Albuquerque Divorce Lawyer Blog

The occasional trip to the casino or racetrack can be a fun and harmless outing. But with so many casinos to choose from, especially in the Albuquerque and Santa Fe area, many New Mexicans know from personal experience that gambling can often get out of control. Not infrequently in New Mexico, gambling issues lead to divorce. Divorces are complicated and contentious particularly in the division of property and debt. They become doubly so in the face of gambling debt. Though much of the damage may already be done, there is some relief under New Mexico law for the innocent spouse.

As a community property state, the general rule in New Mexico is that all debts incurred during the marriage are community. This means that upon divorce each spouse shall be responsible for payment of fifty percent of that debt, no matter which spouse actually incurred the debt. However, the New Mexico legislature has recognized the potential unfairness that would result to innocent spouses if the traditional community property rule is applied to gambling debts. As a way of addressing that potential unfairness, the legislature added NMSA §40-3-9.1 to the domestic affairs statutes, which provides that a gambling debt incurred by a married spouse becomes the separate debt of the spouse that incurs the debt.

While the law stating that gambling debts are separate is clear, identifying those debts during a divorce may be tricky. Often gambling debts can be masked as credit card debt because the incurring spouse took out cash advances to pay for gambling. Or parties may take out a home equity loan in order to pay off one spouse's gambling debts. Thus, it is very important for parties to a divorce where one or both spouses have incurred gambling debts to consult with an experience New Mexico divorce and family law attorney in order to ensure that a spouse does not wind up taking on debt as part of a community property settlement that should really be apportioned to the other spouse.

Sarah Armstrong
Albuquerque Attorney
www.CollinsAttorneys.com

One of the most complicated and contentious issues in a divorce is the division of marital property and debt. The first great challenge is often identifying and valuating the marital property. Given that New Mexico is a community property state requiring equal division of all marital property and debt, both parties have a significant interest in making sure that all marital assets are properly identified and valued.

Unfortunately, sometimes one or both spouses will try to manipulate assets or asset values. They may try to classify community property as separate property. Other times, one or both parties will try to distort the value of the property, up or down, depending upon motive. Worst case, one or both parties will try to hide assets.

So what can be done if a spouse suspects that the other spouse is hiding assets? The first step is to use the tools available under the New Mexico Rules of Civil Procedure and begin the discovery process. Discovery is the system devised by the courts for the exchange of information in court cases and it can include written requests for information (called interrogatories, requests for production and requests for admission). In a divorce case, the main focus of discovery is getting both parties to accurately identify all of their debts and assets. The discovery process also allows the parties to hold depositions, which is an interview, held under oath at which the spouse being interviewed can be required to answer questions about the existence of assets. Parties can also be required to bring documents to depositions.

If the parties have engaged in the traditional discovery process and one spouse still believes that the other is hiding assets, it may be time for that party to think about hiring an investigator. Such investigators are typically certified public accountants who are trained in reviewing financial records to look for evidence of missing assets. Basically they are looking for a paper trail connecting various deposit and receipts and tracing where all of the marital income went. Sometimes the investigator is appointed by the court as an expert charged with reviewing the financial records provided during discovery.

Hiring an investigator or asking the court to appoint an expert can be very expensive. Neither party is advised to go down this road unless it is absolutely necessary. Often a good forensic accountant will charge more per hour than the attorney. Often a basic review of the documents provided during discovery will show where all of the parties' marital income has been spent and that there isn't' anything to hide. An experienced family law attorney may be able to trace that money and dispel fears of hidden assets without having to hire an expert. Therefore, if a spouse believes that another spouse is hiding assets it is very important to review that claim with an attorney before proceeding.

A Qualified Domestic Relations Order ("QDRO") is a specialized order issued by the Court to divide retirement benefits during a divorce proceeding. As a community property state, the law in New Mexico provides that each spouse is entitled to 50% of the retirement benefits earned by the other spouse during the marriage. Retirements benefits can include, among other things, pension plans, deferred compensation accounts and 401(k) plans.

Retirement plans can often be one of the most valuable community assets owned by a divorcing couple and there are different ways to approach division of retirement benefits. As a preliminary matter, the parties must determine the value of the retirement benefit at issues. This determination can be fairly simple as in the case of 401(k) account, which contains a readily identifiable amount of money on any given day. In contrast, the value of pension plans can vary greatly depending on how much the employee spouse is making at the time of retirement and at what age the employee spouse retires. In complicated retirement cases, the parties and their attorneys should think seriously about hiring an actuary or other trained expert to determine the value of the disputed retirement benefit.

After the value of a retirement plan is determined, then the parties (or the Court) must also decide how and when the benefits will be distributed. In the case of some 401(k) plans, the parties can split the account at the time of divorce. In the case of other pension plans, neither party receives their share of the retirement plan until the employee spouse actually retires.

