Episode 8 | Breaking Up Is Hard To Do: Navigating the Domestic Relations Arena - Former Frantz Ward Domestic Relations Partner Katie Arthurs joins us to explain the divorce and dissolution process, to discuss the best strategies for navigating the difficult and often painful challenges that arise in a divorce, and to provide important insights on how you can best protect your businesses from being impacted by such events.
Podcast First Aired: April 27, 2021
Mike Smith: Welcome to another episode of Frantz Ward's podcast series, Shoveling Smoke. I'm Mike Smith, your host for today's podcast. As you know, for over 20 years, Frantz Ward has been dedicated to protecting and improving all aspects of our clients' business activities. In fostering those relationships, our clients have also become our friends and have entrusted us not only with their business interests, but their personal interests too, such as tax and estate issues. In recent years, many of our clients have sought help in the domestic relations arena. They want to understand how to best navigate what can be a life-changing personal event or how such an event may impact their business.
Mike Smith: Here with me today to discuss these tough issues is one of the best in the business, my partner, Katie Arthurs. Katie leads Frantz Ward's domestic relations practice. That includes handling divorce, dissolution of marriage, child custody, prenuptial agreements and mediation. Katie devotes her practice to both litigation and alternative dispute resolution and has advanced training in collaborative law, divorce mediation, and parenting coordination. Katie also currently serves as president of The Center for Principled Family Advocacy, an organization providing education and promoting alternatives to litigation in resolving divorce and parenting issues in Ohio. When Katie gets some free time, she enjoys cooking, visiting museums and historic places, and tackling home projects. Katie also pays way too much attention to her two kittens she adopted during the pandemic.
Mike Smith: Hey, Katie.
Katie Arthurs: Hi, Mike. How are you today?
Mike Smith:Good. Thanks for being with us today.
Katie Arthurs: I'm glad to be here.
Mike Smith: Now, before we get going, I hear you've been swapping your briefcase for a tool belt. Is that right?
Katie Arthurs: I did. Last year, actually, I purchased a new home and decided to do a very extensive home renovation right before the pandemic started and then continued that project throughout the pandemic, whereas I didn't even have a kitchen when the pandemic started.
Mike Smith: Wow, that must have been challenging. Well, hopefully you won't quit your day job and you can continue to help us out.
Katie Arthurs: Yeah, absolutely.
Mike Smith: I guess the best place to start, Katie, is to understand the fundamental difference between a dissolution and a divorce. Can you explain that for us?
Katie Arthurs: There's two ways of getting divorced in Ohio, one is considered a dissolution of marriage, the other is a divorce. At the end of the day, it's going to end up being the same result in terms of the parties being able to reach a divorce decree, however, two different processes of getting there.
Katie Arthurs: With the dissolution of marriage, everything is negotiated prior to ever stepping foot in a courthouse. The parties can go about it a myriad of ways, but once the agreements are reached, they get signed, they're filed with the court, and then the court schedules a final hearing about 30 days later in order to adopt those agreements. At that point, the court is acting more as a formality and a rubber stamp than being actually involved in the divorce proceedings between the parties.
Katie Arthurs: On the other hand, a divorce is a lawsuit. It's actually where one of the parties sues the other party in court in order to achieve an end result. With a divorce, the court is more involved in the process. They set a myriad of pretrials, discovery can be had. The parties can ultimately come to a resolution during those proceedings, but if they're unable to reach a resolution, the court will ultimately have a trial and make the decisions for the parties on how the assets are split, how custody is awarded, and if any support would be exchanged between the parties.
Mike Smith: I think one thing that everybody always wants to know about, they've heard of these two things, and you've done a great job explaining them and we'll talk about them in more depth, but the first thing I think that people always want to know is, is there any legal significance, long term, between having a dissolution done and actually getting a divorce?
Katie Arthurs: There is no legal difference, because at the end of the day there's going to be a divorce decree ordered. Whether it's a dissolution of marriage or divorce, it's the same end result in terms of the parties' marriage being terminated. It's just two different processes of how to get there and whether or not the parties reach a resolution on their own or the court actually makes a decision and issues an order for them.
