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HS 137 – Protecting Your Marriage Financials with John Patti

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John Patti

John Patti is a Matrimonial Law Attorney. He tells Jason that revenge is not the only reason people hide their assets in divorce proceedings and discusses the penalties for hiding your wealth from your soon-to-be ex-spouse. He explains some of the signs that your spouse may be hiding money from you and why these penalties aren’t being enforced like they should.

John A. Patti is Certified by the Supreme Court of the State of New Jersey as a Matrimonial Law Attorney and is Peer Review Rated by Martindale-Hubbell. John also possesses exceptional academic credentials, strong community ties, and is passionately committed to the pursuit of excellence in the practice of family law and has been practicing law nearly twenty years.

John understands the difficulties divorce can impose upon a family. He is dedicated to working with you to develop custom-tailored legal solutions for issues such as child custody and support, division of assets and debt, and visitation schedules that work for you and your family. He spends the time to get to know you and your family so he can make the recommendations that are right for you.

As an experienced litigator, John will never allow anyone to take advantage of you. If reasonable agreements cannot be reached without the need of trial, he will vigorously advocate for you in court. John has also recently appeared before the Honorable Chief Justice John Roberts of the United States Supreme Court and is admitted to practice law in that Court. John’s application for the Certified Matrimonial Trial Attorney was accepted and John recently sat for the Certification test in Trenton.

Visit John A. Patti’s website at http://www.japlaw.com/(Top image: Flickr | Synergy by Jasmine)

Check out this episode

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Narrator: Welcome to the Holistic Survival Show with Jason Hartman. The economic storm brewing around the world is set to spill into all aspects of our lives. Are you prepared? Where are you going to turn for the critical life skills necessary for you to survive and prosper? The Holistic Survival Show is your family’s insurance for a better life. Jason will teach you to think independently, to understand threats and how to create the ultimate action plan. Sudden change or worst case scenario, you’ll be ready. Welcome to Holistic Survival, your key resource for protecting the people, places and profits you care about in uncertain times. Ladies and gentlemen, your host Jason Hartman.

Jason Hartman: Welcome to the Holistic Survival Show. This is your host Jason Hartman, where we talk about protecting the people places and profits you care about in these uncertain times. We have a great interview for you today. And we will be back with that in less than 60 seconds on the Holistic Survival Show. And by the way, be sure to visit our website at HolisticSurvival.com. You can subscribe to our blog, which is totally free, has loads of great information, and there’s just a lot of good content for you on the site, so make sure you take advantage of that at HolisticSurvival.com. We’ll be right back.

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Start of Interview with John Patti

Jason Hartman: It’s my pleasure to welcome John Patti to the show. He is a certified matrimonial law attorney practicing in New Jersey. And I just want to give you the disclaimer before we just into this, that we talk about marriage and family law issues that I think are important to most people. He is only licensed to practice in the state of New Jersey, and this is not legal advice. If you desire specific legal advice consult a lawyer in your own jurisdiction. And John, with that I think I gave the disclaimer for you. So welcome. How are you?

John Patti: Thank you Jason. I think you and I are both covered on that one.

Jason Hartman: Okay, good.

John Patti: So I think we’re all squared, and again if you have a specific situation, seek out a matrimonial law attorney and bring that to his or her attention. We’re just going to give you some thoughts.

Jason Hartman: Fantastic. You’ve got 25 years of experience in this field. When it comes to divorce, maybe we’ll kind of come into it backwards from the negative part first and maybe we can circle back and talk about how to set a marriage up properly from the beginning. But when it comes to divorce, you always hear these horror stories and one of them is about one of the spouses hiding assets from the other. What are some of the reasons that people do this, besides the obvious?

John Patti: One is that obviously people have greed and they don’t want to share what has been accumulated during the marriage. The other is revenge and looking to insert pain into their spouse, or broken hearts, whatever. And there’s another area, and I call that people who unintentionally hide assets, meaning they’ve put in their mind that this asset is not part of this marriage and therefore, I do not have to disclose it. It doesn’t matter whether the asset is gathered during the marriage or not. And it may not be part of the marital pot for distribution. You have to disclose everything. Even if you sincerely believe that this asset should not be part of any discussion, you still have to disclose it. And nine times out of ten the attorneys will figure that out and move on, but you don’t want your spouse’s attorney to say you never told us about that house in Vermont. We have a problem with it. What other assets are out there that you’re not telling us about? And then at that point, you’re just going to prolong the litigation.

Jason Hartman: Right. Now, with wealthier clients that I’m sure you’ve represented over the years, they’ll even have offshore structures that are outside of the United States and they may or may not have accumulated these before the marriage, so it’s debatable whether it’s community property. Do they have to disclose those too? You’re probably going to say yes, I think.

