-term marriage is the most moral option, but that it can be valuable and enjoyable.   If there’s no easy way out, spouses may be willing to overcome the inevitable obstacles in a marriage.

Which takes us to prenuptial agreements. 

As a lawyer and mediator, I have worked on many of these.  And I have come to believe that they are usually unnecessary and often serve to weaken the marriage at the outset.  A person with a prenup has been given a preset path to divorce with no transaction costs.

While some attorneys and financial advisors recommend prenuptial agreements in order to reduce the financial risk if the couple divorces, a prenuptial can actually serve to increase the divorce risk of the couple.  Why should someone stay and work things out when the exit path is so easy?

Financial convenience, though certainly not a reason to stay married by itself, can take a marriage through a rough period so that the couple can grow and the marriage can flourish again.  Divorce factors that may contribute to divorce,  like prenups, celebrity wealth, or residing in a community property state may lessen the chances of making it through a long-term marriage. 

© 2011 Laurie Israel.  All rights reserved.

Tiger Woods – Throw that Prenuptial Agreement Away!

by Laurie Israel.   I’ve been hearing the sorry tale of Tiger Woods’ alleged deficits as a faithful husband to his beautiful Swedish wife, Elin Nordegren.  It is just a more publicized and extreme version of what I see in my law practice where I spend my days as a divorce lawyer.  In youthful marriages (Tiger is 33, Elin is 29, and have been married for 5 years), the pledge of fidelity is often a difficult one to maintain. 

According to Forbes Magazine, Tiger’s net worth from his work as a professional golfer is about a $600 million dollars.  (The $1 billion figure in the news is his lifetime earnings, not net worth.) 

Tiger actually fits the profile of having a good chance of having a marriage that lasted.  He met his wife four years before they were married.  Tiger’s parents remained married until his father’s death in 2006. When a child’s parents remain married, the child generally has a better chance of having a lifelong relationship.

 However, there were three strikes against him.  Tiger had become a very wealthy man at a very young age through his own efforts at his profession.  He has been a celebrity in the public light for a long time. These two factors alone can cause several personal and identity problems. And the third (probably the worst) problem is that Tiger (presumably advised by his attorneys) made sure that he entered into a Prenuptial Agreement with Elin prior to their marriage in 2004. This provided that Elin would get $20 million if she remained married to him for 10 years.

 Now, it appears that Tiger and his wife are compounding the error by renegotiating the Prenuptial Agreement, rather than just trashing it.

 Tiger’s first offer was to add another $5 million to the $20 million Elin would have received under the original terms of the Prenuptial Agreement.  Now, according to news reports, he is offering her another $80 million to remain with him another six years.  (Hmm, how much is that a year?)  Even $80 million for a man with $600 million is small change to buy Elin’s willingness to give Tiger another chance to recommit to his marriage.  So the message is, “You stay with me for another six years, and I will throw a little more money at you if we divorce.”  It doesn’t show very much commitment on Tiger’s part.

 The sad truth is that most fundamental problem in the Tiger Woods marriage may be that they had a Prenuptial Agreement in the first place.  It allowed Tiger to have one foot in the marriage and one foot out of the marriage.  It allowed Tiger (and Elin) to contemplate a divorce and the terms of the divorce even before they took their vows.  It allowed Elin (who was 24 years old at the time of the marriage) to make decisions with a huge impact about the financial implications of the institution of marriage before which she really knew what marriage was about.  It probably made Elin feel abused and probably made Tiger feel cruel and heartless.  Not a good way to begin a marriage.

 So when Tiger and Elin got married, they did not make the 100% commitment that most other married people make on their wedding day.  They had wedding vows, but if they said  “I marry you with this ring, with all that I have and all that I am, for better or worse, for richer or poorer … ” they were not telling the truth.  Tiger and his attorneys were manipulating the terms of a very real institution that has been developed throughout the thousands of years that humans have been creating supportive, monogamous relationships.  By manipulating it with a Prenuptial Agreement, they were weakening it, not strengthening it.  It’s not surprising that Tiger may have found it relatively easy to depart from his marital vows.  He had made another (contractual) vow that conflicted with the marital vows. 

 As a result, Tiger and Elin were only half married.  Marriage requires total commitment.  A Prenuptial Agreement gives a person a “way out” of the marriage.  Without that total commitment there are bound to be marital problems and divorce.  It’s not surprising that Tiger and Elin ran into problems. Couples that depend on each other financially do not have the latitude to think about straying from the marriage.  It is actually a blessing in a marriage not to have “too much” money.

 What if Elin said to Tiger, “Yes, I will stay married to you, but only if we rip up the Prenuptial Agreement and be like real married couples.”  Yes, they would have risk and uncertainly if there is divorce. Maybe that’s a good thing.  If Tiger finally said “Yes, I will be married to you, completely”, then Elin and Tiger could start to be truly committed to their marriage without money getting in the way.  They would both be following the marriage vows, and their marriage could truly restart. 

 So Elin and Tiger, think for a moment about tearing up that Prenuptial Agreement and starting a real marriage now.  Say to each other (finally) “I marry you with all that I have and all that I am.”