Discovery in Divorce – The Ultimate Guide for Paralegals

I. NEW DISCOVERY LAWS, RULES, AND PROCEDURES YOU NEED TO KNOW

A. Discovery Rules Update

In 2015, the first time since 2006, amendments regarding e-discovery were added to the Federal Rules of Civil Procedure (FRCP). These e-discovery amendments included: a limitation on the scope of the discovery; a requirement obligating parties to address the preservation of electronically stored information (ESI) during the initial conference; and, a modification to spoliation sanctions for ESI. The amendments were designed to simplify and promote efficiency and cooperation between parties during the discovery process.

FRCP 26(b)(1) altered the scope of discovery by adding the requirement that discoverable material is "proportional to the needs of the case." With this new rule on ESI, paralegals will need to adjust their approach to discovery. No longer will they be able to utilize full subject matter discovery. Paralegals will need to specifically tailor discovery requests in order for their requests to fit within the "proportional needs" requirement. This will require that paralegals fully understand the claims or defenses of the case when constructing their discovery request.

Another change to rules on e-discovery is the requirement for parties to address the preservation of ESI during the initial conference. FRCP 26(f)(3)(C) now requires that during the initial conference, specifically during the discovery plan, parties must state their views and proposals on "any issues about disclosure, discovery, or preservation of electronically stored information, including the form or forms in which it should be produced." This will require that the paralegal as well as the attorney plan before the discovery process how to handle e-discovery. Not only are you required to plan, but also the rule requires that you discuss with the other party how you intend to handle e-discover preservation. Moreover, it is a good practice to memorialize all agreements between the parties in a court order.

FRCP 37(e) has been changed to specify measures that a court may take in response to spoliation of e-discovery. Rule 37(e) only applies when ESI is permanently lost. Additionally, the rule only applies "if the lost information should have been preserved in the anticipation or conduct of litigation and the party failed to take reasonable steps to preserve it." If the ESI is still able to be located, even in a different formant Rule 37(e) does not impose any penalties on the parties. Paralegals should be familiar with the ESI involved in their cases in order to take proactive measures to preserve that information. Moreover, paralegals need to work with both the client as well as the attorney to ensure that ESI, which is needed in the anticipation of litigation, is properly preserved.

B. Divorce Discovery Laws on Electronic Evidence

Files on a computer are discoverable in the same manner as tangible documents. In fact, one court held that a computer's memory is akin to a file cabinet because as the wife could have access to the contents of a file cabinet in the marital home, she should also have access to the contents of a computer in the home. It is important to note that this holding stands even where the computer is not owned by either party and is instead on loan by a party's employer. However, the rule may be different where the computer is not equally accessible to both spouses and where the information is password-protected.

In Parnes v. Parnes, the husband left the first page of his email to his divorce attorney sitting openly on his desk in the marital home. Although only the husband used that particular desk, the wife had her own desk located in the same room. For this issue, the court held that any claim of confidentiality or privilege with regard to this printed email page had been waived because the wife, as well as the nannies and babysitters, frequently utilized that room.

After the wife in Parnes saw the email's first page, she then searched for the second page and discovered a paper on which the husband had written the user name and password for his email account. Using that password, the wife accessed the husband's email, printed out various communications with his divorce attorney, and provided them to her counsel. The paper was not visible from the surface of the desk; the wife had to remove other documents to find it. As to these documents, the court held that confidentiality and privilege were not waived and thus the emails could not be used in the divorce case.

Parnes is a good indication that when files or emails are password-protected and reasonable care is used to protect the password, the confidentiality of the files and emails is preserved. It is important to note that the court's decision in Parnes depended heavily upon the fact that the material sought was protected by a source of confidentiality outside the emails themselves: the attorney-client privilege.

However, where the attorney-client privilege does not apply and reasonable precautions were taken to protect email with a password, the law is more complex than Parnes. In Teeter v. Teeter, the husband used spyware to collect information from the wife's emails. The email account was password-protected and the husband did not have the password. The court held that the emails were inadmissible under 18 U.S.C.A. § 2515, which excludes from evidence the fruits from intercepting "any wire or oral communication[.]"

Unfortunately, the court misread the statute. Emails are clearly not an "oral communication," so the cited statute applied only if emails are a "wire communication." Common sense would suggest that they are, but common sense is not always a reliable guide to federal electronic privacy statutes. A "wire communication" is defined in 18 U.S.C.A. § 2510(1) as "any aural transfer made in whole or in part through the use of facilities for the transmission of communications by the aid of wire, cable, or other like connection[.]" An "'aural transfer' means a transfer containing the human voice." Because the wife's emails were not transmissions of a human voice, they were not "aural transfers." Because they were not "aural transfers," they could not be "wire communications" and the exclusionary statute did not apply.

Federal Law classifies transmissions of data as "electronic communications." Congress deliberately refused to include electronic communications in § 2515 for fear that excluding electronic communications would allow too many criminal defendants to go unpunished. Although this omission has been frequently and persuasively criticized, Congress has rejected many attempts to amend the statute. As a result, the term "'wire or oral communication[s]... does not encompass 'electronic communication[s]' such as email messages[,]"and the stated reasoning of Teeter is clearly wrong. Federal law "does not provide an independent statutory remedy of suppression for interceptions of electronic communications."