John Patti: Sure. Yeah. And sometimes the spouses are very interconnected with the finances and everybody knows that there’s an account in the Cayman Islands, or Bermuda or in Switzerland. And those actually have to be disclosed on your federal taxes. Not to do so is actually tax evasion. You have to disclose that you have foreign interests and there are certain forms that you have to fill out.

Jason Hartman: So even, don’t you just get, and of course we’re coming to this backwards from the bitter end, if you will, don’t you just get the tax returns of the other spouse and solve the problem that way?

John Patti: Yeah. It’s very normal, and I would say about a good 90% of the people that you deal with file joint tax returns. So one grabs a copy, it’s the same copy that they’ve had for years and depending upon the girth of the case is depending upon how far back we want to go. But on that tax return is a ton of information.

For example, a spouse may say, I don’t really know what my husband has, or my wife has. We’re seeing a lot more by the way, of the research of the wife being the financially superior spouse. But in the case of the husband, we look to the tax return and actually find out where the dividends and the interest of the federal tax return to find out what exactly is out there. So that’s a quick way to investigate exactly where the interest is coming from. It won’t disclose exact amounts, but if you see an account that has five or ten thousand dollars’ worth of interest, there’s probably a lot of money in it.

Jason Hartman: There’s probably some decent money in it, especially nowadays because the banks pay no interest virtually.

John Patti: Yeah, it’s less than 1%.

Jason Hartman: Right. What are some of the tips you can give people to go into a marriage with the right mindset, but also with the right legal set, if you will. You’re probably going to say as an attorney, get a prenup. But I remember having that discussion with my mother, and I should probably make the disclaimer that I’ve never been married, although I’d like to get married. But I remember my mother saying, you know Jason, when you do that, you’re kind of setting the wrong tone for a marriage. You’re maybe planning for failure. What are your thoughts?

John Patti: Well, in some cases the prenuptial is very much needed and an essential document. For example, you’re in a family business in which you own a percentage of that. And then you get married. If you don’t protect that interest in the family business, somewhere down the line if the marriage moves towards disillusion, you’re going to find yourself having to fight and explain why that family business should not be distributed, whatever percentage it may be, to your spouse.

So in cases like the family business one, a lot of times people come in with inherited property. Or even property that they’ve obtained from a divorce prior to that marriage. If there’s been any comingling of assets, the court considers that to be an asset of the marriage. For example, the spouse comes into the marriage with a house, the house is somewhat dilapidated. And the new spouse says, tell you what, $50,000 let’s really get this house in shape. Who’s not going to take the $50,000? And they go into the house and there’s a new kitchen, new floors, new siding, and several years later they decide to divorce. That becomes an issue. So this asset that had nothing to do with this person prior to the marriage, it now is very relevant as far as distribution is concerned.

Jason Hartman: So here’s a question for you. What you’re alluding to is that in my former state of California, that’s a community property state, and as I understand it, you could have separate property in a marriage as long as you didn’t comingle it during the marriage. Then it could become community property if you did. And so if one spouse went into the deal and they had 25 rental houses, 25 income properties, and then they maintained those for 5 years, and when the money came out of the properties, when they got positive cash flow, they put that into an account, and then when there was a repair that needed to be made on the properties, they used that money from that account to fix up the properties. And they kept it as separate property.

But what you’re alluding to is that people tend to get lazy about this, or they may not know any better and they use community money out of the joint bank account to then fix up the property or support it during a time of vacancy or something like that. That’s the issue. That’s the crux of it, right?

John Patti: Right. You’re taking money from the joint enterprise. Consider you and your spouse to be an enterprise moving forward. You gather assets, you collect income, you collect retirement accounts… if this enterprise is funding something that is clearly premarital, then maybe, and I say may because it depends on the circumstances, there may be an argument that now that asset is now included into the marital pot to some extent. In New Jersey, we’re an equitable distribution state, although some of us may say differently because a lot of times you’re trying to explain to the judge that well, it’s not 50/50, we’re equitable distribution. Meaning the court has to weigh 16 factors before it makes its decision. In California in the community property states, it’s always the assumption that everything is 50/50 unless you tell me otherwise. In New Jersey it’s like you tell me otherwise, or it’s going to be 50/50. It’s the opposite.

Jason Hartman: Right, right. So let me just understand that. So in New Jersey, to use the other metaphor from criminal law, are you sort of innocent until proven guilty, but in California you’re guilty until proven innocent?

John Patti: I’ve never looked at it that way, but that sounds about right.

Jason Hartman: Yeah. So, California the assumption is that both spouses own everything until you tell them different. Right?

John Patti: And again, you’re looking at the marital enterprise. What was gained together as the team of you and your spouse and dividing that up. There’s always a nuance – in every case there was always property that was given to them by their family, and then money invested in that. And those make the special circumstances that make the issues in divorce law.

