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Bifurcation of Dissolution of Marriage Actions – Part One

Family Law

There may be no field of law as fraught with dangers and pitfalls to the attorney as that of family law. The “bifurcation” of a dissolution of marriage action creates myriad legal ramifications potentially hazardous to attorney and client alike. For this reason, Miller’s article will appear in two sections. This first section reviews both the practical and legal effects of a bifurcation. The second, which will appear in the December 1981 issue, will review the case law, available appellate remedies and the bifurcation law of the State of California.

Whether counsel is opposing a motion for bifurcation, or whether the client seeks advice as to whether a bifurcation should be stipulated by counsel, the ramifications in that bifurcation must be explained to the court and to the client.1 ” Bifurcation,” for the purpose of this article, is the separation of the property, alimony and support issues from the dissolution of marriage. There are instances in which one might wish to bifurcate the issue of child custody from all other issues; and there are instances in which one might wish to bifurcate the issue of the validity of a prenuptial agreement from all other issues. This article, however, is concerned only with the bifurcation situation in which one spouse, generally the husband, wants the marriage to end now, and the property rights to be resolved later. (Sometimes “later” means “much later,” and sometimes “later” means “never.”) This discussion assumes that the wife will be the one seeking lump sum alimony, special equity and periodic alimony, that the assets are titled in the name of the husband or in the parties joint names as tenants by the entireties and that there is no prenuptial or postnuptial agreement between the parties.2

Legal ramifications of bifurcation
Bifurcation creates many potential legal consequences. Upon dissolution, property held as tenants by the entireties becomes property held as tenants in common.3

• Liens could attach to the husband’s share of the real property to which the wife may be looking in satisfaction of her claim for lump sum alimony (as an instance of support), or lump sum alimony, (as an instance of “equitable distribution”). All or some of the property may also be subject to the wife’s claim for special equity.4

• Even if the husband were enjoined from encumbering his property, that property may be encumbered involuntarily by virtue of, for instance, either a judgment against the husband which is already of record at the time of the bifurcation, or by the Internal Revenue Service or some other debtor enforcing its rights.5

• If the husband disregards the court’s injunction and encumbers his property, the wife may not discover that fact until it is too late to do anything about it. Even if the discovery were made on a timely basis, there may be nothing practical the wife can do to repair the resulting damage.

• The husband could transfer his property without consideration or dissipate it, and notwithstanding the fact that the transfer would be in violation of a court order, the transferred assets may be irretrievable. The wife will often lose her medical insurance coverage.6 I f the husband were to die between the time the dissolution action were bifurcated and the property rights resolved, there are two problem areas to consider with respect to life insurance: (a) If insurance is in existence, the trial court at the time of bifurcation must order that the insurance be maintained for the protection of the minor children and the premiums paid by the husband.7 ( b) If insurance is not in existence at the time the court considers bifurcation, then insurance benefits may not be available. Query: Does the court have the authority to order the husband to obtain life insurance as a condition of the bifurcation?

There may be income tax consequences to the wife. Husband and wife must be married on December 31 in order to file a joint income tax return. If the husband remarries, he can file that return with his new spouse. (The first wife could also file with her new spouse, but for reasons discussed below, the wife may be hesitant to remarry). If the wife received temporary periodic child support, all of these sums will be taxable income to her.8

Were the husband to die unremarried, with a will, prior to the time of the adjudication of the property rights, the wife would not inherit under the husband’s will because any provision for the wife in the will would be void. The husband would have to make a new will after the dissolution to provide for his former wife, an unlikely act and one which the trial court could probably not require of the husband as a condition of a bifurcation.9

Were the husband to die unremarried without a will prior to the time of adjudication of the property rights, the wife would lose her intestate share.10

Were the husband to die unremarried with or without a will, the wife would lose her “elective share”;11 lose her “homestead rights”;12 lose the benefits of certain “tax exemptions”;13 and lose the benefits of the “family allowance.”14

Further, if there are children who are the residuary beneficiaries of their father’s estate, the loss of the marital deduction may reduce the net amount of their inheritance.

Were the husband to die unremarried, with or without a will, prior to the time of the adjudication of the property rights, the second wife would be seeking her “elective share” or intestate share, as the case may be (absent a prenuptial agreement), and the first wife would be looking to the same assets to satisfy her claims. Query: Which claim would be given priority?

Were the husband to remarry and become embroiled in a second contested dissolution of marriage action prior to the time of the adjudication of the wife’s property rights, there would be two spouses seeking to enforce their rights with respect to the same assets and income. Query: Should the two dissolution actions be consolidated?