Mike Smith: Okay. Under what circumstances do you think it's best to pursue a dissolution versus a divorce?
Katie Arthurs: I tell people all the time that if you can achieve a dissolution, that is the preference. It is certainly less financially, as well as emotionally, costly for the parties. The parties have control over the process. They're able to reach their own agreements and they don't have to have a court actually be involved. Dissolution is always the best process to pursue, although it's not always possible. For instance, with dissolution, there needs to be cooperation. What I tell people is cooperation, to me, means both parties actually want the divorce at the end of the day, both parties are willing to be transparent and provide financial information in order to have a negotiation, and both people are going to engage in the process in good faith in terms of negotiating and coming to their own agreements. That's when it's going to be best to pursue that process.
Mike Smith: There must be some circumstances though where a divorce is the better way to go.
Katie Arthurs: Yes, with divorce, the biggest thing is where there's a lack of cooperation and it's all the opposite from what I just explained. For instance, if one of the parties does not want to be divorced, of course they're not going to enter into a negotiation to be able to handle dissolution of marriage. The only way for the spouse to actually get divorced is to file with the court. Another instance is where one party is not providing full financial disclosure. If documents aren't being produced or someone doesn't want to disclose what assets or liabilities they have, then the only way to even obtain that information is through the divorce process, where you can issue things like discovery, subpoenas and be able to get that information that's not being provided.
Katie Arthurs: Another thing to know is sometimes people need what's called temporary support. If one party decides to cut the other party off from the finances because they don't want to pay for things anymore, the only way for the spouse to be supported is to file what's called a motion for temporary support through the court, at which point the court can order monies to be paid in order for bills to get paid for the house, for instance, or them to be able to pay their personal bills in general. That would be through the court.
Mike Smith: It sounds like divorce is the way you have to go if you're going to need somebody's intervention, like a judge.
Katie Arthurs: Correct, correct. The court can also issue things like restraining orders. For instance, if one party's concerned that the other party is going to empty bank accounts or start changing things or not give them access to financial information, that party can also seek a restraining order through the court to actually stop that action from happening. You are correct that the court, in a divorce, is able to intervene and basically level the playing field in those instances.
Mike Smith: Let's talk a little bit about dissolution in terms of how you have the process that you undertake to do that. Are there different ways to negotiate a dissolution?
Katie Arthurs: There are many different ways. I think a lot of people, when they go into this process in terms of a dissolution a marriage, they don't know that there are a myriad of ways to do it. For instance, both parties can hire lawyers and the lawyers can handle the case in terms of negotiations, going back and forth in a traditional sense, but there's other things, like mediation. I am also a family law mediator in addition to being an attorney. I have had clients hire me to actually sit down with them as a neutral third party, to talk through the issues and come to their own agreements, to then write up those agreements and then their lawyers can formalize them with the court. I have also had parties come to their own agreements on their own, then they come to the lawyers as merely to draft the documents and file them with the court, which I consider a kitchen table divorce. The attorney at that point is acting more of the person who's drafting documents versus handling the negotiations.
Katie Arthurs: There's also something in Ohio called collaborative divorce. The name's a little tricky because it's actually not a divorce at all, it's done as a dissolution of marriage. A collaborative divorce is where both parties hire their own attorneys, and actually a collaboratively trained attorney, to sit down in a series of four-way meetings, meaning the lawyers and the parties will both be present. They enter into a contract, where they agree to do it as a collaborative divorce. In doing so, the process is completely confidential. It is collaborative in nature, just like the name. It requires full financial disclosure of both parties and cooperation, like I talked about before. The thing with the collaborative divorce is if the parties are determined that the negotiations are not working and they can no longer use that process option and the process then gets terminated and they have to go to litigation, you actually have to get rid of your lawyers at that point and hire new lawyers.
Mike Smith: How do you choose the right process?
Katie Arthurs: Choosing the right process really is based on, I would say, first of all, personalities. You need to know who you're dealing with, both the attorney as well as the other party. If you've got personalities that are willing to cooperate and sit down and have thoughtful discussions about the issues, then you're going to be going the dissolution direction. If you know your spouse or the attorney they hired are not going to produce information, that they might be not truthful, they're not going to be willing to provide temporary support during the process, then you're headed the divorce direction.