Jason Hartman: Sure. So I guess the million dollar question here is, if you go into a marriage and you don’t have a prenuptial agreement, is it possible to keep separate properties separate that you had before the marriage? Or is it just going to ultimately get all murky? I know conceptually it’s possible, but I’m talking about in practice.

John Patti: It just makes it difficult, not impossible, to keep certain assets out of the marital pot. And sometimes spouses readily admit, I don’t want that. He received that from his parents when they died, that’s his.

Jason Hartman: You mean they actually act in an ethical fashion?

John Patti: I would say for the most part that you have people that do that. There are a ton of exceptions, but for the most part people come in and they want a clean break and they want to start a new life. And they’re not being greedy about trying to get the most out of their ex. I have a good number of cases where the opposite is true. Where you have to fight for everything, you have to prove. Even though that spouse knows that that asset wasn’t acquired during the marriage. They’ll sit and make the attorneys work and give that proof to show that it’s not an asset that should be considered. I see both. I see good people come to the table and they just want to end it. They do good things for their kids and they work together, and it’s just a loss of love between the two.

Jason Hartman: I think the famous example of that as I recall was the late Vidal Sassoon. I remember reading or hearing a story about that divorce many years ago. They didn’t make the lawyers rich – they went to divorce mediation and just worked it out. And there was a considerable fortune there at stake. And then you hear about some of these other marriages where even with prenups, the prenups are getting overturned and that’s an issue I wanted to have you speak to, is prenuptial agreements. When they are used, how do you make them valid? I’ve hear that you’ve got to make sure both parties have an attorney, review the document, but are there any other good rules of thumb?

John Patti: Sure. The attorney is vital, and when you get the attorney may be a factor as well. if getting the attorney on the eve of trial to review an agreement, that’s not going to pass any muster.

Jason Hartman: I’m not saying on the eve of trial, I’m saying on the eve of marriage.

John Patti: Oh, not the eve of trial, I apologize. The eve of marriage. That’s not going to pass a sniff test. You have to give your spouse some notice several months prior to, so there’s no duress. The court may look at the fact that one of the, either the bride or the groom has put substantial funds into planning the wedding or there’s parties planned and then they get hit with the prenup. They’re really not thinking straight. It’s almost like, I’d better sign this otherwise I’m going to be embarrassed here.

So, duress is an important factor. Disclosure is just as important. If you sit there with your spouse and say look, I want a prenup. And for some reason you don’t tell her all the property that you want prenupted, and some people feel like well, if I tell my spouse that I’m a multi-millionaire, well that’s going to somehow cause a problem. And she’s going to want the money. But in actuality you’ve got to set it down upfront in order to make sure that the property is not considered if there’s a disillusion down the road. So disclosure is very important.

And I always tell people, I had a case where it was very sad because the woman was very much manipulated. And she was manipulated into signing the prenuptial, and then when I represented her trying to fill out the prenuptial, we were doing good. On the eve of trial, she was manipulated again to drop the case with the same thing. It was a promise not put down on the agreement, and that’s important. Anything not on the agreement is not part of the agreement. I don’t care what they tell you. In the case I’m thinking about, he promised he would always take care of her. A week after she dropped the case she was living in welfare funded housing and it was very sad. And I pleaded with her, please don’t do this. You’re making a mistake, fell on deaf ears and sometimes there’s nothing you can do about that. Some people are just very manipulated and no matter what any attorney says, they’re just going to do what their heart tells them to do.

Jason Hartman: Let’s kind of change the focus here, and let’s talk about the issue of children. Obviously a very important issue in a marriage, one that has caused a lot of emotional distress on both sides. What should people know about child custody issues and this area?

John Patti: First of all, you have to keep in mind that it is not about you. And everything having to do with child custody is solely about the child. And the one concern and the one concern only that you ought to have, is what is the best interest of the child? I give an example where one spouse wants to take the other to Disney World or if you’re on the west coast, Disney Land, and the other spouse objects because it’s his or her parenting time. Well think about it, what kid doesn’t want to go to Disney World, and is it in the best interest? Would you want your child to go there and have that good time? That’s how you have to think. And it’s difficult because you may not trust your spouse to do the right thing. You may feel that your spouse is manipulating the children, but you really do have to consider the best interest of the child whenever you’re making any decision. And never, and I emphasize, never use the children in your divorce for anything.

Jason Hartman: Sadly though, a lot of times these kids are used as pawns.

John Patti: I’d like to say that they’re used as cannon fodder. Because you will hurt this child for more years than you could possibly imagine. And you have to keep in mind too, that when it comes to children, dad is always going to be superman. And mom is always going to be wonder woman. And you don’t want to take that away from them. You don’t want to sit there and say, you know your mom’s cheatin’ on me, I just want to let you know that. Or your dad boozes it up and gambles everything down at the casino. You don’t want to do that. You’re really taking away from the foundation of the child when you do that.

