Georgia Family Law Bar Exam Question
In 1995, Mary and John, residents of Fulton County, Georgia, were engaged to be married. John, several days prior to the scheduled marriage, delivered to Mary a proposed premarital contract, prepared by his attorney, and indicated to her that he would not proceed with the planned marriage unless the agreement was first executed. The agreement provided that property owned by a party at time of marriage would remain the property of such party in the event of divorce and that both parties waived any claim for alimony in the event of divorce. A list of purported property of John was attached to the proposed agreement as Exhibit "A." John advised Mary that she should attach a list of her property as Exhibit "B." Exhibit "A" listed a home, valued at $150,000, subject to a loan of $50,000; a certificate of deposit of $100,000; furniture valued at $10,000; and an automobile valued at $5,000. John inadvertently failed to list on Exhibit "A" Coca-Cola stock valued at $45,000. Mary, after consulting with her attorney, and not wanting to call off the marriage, decided to enter into the agreement. Mary attached a list of her assets, which consisted of an automobile valued at $1,500 and furniture valued at $2,000. The parties executed the agreement and proceeded with the marriage.
In 2005, John and Mary decided that they were not compatible, that the marriage was a mistake, and that they should separate and obtain a divorce. The parties have one child, age 2. After the separation, John learned that Mary had engaged in an adulterous affair that ended 6 months before the parties separated. John still holds the certificate of deposit which he held at the time of marriage which, with accrued interest, is now valued at $150,000. The home owned by John at the time of marriage has increased in value to $300,000. The loan on the home has been paid with funds earned by John during the marriage. The Coca-Cola stock has increased in value to $70,000. John, during the marriage, has accumulated assets valued at $100,000 in a 401(k) retirement account. Mary, during the marriage, has accumulated $20,000 in an Individual Retirement Account. Each party has a new automobile valued at $15,000 and the parties have furniture and furnishings, accumulated during the marriage, valued at $20,000.
Mary has hired you to represent her in the divorce. She wants to know whether the premarital contract is enforceable. She also wants to know how the property of the parties should be classified for the purpose of equitable division and whether John's 401(k) retirement plan and her Individual Retirement Account can be reallocated to benefit her without either party having to pay income taxes on the transfer. She is also concerned about the effect of her adultery on her case. Mary is very inquisitive and wants you to explain how applicable Georgia law applies to the facts of her case and what legal tests, as to each aspect, will govern the outcome.
Advise Mary as to the following: (Do not discuss issues of child support.)
1. Is the premarital contract enforceable? Explain.
2. Assuming, for the purpose of answering this question only, that the premarital contract is not enforceable:
a. Characterize property of John and Mary (separate, marital and/or part separate part marital) for the purpose of equitable division. Explain.
b. Characterize the increase in value of the home during the marriage. Explain.
3. Can the 401(k) retirement plan and the Individual Retirement Account be divided, without tax effect, as a part of the equitable division of property? Explain.
4. Continuing to assume that the premarital contract is not enforceable, does Mary's adultery bar her claim for alimony or her claim for equitable division of property? Explain.
Question 4 - Sample Family Law Essay Exam Answer 1.
Disclaimer - These are sample answers and may contain some incorrect information.
I. Enforceability of the Premarital Contract
Parties may enter into two types of premarital contracts. One type is that which is contingent upon getting married. The other type, which is at issue here, is what explains what happens to property after divorce or separation. In Georgia, a premarital contract must be voluntarily entered into, it must be based on full disclosure of relevant facts, and it must be fair at the time it is sought to be enforced.
The first issue that Mary might raise in combating the enforceability of the premarital contract is that she did not enter into it voluntarily. She might argue that John’s threat of not marrying her if she did not enter into the agreement overcame her free will. However, this argument is not likely to be successful. To hold that every time one party in an engaged couple decides to ask for a premarital contract the other party does not voluntarily agree would render most premarital contracts void. Mary knew the nature of the document and signed it. The agreement was voluntarily entered into by both parties.
The second argument Mary might make is that John did not fully disclose the extent of his property. This is likely to be a more persuasive argument since a premarital contract in Georgia must be based on full disclosure. In this situation, Mary was not fully informed of the extent of John’s property. If she had known of the additional $45,000 worth of stock she might have bargained to receive something in the event of divorce.
The third issue Mary might raise is that it must be fair at the time it is sought to be enforced. In this case, Mary has only her automobile ($15,000), furniture ($2,000) and a $20,000 IRA. John on the other hand has a $150,000 CD, a home worth $300,000 (we’ll discuss later that not all of this $300,000 is his), $10,000 worth of furniture, and an automobile worth $15,000. The worths of the parties are clearly imbalanced and it would be unfair to enforce the agreement against Mary. The length of the marriage is taken into account in determining to whom property should go to in a divorce. The longer the marriage the longer the parties have had to become accustomed to their way of living. It would be unfair to Mary to leave her with such little funds while John took so much. The premarital contract between Mary and John would be unenforceable because it would be unfair to enforce the contract at this point and it was not based on full disclosure.
II. Premarital Contract Is Not Enforceable
a.) character of the property
In Georgia, property of the spouses in a marriage is divided on marriage in what is called equitable division. Separate property is that acquired before marriage or after marriage by gift or devise. Marital property is property acquired during marriage. Finally, mixed property is that property which is partially marital property and separate property. A court will give each party their separate property and then divide the marital property equitably.
