Case Example: Ex-Spouses

Even after the divorce has been finalized and the marital property divided, one spouse often has an incentive to keep financial tabs on the other. Alimony payments, and even property settlement agreements, can be modified years after the divorce, based upon a change in the financial circumstances of one of the parties or upon newly discovered information. A friend, Alex, was divorced and his wife, Liz, was awarded alimony of $400 per month for ten years. They had only modest assets at the time.

Starting immediately after the divorce, Liz had a private investigation firm perform annual financial "checkups" on Alex. Despite the divorce, she had confidence in his ability to make money—and she wanted to know about it when he did. Three years later, the investigator reported that Alex had indeed become successful. He had built his computer software business into a promising enterprise—worth more than $3 million.

Liz’s faith in Alex had paid off. She consulted with her attorney, and they filed a petition to modify the divorce decree. She argued that based upon Alex’s new wealth the amount of the alimony award should be increased. Also, she claimed that Alex’s idea for his business had been developed during their marriage—the company stock was marital property and she was entitled to half.

Although it wasn’t clear which argument he relied upon, the judge increased the alimony from $400 to $9,000 per month. He also awarded her $1.2 million in cash for a retroactive increase in prior alimony payments, her marital interest in the company stock, and attorneys’ fees and court cost.

A client of ours, Dennis, was awarded custody of his two-year-old son Michael, following a divorce from his alcoholic and abusive wife, Marie. After the divorce Marie never contacted Dennis or visited with Michael. Luckily, Dennis was a good father and Michael developed into a smart and happy young boy. Dennis was a high school science teacher and over the years managed to save about $100,000 for Michael’s college education.

One day, ten years after the divorce, Dennis received an unpleasant surprise—a telephone call from Marie. She said that she was getting her life together and wanted to contest custody of Michael. She also said that she had run an asset check on Dennis through a local investigation firm and had discovered the college savings account. Getting directly to the point of the call, she offered to give up her custody claim in exchange for a payment of the $100,000.

Unfortunately, the cat was out of the bag at that point, and there was nothing we could do (other than advise Dennis to call the police). So he paid her the money because he couldn’t risk jeopardizing his life with his son. It is a cliché by now to say that "information is power." But we can see that those who are skillful in acquiring the right information can successfully achieve objectives otherwise impossible to accomplish. Bargaining is about knowing the strengths and weaknesses of your opponent. A lawyer, business competitor, spouse, or ex-spouse with information about what you own can exploit this knowledge to attack your most vulnerable points. In the next chapter, we will look at the lawsuit process to show you what really happens if you get sued.