Richard A. Rabb, Author at McCarthy Lebit - A Cleveland/Ohio Law Firm

Beyond the Knot: The Power & Purpose of Prenuptial Agreements

Richard A. Rabb — Thu, 08 Feb 2024 14:00:00 +0000

A prenuptial agreement, more commonly known as a “prenup,” often conjures images of high-profile celebrities and wealthy businesspeople safeguarding their assets. However, in the State of Ohio, prenups serve as an invaluable tool for individuals from all walks of life, promoting financial transparency and providing a roadmap for securing assets and family wealth. Think about a prenup like an insurance policy; no one bets on a house flood or fire, but everyone has insurance. No one anticipates divorce or death when they marry, but the divorce rate says otherwise, and death is certain. Protecting finances in your marital relationship is a smart step to take before entering that financial partnership.

To appreciate why these documents are helpful, one must appreciate what happens in the event of divorce or death and this document is not drafted. Prenups may be perceived as taboo, however, they aid in the unlikely termination of the marriage. Like an operating agreement in a business partnership, the contract that defines what happens should the business cease operation is critical—the same is true in marriage. A prenup is a legal contract entered into by a couple prior to marriage, outlining distribution of assets, spousal support, and other financial considerations in the event of divorce or death. In Ohio, these agreements are prudent means of protecting individual interests while fostering open communication between partners.

In the event one spouse has a business interest, a prenuptial agreement should be an absolute prior to entering the marriage. It is important to recognize if your marriage has a financial component so you can take steps to protect your family wealth and your finances before entering that financial partnership with your spouse.

Prenups enable candid conversation about financial expectations, assets, and debts prior to marriage, laying the foundation for a relationship built on trust and understanding. By clearly defining each party’s rights and responsibilities, a prenup can mitigate disputes and uncertainties that may arise in the unfortunate event of divorce or death.

No two relationships are identical, which is why it’s important to consult legal counsel when considering a prenup. There are several online resources that perhaps may be less expensive, but it is the proverbial, “you get what you pay for” that may make that inexpensive indulgence unenforceable when the agreement has application. Engaging with legal counsel is vital in minimizing potential prenup challenges that may be faced in the event of divorce or death. Whether safeguarding a family business, protecting inheritances, or outlining spousal support terms, attorneys can customize prenups to meet the unique needs and circumstances of each couple.

Ohio is home to a myriad of entrepreneurs and small-business owners. Prenups provide a mechanism for these individuals to shield their businesses from complexities of divorce proceedings, helping to ensure the continued success and security of their enterprises.

Crafting comprehensive prenuptial agreements requires a nuanced understanding of Ohio’s family laws for divorce, death, and tax. In handling prenups, our experienced legal team offers a unique approach in that we offer experienced counsel in family law, estate planning, and tax planning. All prenups see the eyes of at least one family law attorneys and another for the death piece of the agreement.

Prenups are not merely tools for the affluent; they are also practical instruments for individuals committed to building a strong foundation for their marriage. At McCarthy Lebit, we recognize the significance of these agreements in promoting financial transparency and protecting individual interests, and we can assist you in securing your future.

For more information or to seek counsel from our Family Law attorneys, please reach out to request a consultation or call us at 216-696-1422. McCarthy Lebit would like to thank law clerk Daniel Howard for his effort in assisting with the preparation of this legal blog post for The More Report.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Beyond the Knot: The Power & Purpose of Prenuptial Agreements appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

To-Dos and Considerations When Contemplating Divorce

Richard A. Rabb — Thu, 06 Jan 2022 13:00:12 +0000

Although divorce isn’t a prediction one makes upon entering a marriage, it isn’t a farfetched assumption. In 2012, PolitiFact.com estimated that the lifelong probability of a marriage ending in divorce is 40%–50%. If divorce is likely to occur in 50% of marriages, it’s helpful to be prepared in the event you are put in the situation to make this decision. Before proceeding with filing for divorce, it is important to understand that it can be a lengthy process. Richard Rabb, Principal and head of our Family Law practice, lays out his general overview and checklist of to-dos and considerations to make before jumping into a divorce.

Do Some Homework

Before meeting with your legal counsel, try to understand your options to the extent that you are able. Be prepared to ask questions. It’s best to have at least some nominal appreciation of your circumstances as well as available avenues and processes.