The considerations set forth above are by no means intended to be exhaustive. Any experienced practitioner with a fertile imagination will be able to supplement this list with additional “potential legal nightmares.”

Practical ramifications of bifurcation
The legal ramifications of bifurcation, depending upon the factual circumstances, can be mild to severe. There are in addition, some very real practical ramifications of which counsel must be aware when either considering a stipulation or opposing a motion to bifurcate. In light of Claughtons15 a dmonition that the desire to remarry does not constitute a sufficient basis for bifurcation, counsel for the husband seeking to bifurcate will have to try to find other reasons in support of that position. The case law does not establish what constitutes sufficient reasons for bifurcation. Realistically and whatever the stated reasons, the basic motive for bifurcation is often the husband’s desire to remarry. The husband receives severe pressure from his bride- to-be. That can be used to good advantage by the wife’s attorney who is seeking to negotiate the most attractive deal possible for the wife. Grant the bifurcation and this leverage disappears.

Leverage may be the single most important factor in negotiating a satisfactory agreement. Determine the adversary’s primary objective and counsel can extract a grand price for delivering that objective. Once delivered, however, there is no more trading material available. Settlements are made when each of the parties can obtain something important that each of them wanted. If the wife or the trial court permits the husband to get what he wants cheaply, the wife has lost the bargaining power she needs to effect an equitable settlement.

Courts and lawyers are both guilty of overlooking the practical aspects and the basic principles of negotiation. Each spouse has strengths and weaknesses in his and her negotiating positions, and each spouse has certain basic objectives to reach. Respective counsel and the court must recognize that the bifurcation in essence affects the normal negotiating process.

When will court permit bifurcation?
What “rule of thumb” should govern the trial court’s determination of whether a motion to bifurcate should be granted? Instinctively, many judges will implement the test of whether the bifurcation adversely affects the objecting spouse. The circumstances are few and far between (if they exist at all) in which that objecting spouse (generally the wife) is not going to be adversely affected. One side’s advantage is generally the other side’s disadvantage.

Consider a factual situation in which an elderly man in his eighties marries a woman 20 years younger than he; there is no prenuptial agreement and the husband has several million dollars. The marriage is of short duration. All factors of health and accidental death aside, the wife should survive the husband. The husband does not want to have the woman to whom he has been married such a short time receive her statutory share of his life-long accumulations. The wife is not anxious to have the property rights resolved. Should the husband be entitled to a bifurcation? If his motion were granted, the wife would lose all her leverage in the negotiations; but if the motion were not granted, the wife may be unjustly enriched. If the husband had children, they would certainly favor a bifurcation and be adversely affected by its denial.16 T he court can consider the ages of the parties and the health of the husband in determining whether to award the wife lump sum alimony as an alternative to periodic alimony.17 I f age and health are significant factors in this respect, then should they also not be relevant to the issue of bifurcation?

Consider the husband who owns a business started before his marriage. After the marriage, the business, which still has significant value, develops financial difficulties requiring the borrowing of funds from a lending institution that requires the wife’s signature on the loan documents. The husband agrees to indemnify the wife from all liability she may incur incident to her executing the documents, but the wife either refuses to sign them or seeks to extract a consideration for her signature which the husband is unwilling to pay. The wife’s signature is not necessary if the parties are divorced. Should the husband be entitled to a bifurcation? Query: Is there a meaningful distinction between preserving a man’s business and preserving a man’s estate?

In Canakaris,18 the trial courts are admonished to fashion an equitable award based upon the totality of the circumstances, ensuring an equitable distribution of property acquired during the marriage, and doing so without substantially endangering the economic status of either spouse. Query: Does the reasoning of Candkaris support a court’s bifurcation when the husband’s business or estate is in jeopardy?

The courts could uniformly deny all unstipulated bifurcations, and “let the chips fall where they may.” It is, however, preferable for the appellate courts to fashion a “rule of reason” to provide guidelines and standards for the trial court to apply in determining whether a motion for a bifurcation should be granted. Very little progress to that end has been made to date.

1 There are no reported cases in which the parties have stipulated to a bifurcation, and the court has failed to bifurcate. One must assume, therefore, that a stipulation will be approved by the court.

2 The practitioner should be cautioned before stipulating to the bifurcation of any issues. As a practical matter, the cost of preparing the case for trial quickly becomes prohibitive. If possible, the case should be prepared only once. The court calendars are crowded, and counsel should try to get all matters resolved as soon as possible. Some judges seem to lose interest in cases that appear before them on a multiple basis, and the adrenalin which a good trial lawyer needs in order to give the client the best representation often becomes more difficult to muster with each successive hearing.

