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Court denies ex-husband's bid to reopen divorce settlement

Occasionally in divorce cases that have already been settled, one of the spouses will request to reopen the case due to unforeseen financial setbacks. Very often these requests are for child support modifications or a revision of the division of assets after the paying parent loses a job or experiences a dramatic drop in income. In one recent case, a man tried to re-settle after he realized his income was much lower than he estimated during the divorce.

Most Texans haven't forgotten Bernard Madoff's infamous Ponzi scheme. Neither has a man who invested with Madoff and included the estimated value of those investments in his divorce settlement. After the couple separated in 2001, the man's wife received a $6.25 million settlement when the couple divorced in 2006, $2.7 million of which was paid out from the husband's Madoff account.

There was a cutoff date of Sept. 1, 2004, for valuing the couple's assets. At that time, the husband believed he had $5.4 million in the Madoff account. The Ponzi scheme wasn't discovered until 2008. The man requested a revision of the divorce settlement, reasoning that he ended up with much less money than he thought he had when the couple settled. But the New York Court of Appeals reversed an appellate court's decision to grant the reopening.

The court pointed out in its ruling that the husband was able to access funds from the Madoff account during the divorce in order to settle accounts with his wife. It was possible, the judges argued, for the husband to have withdrawn part or all of his funds up until the scheme was revealed.

One of the judges noted that if the man's marital assets had increased after the settlement, his wife would not have been able to claim entitlement to the higher value. Therefore, the husband can no more easily attempt to reopen the settlement agreement simply because the value of his assets decreased.

The losses experienced by Madoff investors or any other Ponzi scheme investors are highly unfortunate, but in the end they aren't all that different from a loss of income for other reasons, such as a job layoff. To reopen a settlement after several years would be unfair to the spouse who received income in the division of assets and relied on those funds once the settlement was complete.

Source: New York Law Journal, "Ex-Husband Loses Madoff-Prompted Bid to Reopen Divorce," Joel Stashenko, April 4, 2012

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