Mike Smith: We've talked a lot about the process and the difference between dissolution and divorce, but regardless of the process, what are some of the tips for people considering or preparing to either go through a divorce or through the dissolution?
Katie Arthurs: I tell people in the beginning they need to get their ducks in a row. What that means is people need to understand and appreciate what their finances are before they even start going down the road of divorce. They should be collecting documents, they should be collecting information, they should be knowing what their assets and liabilities look like, they should be thinking about what parenting time could look like and what living in two households could look like, so that they're making a thoughtful decision about what it means to go through this process.
Katie Arthurs: I think it's very important for people to prepare before they enter into the process, because the more information they have before it even starts the better off they're going to be. That also goes for if the other party's not going to produce information, that they would already have that information ready to go. I also tell people all the time to secure irreplaceable items of personal property that if someone got angry during the process could potentially disappear. I tell people to change their passwords all of the time before the process starts. The reality here is divorce can be nasty and it's better to be prepared than not.
Mike Smith: Speaking of preparation, one of the things that we always preach here at Frantz Ward is preventative medicine. I think one of the things listeners might like to hear is your comments or thoughts on trying to anticipate these kinds of things and deal with thorny issues even before marriage happens.
Katie Arthurs: Yeah. One of the things people can do before a marriage is actually enter into a prenuptial agreement. A prenuptial agreement is a contract between the parties, determining how things would be divided in the event of a divorce. With the prenuptial agreement, one of the misconceptions is there's a stigma associated with them and they can be nasty, but the reality here is prenuptial agreements can be a way of thoughtfully looking at a situation and doing planning ahead of time of how they want things to look in the event of a divorce. They can be as simple as you want them and they can be as complex as you want them. If two parties wanted to ensure that in the event of a divorce they would each keep their own bank accounts, you can do that ahead of time to protect those assets. Otherwise, they would be considered marital and subject to division.
Mike Smith: You've talked a lot about prenuptial agreements. Are there other types of strategies besides those specific agreements that people can undertake in order to minimize a potential damage, financial or otherwise, in the event that a dissolution or divorce occurs, before the marriage happens?
Katie Arthurs: The problem here is the only enforceable agreement between a husband and wife is a prenuptial agreement. Unless you actually do a prenuptial agreement prior to the marriage, there's little that you can do to protect yourself then during the marriage with marital property. Now, what I will say is if someone does not have a prenuptial agreement, there is something in Ohio called separate property. Separate property is anything that's gifted, inherited, premarital monies or personal injury damages. For instance, if people have premarital property but they're not entering into a prenuptial agreement, they can still protect that property so long as they maintain the documents to trace it. If they can show, for instance, in a divorce and prove that they had property prior to the marriage and can demonstrate all those documents, that property would come back to them so long as it still existed at the time of divorce.
Mike Smith: Many of our listeners deal with divorce in the business context too. I see two situations that I'd like your thoughts on. The first one is where the business is actually an asset involved in a divorce or dissolution, and the second one is where a business is not directly involved, but it has to become involved because one of the parties is personally involved in a divorce. With regard to the first one, when the business is an asset, what are the things that have to be dealt with?
Katie Arthurs: What a lot of people don't know is a business is an asset of the marriage, including its actual value. A lot of times people see businesses as an income stream, but they don't see the business having value in and of itself. In a divorce, the court has to determine the fair market value of all marital property, so that would include the business itself. What ends up happening is each spouse would have to retain a financial expert to value the business, determine the fair market value, and then divide that value amongst the parties, whether it was over time or an offset of other assets, at which point the business becomes involved in not only document production, but potentially having one of the partners involved in the business have to pay their spouse in order to retain it.
Mike Smith: Can you use the prenuptial agreement to deal with those kinds of business asset issues before you enter into a marriage?
