Divorce Lawyers & Bankers

Divorce attorneys and their clients utilize the services of bankers almost daily.  It’s important to have a good relationship to better provide services for all of the stakeholders involved.  Often, the key to this is great communication.

Some of the most common issues are records requests, dealing with subpoenae, dividing marital accounts, dividing investment accounts and the refinance of mortgages.

Records requests

Bank records tell stories.  That is why we as divorce lawyers seek them and the information that we derive from them can help us win (or perhaps lose) a case.  Bank records are a great source of information and not merely related to cold bank balances.  My mentor and former judge (now deceased) Charles E. Rice, III was perplexed about his client being asked about his expenditures on his credit card for “Wilmington Golf and Leisure” which was the merchant name for a local strip club.  This evidence was hurting our client but it was clear he had spent significant sums of money at this strip club.  Similarly, statements may show significant gambling problems, money being spent at ABC Stores, and bars, etc.  These are some of the reasons we want this data.

Our clients are generally asked to obtain bank statements for every account (both assets and liabilities) for at minimum the date that the parties were separated and the current statement.  Sometimes statements are also needed for the date of marriage which poses a problem if the parties have been married for more than six to seven years – the record retention policy of most banks.  These statements are often used to equitably divide assets and liabilities.

Monthly bank statements for consecutive months over a long period of time are often forensically examined to determine whether money was diverted, whether a party has income they did not report or whether they are engaging in behaviors that would be detrimental to an award of child custody.  The evidence may be very helpful in child support or spousal support hearing.  Sometimes copies of the checks are also needed to help prove who endorsed them, to what institution they were deposited, etc.

Information is also sometimes sought in an effort to trace specific funds.  If a client owned a home before they were married and used funds from the sale of that house to buy a new house post marriage, it could be argued that the new house is also their separate property or at least that the court should consider the infusion of separate funds in determining how to split the property (e.g., unequal split).  For this, we often need realtor records (e.g., HUD, Closing Statements), copies of wire transfer records and checks.

When we need such information we sometimes issue a subpoena decus tecum (a court order requiring the person to produce records).   Under North Carolina law, if the bank wishes to be paid the costs for researching and responding to the subpoena, they have to object to the subpoena on those grounds before responding.  We have been advised by the State Bar that we cannot use a client’s trust funds to pay a bank-issued invoice that was issued without following the rules of civil procedure (since it is an invalid invoice) unless the client voluntarily consents to pay it.  Often, we have to inform banks that fail to follow the proper procedure is that they cannot be paid.  Some banks, however, follow state law and issue the objection which then allows us to negotiate a fee that the client often will authorize.

Dividing Joint Accounts

We often advise our clients at the beginning of legal separation to take one-half of all marital funds in checking, savings, money market and other accounts and attempt to have their name removed from the account.  Our concern is that if the other spouse then overdrafts the account that our client will then be liable.  Some banks/credit unions have allowed this while others will only allow the closing of the account.  Obviously, when a spouse is separating and the other does not know it, it sometimes makes it difficult to achieve the closing of the account when you have automatic debits, outstanding items, etc.  And there may be reasons such as domestic violence which necessitate leaving without such communication.

Investment Accounts

When the bank offers investment accounts such as Individual Retirement Accounts (IRA), 401(k) or similar accounts, we often work with the bank or financial institution to divide them sometimes through a Letter of Instruction and sometimes through a Qualified Domestic Relations Order (QDRO).  Through this process, we have sometimes sought the help of bankers to help equitably distribute the basis for capital gains tax.

Refinance

Often the parties will have joint debt that needs to be separated.  While we can have a settlement agreement or court order which requires one spouse to be solely responsible for such debt and to indemnify and hold the other spouse harmless we realize that as between the joint debt holders and the bank, the bank can go after both for non-payment.  Therefore, the preferred method of handling such situations is a release of liability of one party or a refinance.  We often work with bankers in an effort to make this happen.

We sometimes don’t understand why one bank allows the removal of a client’s name and another will allow it.  Obviously, different financial institutions (e.g., credit union v. bank) are regulated differently and each financial institution has its own rules.  The better we understand such rules and work together, the better for our clients.  So always feel free to contact us.