This article was originally written by Linda Olup, Esq, a Minnesota attorney who practices in Edina MN, and is used, with gratitude, by permission of the author, with a little editing by Neil A. Fredman.
S v. S – Gold Diggers Need Not Shake in their Booties
In March 2015 Rochelle Sterling, as the wife of Donald Sterling, sued V. Stiviano alleging that Ms. Stiviano had received community property in excess of $2.6 million without Mrs. Sterling’s knowledge and consent. She sought the return of what Ms. Stiviano had received from Mr. Sterling. Ms. Stiviano declined to return the assets and a lawsuit followed.
On April 14, 2015, Judge Richard Fruin Jr. of the California Superior Court ordered Ms. Stiviano to return approximately $2.6 million in assets, including a $1.8 million home, a Ferrari, a Bentley and other vehicles worth more than $800,000, as well as cash gifts that Mr. Sterling gave to his 32-year-old companion. V. Stiviano asserts that she will file an appeal.
The important part of this order is that the money is to be returned to the Sterling Family Trust, not to Mrs. Sterling as the wife because Rochelle and Donald Sterling do not personally own the money that was used to acquire the assets given to Ms. Stiviano. Their Family Trust owned the funds used to purchase the items held by or given to Ms. Stiviano. The Sterlings were both Trustees of the Family Trust and the sole beneficiaries of the Trust, but they do not own the assets of the Trust.
Family Trusts, such as the one established by the Sterlings, are devices used to legitimately avoid taxes that would substantially diminish the value of the estate. Donald and Rochelle are the settlors and trustees of the Sterling Family Trust and are the “sole vested current beneficiaries of the Trust”. Trustees are obligated to maximize the value of trust assets.
In 2014, to facilitate a sale of the LA Clippers, Mrs. Sterling became the sole Trustee and thereby acquired control of the Sterling Family Trust under the unambiguous provision of that Trust which allows for the removal of a Trustee who has been declared incapacitated by two experts. In the ultimate act of “girl power” Mrs. Sterling, as the sole Trustee of the Sterling Family Trust, sued Ms. Stiviano. Having effectively disposed of her husband as a Trustee, she was clear to pursue the lawsuit as the remaining Trustee.
The question arises as to whether illicit companions should be concerned by this ruling? If there is an appeal the ending to the story has yet to be written, as an appellate court will determine whether Judge Fruin interpreted the law correctly.
Does the ruling have an impact for other scorned spouses across the United States? As a practical matter, probably not. Most Gold Diggers are safe and need not shake in their booties. New York law, like California or Minnesota, Ms. Olup practices, allows a disgruntled spouse to recover ½ (or possibly more) of the “wasted” assets that can be proven to have been improperly dissipated. The recovery is usually against the remaining marital estate, not the “gold digger” her (or him) self. There are also very practical issues to deal with.
First, unlike the Sterlings most families do not have assets in excess of $2 Billion. Second, most families do not have Family Trusts to protect the value of their wealth.
As a practical matter, if one spouse has spent money on an illicit companion, the amount of money is generally not worth pursuing in the divorce. The amount spent on an illicit companion is dependent on the earnings and liquid assets of the parties. Even for someone earning a high six figure income there are limits to what will be spent. Let’s say that someone is alleged to have spent $1 million on a mistress from marital income and/or marital assets. In most states, including New York, barring the “waste of marital assets” issue, the $1 million represents funds that would likely have been divided equally in the event of a divorce. So the amount of money owed to the aggrieved spouse is $500,000, not $1million.
Equate that to a marriage in which the unfaithful spouse earns $150,000 per year and spent $20,000 on the illicit companion. One-half of the money, i.e. $10,000, belongs to the aggrieved spouse, which is what she should receive if successful in her claim. The aggrieved spouse needs to seriously consider how much time and money she wishes to spend to prove the claim to impel a judge believe to return to the funds to the marital estate. Often the only way to return the funds to the aggrieved spouse would be to divide the marital assets and return to the aggrieved spouse the sum of $10,000 from the other spouse’s share of the assets.
Next, the cost of paying a lawyer and forensic expert to prove what was spent on the affair is an expense the aggrieved spouse is going to have to pay, initially, with the hope that if there is proof of the claim, the Judge will order attorney fees and costs to be recovered. In the case of Donald Sterling, his companion provided a lot of the proof that allowed Rochelle Sterling to build her case. V. Stiviano publicly discussed the gifts she received from Donald Sterling making it relatively easy to ascertain the value and extent of what she received from the family trust. Most illicit companions are not going to be publicly bragging and most illicit companions will not be getting such substantial gifts that it is worth the media taking note. So digging up the dirt will be expensive and may cost more than the claim is worth.
Most cases will require a forensic expert to review credit card receipts, account for all cash expenditures, and track the liquidation of assets which is a very time-consuming process. There also may be the cost of including an illicit companion in the lawsuit and the task of naming them as a third party to the divorce, something that does not often occur in no-fault divorce states. Gold diggers of either gender are not usually flush with cash and so suing them is not likely to provide a good return on investment.
Typically the attorneys involved in such matters are high-powered and expensive. These will not be the lawyers charging $200 per hour and working “virtually” from their homes. The forensic experts are also expensive.
In the long run, it is not likely that an aggrieved spouse will quench the thirst for financial revenge. Often, the “innocent” spouse “throws good money after bad”. Few of us have the luxury afforded to Rochelle Sterling of forcing a “hussy” to account for her greed (or her husband’s wasteful behavior). Sterling proves that it can happen, but underscores the kind of unique factual situation needed to prevail. Any spouse considering such an endeavor needs to evaluate all of the circumstances, and, guided by an experienced, skillful practitioner, decide whether it is worth the trouble before embarking on such a voyage.
Fredman Baken & Novenstern, formerly Fredman Baken & Kosan, is a Westchester, New York Divorce Law Firm dedicated to providing objective and experienced advice to assist you in making informed decisions, during a time when you may be feeling confused and overwhelmed, so that your family can transition from uncertainty to security. Call (914) 997 9070 today.