Four years later we are still encountering financial complications of our 2008-2009 financial crisis in divorce proceedings. Many bank and brokerage companies were forced to merge during the crisis. Morgan Stanley merged with Smith Barney. Bank of America merged with Merrill Lynch. Wells Fargo took over Wachovia and Lehman Brothers went out of business. On top of the logistical problems; many people lost a lot of money. Here are three complications to watch out for.
1. During mergers many firms changed client account numbers. I have seen more than one occasion where a Marital Settlement Agreement was written with two different account numbers for the same account. Even worse, the two different account numbers might be treated differently. One awarded as separate property and the other to be divided.
2. During the crisis itself many investors lost large sums of money in their investment accounts. The S&P 500 lost 56% during the crisis and I have seen some situations where clients lost money then sold the assets locking in the losses. Now the spouse with no involvement in the investment management is wondering where all the money went. They may even be considering the possibility that they spouse responsible for managing the investments could have taken the funds and hidden them elsewhere in preparation for the divorce.
3. Some brokerage companies and banks did go out of business. It makes it difficult to track down account statements and verify funds when the custodian of the account no longer exists or has been consumed by another institution.
I suspect the effects of the Financial Crisis will continue to complicate the financial negotiations of divorces for a few more years maybe longer in situations where separate property claims must be traced back to 2008 and earlier.
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