Visit a Psychologist

Divorce is an emotional event. Seeking help from a professional is not only beneficial for your mental health but taking the initiative to seek help when you aren’t in the proper state of mind allows the court, if your case ever makes it that far, to view your efforts as a point of strength.

Establish Financial Peace of Mind

Get a copy of your credit report. This will aid in answering questions your legal team may have, as well as questions you may have, regarding your assets, liabilities, and expenses.
Go to a bank, where you don’t bank currently, and open your own bank account because when the divorce is over, or sooner, you’re going to need a bank account so you can access your money, pay your bills, and do what you need to do to function without delay.
Get a credit card if you don’t have one in your name. In the event your spouse shuts down a shared credit card, having one of your own will allow you to further solidify your financial peace of mind.

Understand Your Assets & Liabilities

Do your research to fully understand your assets and liabilities. Lines of credit are secured on your home, just like a mortgage is secured on your home. This information may be available online so, be aware of these details. Depending on the county you live in, you can visit the county recorder’s office website and enter your address to populate lien information, how the house was titled, if it’s titled jointly or if it’s titled to you, as well as mortgage information and if there is a line of credit associated. If there is a line of credit, there are two things you can do:

If you need money, you can extend on your line of credit and then put that money in your newly established bank account.
If you don’t need money and want to minimize your exposure, as well as ensure your spouse isn’t going to touch your line of credit, write a letter to the bank informing them that you will no longer be obligated for any further charges or extensions on the line of credit. The same goes for minimizing the credit line on shared credit cards.

Appreciate & Secure Your Assets

If you don’t have a grasp on your assets, collect as much relevant material as you can. For example, tax returns will potentially allow for account discovery, provide a concept about the party’s income, and detail other assets that may have generated a loss or gain. Collecting documents that are unique to your divorce case is also important. In securing your assets, be sure to note any accounts that require two signatures as you want to minimize how those accounts can be accessed.

Secure Your Personal Property

Minimize the potential heartache related to items that are personal to you. Know where your priceless personal belongings (i.e., photos, family heirlooms) are located because often, they tend to disappear, and they have no monetary value and generally cannot be recovered. Get referrals and start interviewing for a financial planner to assist you with budgeting and asset management. When interviewing for a lawyer, make sure you are comfortable with who you decide to hire. Ensure that they are accessible and know how to best communicate. Most importantly, make certain they answer all the questions you have. Accomplishing all of Richard’s recommended to-do items will best prepare you to take on the divorce process. For more information or to seek counsel from our Family Law group, please reach out to request a consultation or give us a call at 216-696-1422. _____ This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Visitation Rights in the Era of COVID-19

Richard A. Rabb — Mon, 30 Mar 2020 18:03:56 +0000

As the global pandemic and outbreaks of the novel Coronavirus (COVID-19) develop around us, the health and safety of our children is at the forefront of our concerns. Individuals across the United States are encouraged to practice social distancing as much as possible. However, divorced parents with shared custody arrangements may have differing views on the level of containment measures necessary.

In an ideal world, both parents limit their social interactions and prevent their children from excessive socializing. Unfortunately, some parents are unable to practice social distancing or do not enforce rules that will keep the children safe.

When one parent chooses to dismiss the CDC’s COVID-19 community mitigation strategies, including social distancing, he or she increases the chances of transmitting the virus to his or her children during their visitation time.

Visitation schedules and parenting arrangements might look good on paper, but when a novel viral pandemic strikes, the constant back-and-forth between parents might not be so convenient or safe for anyone involved. Both parents should have the opportunity to have frequent and continuing contact with their children, however, the right to visitation is not an absolute one.

One parent’s failure to implement protective measures during this ongoing pandemic, might cause the other parent to consider withholding visitation, even though they know it may violate a court order. By example, the mother enforces the recommendations of the CDC. She drops her daughter off with the father who is not able or refuses to follow CDC recommendations. By his lack of practicing prescribed social distancing, he potentially exposes his child to the virus and sends her back to the mother when the visitation ends.

This creates a terrible situation for the parents because parents have to consider the safety of children as it relates to their own behavior.