Jason Hartman: Well what else should people know about the child custody issues?

John Patti: With child custody I always like to at least take a stab at working things out, sitting down, and this is very popular in California where the issue is collaborated upon, meaning you sit down with a neutral custody expert and work out the differences, and if you can do that then that’s fantastic. You don’t want someone with a robe telling you what you ought to do or ought not to do with your child. But if you push them, they will do that, and I’m talking about judges. So you want to make the decision with regard to your children. You also want to get yourself educated because this is going to be something new. Especially guys have a tough time with this. It could be a new spouse waiting in the wings and sometimes it’s very difficult. I have a book I always recommend my clients to read. It’s called Joint Custody with a Jerk. That’s actually on Amazon.com. It’s a great read and when I was reading it, it identified most of the situations that I run into as the attorney receiving the phone calls about what the other spouse did.

Jason Hartman: Very important stuff. So read up on it, do a good job at it, and this is likely impossible what I’m about to say, but I’m sure you’d agree, keep the emotions tame. Keep them in check. Right?

John Patti: It is very difficult because divorce is an emotional event. It’s to some people traumatic. I’ve had more than one client sit in front of my saying, I never saw it coming. I thought we had a great marriage. Some people even say, we had relations the day before. I don’t understand this. People come out of the woodwork with infidelity, it’s a shock. And I think it shocks the system when you become involved in matrimonial litigation.

Jason Hartman: Yeah. I bet there are some amazing stories. I’ve got one for you, and maybe we can wrap up on this. But it’s the issue of how do you know when your spouse during the marriage is hiding things from you, especially as it comes to finance. I’m sure you’re not a detective that’s going to take about affairs and so forth, and it is amazing. An ex-girlfriend of mine who got a divorce, told me this amazing, really a horror story, of how her husband, the guy she met after me oddly, was really living a whole separate life. He had refinanced the house, taken that equity and spent it on his whole separate life. Had credit cards she did not know about, a second cell phone to be able to hide this whole second life, this life with another woman. Just a real shocker, unbelievable the lengths this guy went to to do this kind of stuff. Any tips for people on what they should be aware of?

John Patti: What you described is an absolute dysfunction. I mean, you’re talking about someone who literally had a whole separate personality and I would say that unless there were early signs, there is nothing that your girlfriend could have done to prevent that.

Jason Hartman: You know, I met the guy several times and he seemed like a nice enough guy to me.

John Patti: What he did was really not nice in dissipating family assets in order to pursue his own interests.

Jason Hartman: I remember saying to her, I said look, how did he refinance the house without you? And she told me when you’ve got a two year old on your lap and your spouse sticks some documents in front of you and there’s a notary there, and he says sign this honey, we’re going to refinance and get a better rate, not telling her that he’s pulling a bunch of cash out of the house, she couldn’t keep track of all that. You trust your spouse.

John Patti: You do, and that’s one of the signs of a good marriage is the trust between the husband and the wife and to have the trust betrayed like that is one of the classic signs of a divorce. I recommend that people stay involved in all the financial matters having to do with the house. It doesn’t mean you have to sit there and do bills together, but have at least the knowledge of what accounts are out there, where your investments are going, don’t simply say oh I leave that to my husband, oh I leave that to me wife. Believe it or not, in many cases, I’ve had more than several men appear before me saying I don’t know, I give the check to my wife and she pays all the bills. And they couldn’t even tell you what the wife spent at the super market. So get involved. It’s one thing to be madly in love and trust, that I think is a good recipe for any good marriage, but stay in the ball game too.

Jason Hartman: Good points. Well John, give out your website and tell people where they can learn more.

John Patti: www.japlaw.com. It’s always being updated with different appearances and radio appearances and we try to make it as educational as possible on our website, to give you an idea of what’s going on. For those of you listening in New Jersey, I’m in Monmouth county, look me up.

Jason Hartman: Alright, John Patti thanks so much for joining us.

John Patti: Thanks Jason.

Narrator: Thank you for joining us today for the Holistic Survival Show. Protecting the people, places and profits you care about in uncertain times. Be sure to listen to our Creating Wealth Show, which focuses on exploiting the financial and wealth creation opportunities in today’s economy. Learn more at www.JasonHartman.com or search “Jason Hartman” on iTunes. This show is produced by the Hartman Media Company, offering very general guidelines and information. Opinions of guests are their own, and none of the content should be considered individual advice. If you require personalized advice, please consult an appropriate professional. Information deemed reliable, but not guaranteed.

Transcribed by Ralph

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Episode: 137

Guest: John Patti

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