3 FLA. STAT. §689.15

4 Duncan v. Duncan, 379 So. 2d 949 (Fla. 1980).

5 See Hillman v. McCutchan, 166 So. 2d 611 (Fla. 3d D.C.A. 1964), Pollock v. Franklin Finance Company, 342 So. 2d 556 (Fla. 3d D.C.A. 1977), State Department of Commerce Division of Employment Security v. Lowery, 333 So. 2d 495 (Fla. 1st D.C.A. 1976), Liberman v. Kelso, 354 So. 2d 137 (Fla. 2d D.C.A. 1978), and Holt v. Boozel, 394 So. 2d 226 (Fla. 5th D.C.A. 1981), which in summary hold that absent a fraud on creditors a conveyance by one spouse to the other of entireties property prior to the entry of a final judgment of dissolution of marriage will avoid any judgment lien or claim of lien against the conveying spouse whether or not the property is homestead. Beware of the “twinkling of a legal eye.”

6 New Jersey, Ohio, South Dakota, and Wisconsin are among the jurisdictions which have recently adopted statutes dealing with conversion of insurance benefits upon divorce. Some, but not many, policies written in Florida permit conversion.

Florida does not yet have legislation to make health insurance coverage possible where a change of marital status has occurred. Spouses whose medical insurance terminates upon divorce, pursuant to the terms of the policy, should be entitled to the same coverage without proof of insurability. Often the cause of the marital breakup is the medical and/or emotional illness of one spouse who is generally either uninsurable or can only obtain new medical insurance on a rated premium basis.

7 The generally accepted rule is that the husband cannot be required to maintain life insurance for the benefit of the wife. Perkins v. Perkins, 310 So. 2d 438 (Fla. 4th D.C.A. 1975), Durton v. Dutton, 379 So. 2d 211 (Fla. 3d D.C.A. 1979), Eagan v. Eagan, 392 So. 2d 988 (Fla. 5th D.C.A. 1981). But see Stith v. Stith, 384 So. 2d 317 (Fla. 2d D.C.A. 1980).

There is a whole new world concerning the wife’s right to her husband’s interest in pension plans, profit sharing plans, and so forth. Bifurcation has significant consequences with respect to this area of the law as well.

Query: Is there a difference between ordering the husband to “maintain” life insurance and requiring the husband to “obtain” life insurance?

8 Whenever reasonably possible, the wife’s attorney must try to obtain an indemnification for the wife on all joint income tax returns which the wife executed. Although the wife may very well have benefited from certain “liberties” taken on those returns, the wife generally does not have the income which would enable her to pay readily any subsequent assessments.

9 FLA. STAT. §732.507. The court may, however, be able to order the husband or the husband’s estate to indemnify the wife from certain adverse consequences caused by the bifurcation.

10 FLA. STAT. §732.102.

11 FLA. STAT. §§732.201, 732.207.

12 FLA. STAT. §732.401.

13 FLA. STAT. §732.402.

14 FLA. STAT. §732.403.

15 Claughton v. Claughton, 393 So. 2d 1061 (Fla. 1980).

16 In Behar v. Southeast Banks Trust Company, N.A. , 374 So. 2d 572 (Fla. 3d D.C.A. 1979) rev. denied, 379 So. 2d 202 (Fla. 1980), the marriage of an 81 year old man who was terrified of his wife, was bifurcated. Significantly, the wife had constantly changed counsel and had frustrated efforts to dispose of the case.

17 See Hartley v. Hartley, 399 So. 2d 1126 (Fla. 4th D.C.A. 1981), and Nusbaum v. Nusbaum, 386 So. 2d 1294 (Fla. 4th D.C.A. 1980).

18 Canakaris v. Canakaris, 382 So. 2d 1197 (Fla. 1980).

James Fox Miller is in private practice in Hollywood and is a principal in Miller and Schwartz, P.A He has served as author and faculty member of several family law Florida Bar CLE programs and Broward County Bar programs. He received his ].D. degree from Northwestern University and is a member of the Florida and Illinois Bars. He is currently serving as a member of the Executive Council of the Family Law Section of The Florida Bar and is legislative chairman for that section. Miller is also chairman of the Broward County Bar Association Family Law Committee and is past president of the South Broward County Bar Association.

Miller acknowledges the assistance in the preparation of this article of A. Matthew Miller, his partner and brother, who received his J.D. degree from the New York School of Law in 1974.

He writes this column on behalf of the Family Law Section, Melvyn B. Frumkes, chairman.

Family Law