Property division is a contentious issue in many Washington divorce cases. In these dissolution matters, a couple must first work to determine the value of a marital estate. Once the value is determined, a property division that is fair and equitable can be determined.
Reviewing all of their assets can be of assistance to a couple as the settlement agreement is negotiated. These assets typically include not only investment and savings accounts, but also all types of personal property. Once a settlement agreement is made, it can be difficult for a divorced couple to thereafter modify property division issues.
In a recent New York case, a divorced husband returned to court to seek a modification of a property division settlement by claiming a mistake had been made. In his divorce, he and his wife split an investment account that was valued at $5.4 million, among other assets. The agreement called for each party to receive $2.7 million from the account. The wife took her settlement amount in cash, and the husband left his in the investment account.
After the divorce was final, the husband learned that the investment account was a part of the Ponzi scheme created by Bernie Madoff. Though he was aware that the account was held with Madoff's firm prior to the divorce, the husband was not aware that the funds were a part of the scheme that reportedly involved a total of $20 billion in lost investments. Claiming that, because of the fraud, the couple erred in valuing the investment account, the husband asked for a return of the funds attributable to that investment that his wife received as a part of the property division.
The New York court denied his request. The court reasoned the husband could have removed his funds from the Madoff account after the divorce, and if he had, would likely have recovered all or most of his funds. It held that no mistake existed at the time of the property settlement. Absent a mistake of both parties, there was no legal basis for overturning the property division settlement.
While this out-of-state court decision does not directly impact Washington law, those in similar circumstances here would be wise to confirm the precise value of each investment before agreeing to a settlement that could later prove to have been an error in judgment.
Source: Wall Street Journal, "NY's top court refuses to undo divorce settlement," April 3, 2012