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Finding, valuing, and dividing other assets in divorce

FINDING, VALUING AND DIVIDING OTHER ASSETS IN DIVORCE

The community property mandate in Nevada is that all property is to be divided equally to the extent practicable. That being said there are some assets which are just difficult to divide. This is why the "extent practicable" language exists. It could be said that health benefits are just one of those difficult assets to divide.

Following divorce spouses will not typically be required to provide the other spouse with insurance. IF there is a requirement it will typically simply be in the form of an alimony obligation sufficient to cover the insurance premium for the payee spouse. Generally employer related insurance will cease providing for non-employee spouse post-divorce. However, there are exceptions to this rule for business of sufficient size. COBRA, an Act passed in 1985 provides for the right of certain individuals to continue receiving insurance benefits from an employee spouse's employer post-divorce. COBRA provides insurance coverage for the non-employee spouse for a period of three years following divorce. COBRA won't apply unless the company that the employee works for and is insured under has 20 or more employees. Thus don't assume that this is the case for all business employees.

Advise your COBRA recipient client that within 60 days following the Decree of divorce he or she will need to submit the Decree of divorce to the COBRA obligated employer in order to receive these benefits. Once that Divorce Decree is provided to the employer the employer is then distribute the election right the recipient within 14 days so that the employee spouse can make insurance elections.

Understand that this COBRA coverage is not guaranteed. To clarify, if the employer decides not to offer a group plan any longer then COBRA will no longer be available. Additionally, if the employee spouse changes jobs the COBRA benefits will terminate. Thus there are circumstances that can allow for the termination of benefits.

Thus you want to advise your client not to solely rely on COBRA benefits as these benefits could terminate upon certain conditions. It may be in the COBRA recipient spouse's best interest to obtain two forms of coverage for this reason. Fortunately the ACA commonly referred to as "Obamacare" allows for people who ordinarily wouldn't qualify for favorable insurance rates because of things such as pre-existing conditions to still be eligible for reasonable insurance rates. Thus, the risks are not what they once were.

If the opposing party won't have access to COBRA due to the nature of your client's employment then you need to know that it will be your client footing the bill for insurance by way of an alimony award. This will be the case if you represent the breadwinner spouse a sufficiently long marriage. Thus you should have an idea of what the cost of this post-divorce insurance policy will be. This is important to know whether you represent the employee or non-employee spouse. You need to know this expense so you can be prepared to challenge or request alimony proportionately with actual costs. Otherwise you are arguing with guesswork which is never persuasive.

Some people contend that money placed into trust is protected and thus can't be considered for the purposes of alimony, child support, or division of property. Remember that if you are trying to dissolve the trust you need to keep in mind whether one of the parties is in fact the trustee. If one of the parties is not the trustee and thus the trust is a separate entity you will need to act accordingly. If this is the case and you want to dissolve the trust then you will need to name the trust as a party. Without naming the trust as a party, the court will not have jurisdiction over the trust. Thus get the trust documents if you are counsel so that you understand who the players are and what the provisions are. You need to know what the corpus, or body, of the trust is as well.

There are times when you will be dealing with offshore assets. Other times you will be suspicious that offshore assets do in fact exist. Tax returns can be a useful tool for discovering these assets. Tax returns will state whether individual tax payers have foreign offshore accounts. So look to the tax returns to see if there these accounts exist. Foreign countries now are under an obligation to provide an accounting to the United States for monies deposited abroad. This information can be found on the tax return.

If you are investigating a business that operates on a cash basis you will need to know how to investigate that return. If you go to the IRS website you can find a link for "cash intensive business audit techniques guide". This guide is a great resource for learning what to look for when evaluating a return. As counsel you should review this guide frequently. This guide will give you some clues which can be valuable in determining true income and a good resource for cross examination to boot. This is particularly useful for cash businesses.

Generally speaking it is a good idea to do the initial analysis yourself when evaluating the cash business. However, after you get past this initial evaluation you need to be consulting with a forensic accountant. Your forensic accounting will usually be able to get through the numbers faster and more cheaply than you as counsel can. Additionally, your CPA will add credibility to your position at trial.

If you are valuing the business you should first apply the excess earnings approach to determine if you even have a goodwill asset. This method looks to what the business owners actual income is and what his or her income would be if he or she was simply am employee in that same capacity. The excess amount over and above what that professional would be paid simply as an employee is the goodwill component. There are of course other valuation methods which I have outlined in other articles.