There is most likely an increased risk for children with underlying medical conditions, this too should be weighed when considering whether visitation is in the best interest to the child’s health and safety. If frequent and continuing contact with either parent is not in the child’s best interest as a result of the parent’s social habits, those concerns should be immediately expressed to the court by way of filing to modify the decree allocating parental visitation rights.

A Court (if you are able to access one) may place just and reasonable conditions on visitation by way of order or decree. In determining whether a modification of existing parental rights is appropriate, the court will analyze: (1) whether there has been a change in circumstances; (2) whether a modification is in the best interest of the child; and (3) whether the harm resulting from the change will be outweighed by the benefits.

These are tough times and tough questions further complicated by the virtual closure of the courts. In the example above, what should the first parent do? This is a case by case answer, but all parents should be proactive. Seek counsel before making decisions that could later affect your parenting rights; understand the implications of violating court orders; make filings with the court; reach out to people that have served as mediators in the past to broker disputes (lawyers, doctors, social workers, etc.); and do your best to make grounded decisions together.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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A Prenup Could Help Your Business Survive a Divorce

Richard A. Rabb — Thu, 24 Oct 2019 12:54:26 +0000

Even with recent studies indicating that the divorce rate is declining in the U.S., divorces have unfortunately become a part of the American fabric.

Without proper precautions in place, divorce can result in the complete dismantling of your life, your finances…and your business.

One valuable tool for helping a business to survive is a prenuptial agreement. A prenup is a contract, entered into by prospective spouses in contemplation and anticipation of marriage, which defines the value of your sole and separate property prior to marriage. It’s important to note that Ohio does not currently permit postnuptial agreements.

A survey of members of the American Academy of Matrimonial Lawyers found that the number of prenups executed has jumped in recent years and not just for business owners. As people are getting married at a later age today, they have more assets to protect. On the other hand, others are saddled with student debt for which a new spouse may not want to be responsible.

When entered into correctly, such agreements are generally honored by Ohio courts. Individuals entering into their second marriage, marrying at an older age or entering into marriage as a partial owner of a family business should all consider incorporating a prenup into their wedding planning process to safeguard the assets they bring to the marriage in the event of death or divorce.

The benefits of prenups are boundless.

In divorce proceedings, one of the very first things the domestic relations court must do is determine what assets are marital property subject to division, and what assets are separate property. A court must divide both marital and separate property equitably. Marital property is presumed to include all property acquired during the marriage or those assets produced or earned as a result of the parties’ mutual efforts during the marriage.

Generally, for property division purposes, property acquired before the marriage is considered separate property. However, this generalized rule does not automatically mean that just because one spouse holds title to property it is automatically separate property. In addition, just because one spouse receives an inheritance or bequest during the marriage, or a gift that has been given only to that spouse, does not mean the acquired asset is the receiver’s in total. It’s still possible for a portion of that property to be transformed into marital property if it appreciates in value as a result of joint efforts. This is called active appreciation.

Active appreciation is defined as an increase in the fair market value as a result of the labor, monetary or in-kind contribution of either or both of the spouses that occurred during the marriage. For example, if you own a business before marriage with a value of $500,000 at the time of marriage, and that same business doubles in value as a result of a spouse’s role in the business, the increase may be considered a result of joint efforts and, therefore, must be considered marital property subject to division.

As a matter of course, a spouse has the ability to convert separate property into marital property through his or her actions during a marriage. Even an inconsiderable contribution to the growth of the company can convert a family-owned company into marital property subject to equitable distribution. When parties contest whether an asset is marital or separate property, it is presumed to be marital property unless proven otherwise.

In the absence of a prenup that provides otherwise, there are multiple angles and arguments to attack the separate nature of a business interest. The court relies on Ohio law to equitably divide property, entitling a spouse to a portion of your business’s appreciation in value, business assets and a portion of the company’s retained earnings. A carefully crafted prenup can protect your business by keeping the foregoing a separate premarital asset.

While a prenup can be drafted to waive any interest in property acquired by one spouse during the marriage, as well as any rights and interests in income or profits gained therefrom, it does not, however, have to exclude the other spouse from access to your business assets entirely. Prenups can be advantageous by simply providing the valuation method in case of divorce.

These contracts can be drafted to meet your desires, provide financial security in a marriage, and prevent the intrusive review of business records in the event of divorce proceedings.

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