The QDRO should address all of the issues regarding valuation and distribution of retirement benefits. Though it would seem that the valuation and division would be a straightforward mathematical calculation, the division of retirement accounts is often hotly contested. The drafting of the QDRO can be highly contentious. In turn, the QDRO must be submitted to the court for approval and then submitted to the QDRO administrator for its approval. Each plan requires specific language and Orders are often rejected for what appear to be very trivial drafting issues.

There are some QDRO administrators that will review the Order prior to filing with the court. Others require a court approved Order prior to review. In these cases, the Order may take several trips through the drafting process, approval by the Court and final approval by the plan administrator. This process can take a very long time.

In cases where retirement benefits are hotly disputed and the parties cannot agree on drafting, it is often beneficial to have a third party attorney draft the QDRO to reduce the conflict between the parties and their attorneys. Though this will often reduce the conflict and expedite the drafting process, even this step cannot alleviate the conflict in some cases. In those cases, it is often necessary to seek the intervention of the Court. Where this becomes necessary, the parties can be assured that they are embarking on a very expensive adventure.

www.CollinsAttorneys.com

A variety of complicated emotional and legal issues arise when a person dies. And those issues get even more complicated when the deceased is involved in a pending divorce action. Does one party's death end the divorce proceeding? Does the surviving spouse serve as personal representative of the deceased spouse's estate? How does the Probate Code (the body of laws governing the estate of a deceased person) interact with the statues governing Domestic Affairs? The New Mexico Court of Appeals addressed these questions in two 2009 cases.

These questions are very important in a divorce action which is after all a dissolution of marriage. A dissolution of marriage means a division of property and debt. All community property and debt must be divided according to the law. It also means that the separate property and debt must be identified and divided as such. The division of property and debt has significant consequences for the parties. The division may also raise claims by creditors against the community property by creditors including mortgage companies, credit card companies, and even the IRS. As such, the fact that divorce legally survives the death of one of the parties is no trivial matter.

In Karpien v. Karpien, a case that arose in Sandoval County, the wife died during the parties' divorce proceeding which is commenced upon filing the Petition for Dissolution of Marriage. The district court appointed the wife's parents as the personal representatives of her estate (the personal representative is the party in charge of distributing the assets and addressing the outstanding obligations of a deceased person). The husband objected to the appointment of the wife's parents and argued that the wife's death essentially ended the divorce proceeding and that he was entitled to his inheritance as the surviving spouse under the Probate Code. The Court of Appeals disagreed with the husband and ruled that, upon the death of a spouse during a divorce proceeding, the divorce proceeding continues and the personal representative is charged with representing the interests of the deceased spouse.

But what if the will of the deceased spouse appoints the surviving spouse as personal representative? Just this situation arose in a case out of Albuquerque known as Oldham v. Oldham, in which the husband died during a divorce proceeding. The husband's will appointed his wife as the personal representative of his estate, which would have meant that the wife was charged with representing the husband's interest against herself in the divorce proceeding. The Court of Appeals overturned that appointment and ruled that such a situation created an inherent conflict of interest on the part of the personal representative, who in this case was the opposing party in the divorce action. The Court of Appeals sent the case back to the district court with instructions that the district court appoint another appropriate person to serve as the personal representative so that the divorce proceeding could be concluded.

When a family member dies, it is always important to consult an attorney about the probate process. And when that death occurs during a divorce, it becomes even more important to consult an attorney to make sure that all parties involved are compliant with both the Probate Code and the Domestic Relations statutes.

www.CollinsAttorneys.com

Just to make the community property versus separate property distinction even more complicated, sometimes the different types of property can be so intermingled that the property that was once separate becomes community or property that was community can become separate property (although this second example is very rare). This process of mixing property is often comingling or transmutation, which was described in a 1982 case from the Second Judicial Court in Albuquerque, called Allen v. Allen.

The most common way that property is comingled or transmuted is by gift. For instance, in the Allen case, the wife owned a piece of property prior to the marriage, which she later deeded to herself and her husband jointly. The Court ruled that the deed was evidence of the wife's intent to gift the property to the community, which changed the property from separate to community.

However, property can also be transmuted without a document specifically designating a gift, but rather through the actions of the parties. This situation commonly arises with a home owned by one spouse prior to the marriage. Under the basic rules of community property, the marital home would be the separate property of the spouse who owned the home prior to the marriage. However, what often happens is that the mortgage payments for that home are made from the parties' community funds (remember that all income earned during the marriage constitute community funds, even if the parties have separate bank accounts).

The donative intent of the spouse giving the separate property to the community is the key to evaluating whether or not the property was gifted. And without a document specifically identifying a gift, it can be very difficult to prove that intent. These cases may require hiring an outside expert to trace all of the funds applied toward the property, which can be a very expensive process. As with any divorce settlement process, the spouses arguing over possible transmuted property need to balance the value of the property in question against the potentially high cost of proving transmutation.

www.CollinsAttorneys.com