Katie Arthurs: Absolutely. I tell people all the time that that's the number one reason to have a prenuptial agreement. With the prenuptial agreement, the parties can agree that the physical company goes back to that spouse, as well as all of the value that may appreciate during the marriage, which then alleviates the need to value the business in the divorce and also divide it or have one spouse have to buy the other person out in order to retain it. That is a very good reason to have a prenuptial agreement.
Mike Smith: The second situation that I mentioned is situations where a business has nothing to do with a divorce, but it may be affected by someone who's an employee who's going through a divorce, that sort of thing. Can you comment on the typical circumstances and the things businesses have to deal with when that happens?
Katie Arthurs: Sure. There's actually two different instances where that type of business would get involved. One would be if there's, what I mentioned earlier, a restraining order issued. For instance, the business could get joined to the lawsuit in order for the court to issue a restraining order preventing the spouse from doing anything with a particular asset or their income that they're receiving from that business. For instance, I've seen businesses get joined to the lawsuit for purposes of restraining bonuses. The company could get dragged in and then a restraining order issued that prohibits them from paying any additional monies out to that party before there's another court order to deal with that. That's one way of them getting involved.
Katie Arthurs: The other way is through discovery requests or subpoenas. There is a lot of financial information that has to be exchanged in a divorce and sometimes the only way of obtaining that information is through a subpoena. The company may receive a subpoena in order to provide payroll records and bank statements and other financial information that may exist, at which point they may have to respond accordingly to that.
Mike Smith: Do you have any recommendations for business clients out there about how to minimize their involvement when they have to deal with one of these kinds of things?
Katie Arthurs: I don't know if the company can actually minimize their involvement, because once they're involved they're going to have to respond accordingly, but I will say, it's very important for businesses to be very careful when they're dealing with these situations, particularly on the restraining order side of things. I've seen it where businesses have unintentionally distributed money to a party that they should not have. It's really important when they do receive those restraining orders that they're reading them carefully and consulting with counsel and erring on the side of caution in those instances, because at that point they could actually be liable in those situations. That would, I guess, help minimize their involvement that way.
Mike Smith: Yeah, that's something that they really have to look out for, because who knows what happens if they get drawn into a nasty divorce proceeding and they've improperly distributed money.
Katie Arthurs: The other thing I would add is if the businesses do receive subpoenas or document requests, they should also be cautious on what information is being provided, for instance, if a motion to quash is being filed or a motion for protective order is being filed or if a confidentiality agreement would be necessary to protect information. For instance, if there's an ownership interest in a business, if that business is receiving a request for documents, I always say that it's best to have a confidentiality order in place because you don't want those documents then being disseminated to others. I will say, it happens, that's the reality. It's best to have those types of things in place as well.
Mike Smith: Katie, we really appreciate you being here today. One of the things that we do on this podcast is to ask our guests to provide our listeners with two or three takeaways that they can walk away from the podcast and keep in the back of their head as their thinking about these issues. Could you give our listeners a couple today?
Katie Arthurs: Yeah, absolutely, Mike. First of all, choosing the best process option for the situation is just as important as strategizing the underlying legal issues, because this sets the tone for possible outcomes, as well as maintaining co-parenting relationships between families going forward. Second thing I'll say is choosing the best process option should factor in cooperation, personality types and relationship dynamics, not just the underlying issues or legalities involved. Lastly, there's no one-size-fits-all divorce. Divorce today is more than a stereotypical court battle and there are many options that are family-centric and problem-solving based that can really curb financial and emotional costs.
Mike Smith: Thanks again, Katie. We really appreciate you being with us today.
Katie Arthurs: Thanks, Mike. I appreciate you inviting me to be here today.
Mike Smith: To recap the three takeaways that Katie gave us from today's discussion, first, if you're facing dissolution or divorce, it's critical to focus on the appropriate process for achieving the best result, second, factoring intangibles such as relationship dynamics into the process is a must, and finally, consider all the options because one size does not fit all. That wraps up another episode of Shoveling Smoke. Thanks for checking in with us and we hope you listen next time.
Mike Smith: Shoveling Smoke is a production of evergreen podcasts. Our producer and audio engineer is Sean Rule-Hoffman. Thanks for listening.