Most authorities agree that litigation should be discouraged. Many would argue that reconciliation should be pursued whenever possible. However, waiting to protect legal rights in legal proceedings can result, on occasion, in serious damage. For example, the general rule is that the accumulation of marital assets lasts until the entry of divorce. This means that assets acquired and wages earned during a period of separation but before divorce, could be considered to be marital assets and divided. A good example is found in the recent case of Wheat v. Wheat, No. 2008-CA-00476-SCT (Decided June 24, 2010). In that case, Judith Wheat had an affair with a co-worker in September, 2004. As a result, she resigned her position and received a severance of almost $400,000. Apparently, she and her husband attempted to work things out until their separation on March 1, 2005. The parties then attempted to negotiate a faultless divorce, but that failed and Mr. Wheat filed for divorce on adultery on May 27, 2005. It is unclear when the severance was agreed to or paid, but, in the end, the severance was included in the marital assets and divided. Judith contended that the severance was for future wages, but the Supreme Court disagreed and affirmed the division of the package.
The practice question is whether Judith would have been better off financially filing for divorce and obtaining a temporary hearing and order before the severance was paid. The law seems clear that the accumulation of marital assets can be considered to stop after the entry of a temporary order. The practice tip is for parties and attorneys to consider entering into a temporary order, even though negotiations are amicable, in order to prevent assets being deemed marital that probably should not be. Another matter to consider is the tax deductibility of payments made during negotiations. If they are paid pursuant to an order and the wording is correct, the payor may be able to deduct the payments.