Dear Clients and Friends,
When marriages go bad feelings can be raw. Some are tempted to want to hide assets to punish your soon-to-be ex. But if you get caught the consequences can be severe as a recent case shows us.
The couple in the case, Robert and Janet Foisie, decided to divorce in 2010. They went to mediation, where they agreed to fully disclose and equally divide their assets. Robert also allegedly told Janet during mediation that he had no “offshore assets.”
A year later, after both spouses had allegedly fully disclosed their assets in a Connecticut family court, they executed a divorce settlement leaving each of them with $20 million in securities and real estate.
After the divorce however, Janet learned Robert did not disclose another $4.5 million in securities and millions more in promissory notes stashed away in a Swiss trust. Meanwhile, he had donated an estimated $39 million to his alma mater, Worcester Polytechnic Institute, which apparently left him insolvent when he died in 2018.
Janet sued WPI in federal court in Massachusetts, claiming the donation was a “fraudulent conveyance” that it shouldn’t have received and that she should be able to “claw” it back.
WPI argued that under Massachusetts law, a divorce proceeding must be “imminent” in order for a spouse to be considered a creditor entitled to pursue assets that were fraudulently transferred to a third party in order to thwart property division or alimony.
A trial court sided with WPI, but a federal appeals court reversed, ruling that under the state law in question — which was based on the Uniform Fraudulent Transfers Act — a creditor is simply “a person who has a claim.” This meant Janet was not barred from being a creditor just because the divorce already happened.
Now Janet will have the opportunity to seek the assets she’s apparently entitled to. While Robert did not benefit materially from the donation to his alma mater (except perhaps with an extremely large tax deduction), others hide assets in a variety of ways. This case shows that doing so is very unwise. The better approach is to talk to us about how to get the fairest property division you can within the bounds of the law.
Best,
Ron