Mary’s automobile would likely be marital property unless it was acquired with Mary’s separate funds. Mary’s furniture would be separate property since she acquired it prior to and brought it into the marriage. Mary’s IRA would be marital property since it was acquired during marriage. John’s car, for the same reasons as Mary’s car, would likely be marital property. John’s CD would be separate property even though it appreciated in value. Any appreciation in value of separate property will remain separate property. Likewise, the Coca-Cola Stock would be John’s separate property. In addition, John’s $10,000 furniture would be separate property. Although it was separate property at the beginning of the marriage, the home would be mixed property because the mortgage was paid off during the marriage. Mary would be entitled to proceeds from the house to the extent that the mortgage was paid off during the marriage.
b.) Increase in Value to the Home During Marriage
The increase in the value of the home would be mixed property. Generally increase in value to separate property will not change the character of the property. However, there was an existing debt on the home at the time of the marriage. Despite the fact that John’s funds were used to pay the mortgage, it was done during marriage. Items acquired and debts paid during marriage will be deemed to be marital property. Maybe with the mortgage paid Mary was able to concentrate her income in another area. Therefore, the increase in value of the home should be allocated in proportion to how much debt was paid off during marriage.
III. Can the 401(k) and IRA be a part of the equitable division of the property?
In Georgia, a 401(k) or an IRA can be included in the equitable division of property. It will be deemed to be marital property to the extent it was earned during the marriage. Furthermore, it can be obtained without tax effect if a qualified domestic relation order (QDRO) is issued by the court. A QDRO will require the holder of the investment account to hold the court determined portion for the benefit of the spouse holding the QDRO. Since the property will not be passed at that time, taxes will not have to be paid on the transfer.
IV. Does Mary’s adultery bar her claim for alimony or her claim for equitable division of property?
Georgia is in the minority of states that allows evidence of fault in the distribution of marital property. First of all, in Georgia adultery will bar a spouse from obtaining alimony. However, adultery will not bar the equitable division of property. It will, however, be a factor in the analysis. Thus, Mary’s alleged adultery will bar her recovery of alimony, but will not bar the equitable division of property.
Question 4 - Sample Family Law Essay Exam Answer 2.
1. It is highly possible that the premarital K entered into between John and Mary will not be enforceable. This type of marital contract is one which contemplates divorce. In order to have a valid premarital contract, it must be entered into voluntarily, with all the material facts and values of all the assets of both parties, and at the time of enforcement, it must be reasonable.
Voluntary- Both parties agreed to the contract. Mary will argue that she didn’t have a choice if she was to marry John in signing the contract. John will argue that not only did she have the choice, but she even took it to her attorney to approve. The law will look to see whether John really meant that if she didn’t sign the contract he wouldn’t marry her. Mary would have had a better argument here if she hadn’t taken it to her lawyer, because John’s attorney prepared it and John told her to sign or hit the road.
Did John disclose all the material facts? No. John didn’t disclose the stock valued at $45,000 in the contract. The law is skeptical of premarital contracts and when one party doesn’t disclose everything it will make the K fail. This coupled with the lack of . . . will surely make the K fail.
Arguendo, was it fair and reasonable when being enforced? Probably not. His stock he failed to disclose is worth $100,000 and his house is worth $300,000. Therefore, the prenuptial contract probably will fail.
2. Georgia law divides property into separate, marital and/or part separate, part marital. Separate property is property the spouse had prior to entering the marriage or gifts or inheritance during marriage. Marital property is property which has accumulated over the course of a marriage. However, some property may be part marital and part separate if one has separate property but through his/her labors during marriage the asset grows.
a. The Coca-Cola stock valued at $70,000 is John’s separate property. The 401(k) is marital property because it was acquired during marriage. The IRA account is marital property because it was accumulated during marriage. The new automobiles, furniture and furnishings are marital property because they accumulated during marriage. What is tricky is the home. When John and Mary married, John had $100,000 equity in his $150,000 home. The payments have been paid through funds John had earned. However, we would need to know of the contributions Mary made to the marital estate. Just because the funds came from John’s paycheck doesn’t necessarily indicate that Mary didn’t help pay. If he paid the house payment and she paid all other bills, it would be unequitable not to give her a part of the house. So, if she contributed as well, the court is likely to divide up the equity as follows: ½ of 1/3 to Mary because she would get half of the 1/3 interest her and John paid together. He would get the remaining 5/6 totaling his $100,000 equity and half the $50,000. Thus, John would get $250,000 and Mary would get $50,000 of the home.
3. Yes, Under ERISA, half of the proceeds from both the 401(k) and the IRA can be divided among the two persons. However, if the court issues a Qualified Divorce Order, the IRA and the 401(k) can be divided up as a part of the equitable division of property.
4. Mary’s claim for alimony and equitable division of property may not . . . by adultery. Normally in Georgia, adultery bars one from receiving alimony. However, in order to claim this, the divorce grounds have to be adultery. Here, John didn’t discover that Mary was having an affair until after 6 months of being separated. John probably filed for a “no-fault” divorce because this is the most common in GA. Because this isn’t the reason John divorces Mary, it is likely the court wouldn’t bar alimony. Adultery is taken into consideration for the equitable separation of property just as it is taken into account for alimony. The court is going to ask a few questions when it comes to equitable separation of property. First, who are the parties? How long have they been married, what is there education levels? Next, the court will ask what do the parties have? What kind of home? Separate property? Next, the court will ask where the property came from? Income? Gifts? Inheritance? Then the court will ask where is should go? Georgia is one of the few states which takes conduct of the parties into consideration. Here, Mary’s adultery will come back to bite her. The court won’t be as willing to give her stuff due to the adultery.
Similarly, in alimony the court looks to how long they have been married? Education levels? What kind of home? What does each person have? What is the ability to pay alimony? The court looks to who has custody of the children. Then, once again, Georgia (being in the minority) looks to the conduct of the parties. Here to, the adultery will place a serious dent in what kind of alimony she could have received. However, if the court awards alimony, it may as: 1.) permanent periodic payouts, 2.) lump sum, 3.) rehabilitative alimony or 4.) reimbursement alimony.
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