It is also worth noting that § 2515 applies only when communications have been "intercepted." The federal cases hold strongly that an "interception" occurs only when an email is read between the time of sending and the time of receipt. When stored email is read after transmission and receipt, it has not been "intercepted." If the husband used the wife's password to read stored emails already received by the wife, that is a second reason why § 2515 did not apply on the facts of Teeter.

Had these problems been drawn to the court's attention, it could have reached the same result by creating a common-law exclusionary rule under state law. Florida reached this result in O'Brien v. O'Brien, recognizing the absence of a statutory exclusionary rule, but nevertheless excluding evidence obtained through use of spyware as a matter of state common law. It will be interesting to see what happens when the clear flaw in the stated reasoning of Teeter is drawn to the courts' attention, and whether additional state courts create a common-law rule against admitting into evidence the fruits of spyware.

Finally, take note that while there is no federal exclusionary rule for improperly obtained electronic communications, there is an express private right of action. The threat of civil liability can have a meaningful deterrent effect when parties in divorce cases seek to introduce evidence obtained through use of spyware.

A spouse cannot, of course, conceal otherwise-discoverable information simply by protecting it with a password. But the tendency of the courts is to reject broad attempts to discover all material contained on a computer's hard drive without some showing that the material might be relevant to the case. This is mostly an application of the traditional rule against unduly burdensome fishing expeditions. Therefore, when information is password-protected, it is discoverable only if it falls within the normal scope of proper discovery.

For purposes of illustration, assume a spouse is requesting discovery of saved emails that are stored on a computer used only by the other spouse (or password-protected emails stored on a general marital computer). It is doubtful that these emails will be discoverable based solely upon an unsupported allegation that the emails might show evidence of adultery or financial misconduct. Such discovery would be an unduly burdensome fishing expedition. However, if there is some minimal amount of other evidence suggesting that the spouse is having an affair or concealing marital assets, the saved emails would then be relevant and discoverable.

C. Uniform Interstate Depositions and Discovery Act

The Uniform Interstate Deposition and Discovery Act ("UIDDA") was drafted by the National Conference of Commissioners on Uniform Law States. In 2007, it was approved and recommended for enactment in all states. The Act provides simple procedures for courts in one state to issue subpoenas for out-of-state document requests and depositions. It applies if both states have adopted the Act. The following states have adopted the UIDDA:

Alabama, Alaska, Arizona, California, Colorado, Delaware, District of Columbia, Georgia, Hawaii, Idaho, Indiana, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, U.S. Virgin Islands, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin. /

Under the Uniform Interstate Depositions and Discovery Act, the procedure for issuing a foreign subpoena to a state that has adopted the Act is:

1. A party must submit a foreign subpoena to a clerk of court in the county, district, court or parish in where discovery is sought;

2. The clerk, in accordance with the court's procedures, will issue a subpoena for service on the person to which the foreign subpoena is directed;
a. The subpoena issued by the clerk must:
i. Incorporate the terms used in the foreign subpoena; and
ii. Contain or be accompanied by the name, addresses, and telephone numbers of all counsel of record to which the subpoena relates and of any party not represented by counsel.
3. The subpoena must be served according to applicable rules or statutes of the state where the subpoena is being served;
4. Applicable state law governs compliance with subpoenas to give testimony, produce documents, and permit inspection of premises;
5. Any application to the court for protective order, or to enforce, quash, or modify a subpoena must comply with applicable state law and rules and be submitted to the court where the discovery is sought.

Each state has somewhat changed or modified the language of the Act in some way shape or form, so be sure to check your state's rules for the exact language.

II. Discovery Requests, Objections and Responses in Divorce Litigation

A. Initial Information and Documents to Obtain from Clients (w/Checklist)

Once all the initial client meeting procedures have been ran through, it is important to make sure you provide the client with information about what documents are relevant and important to their matter. The following in a sample document checklist for a separation and divorce proceeding.

(1) Information Regarding the Client:
(a) Current Will and Codicil;
(b) Trust agreements - Client created or client as beneficiary;
(c) Power of Attorney;
(d) Naturalization Papers;
(e) Pending Litigation Papers;
(f) Pre or Postnuptial Agreements;
(g) Divorce Decree or Separation Agreement;
(h) Summary Plan Description(s) and Account Statement for Retirement Benefits;
(i) Military Discharge Papers; and
(j) Adoption Papers - Client or Family Members.
(2) Property Interests:
(a) Savings Accounts and Passbooks;
(b) Personal Financial Statements;
(c) Appraisals or Documents Evidencing Ownership of Fine Art, Jewelry, Antiques, Furs, etc.;
(d) Promissory Notes and Mortgages;
(e) Inventory of Stocks, Bonds, and Securities;
(f) Safe-deposit Box or Private Safe;
(g) Copyrights, Trademarks, and Patents;
(h) Royalty Agreements;
(i) Deeds to Residence and Other Real Estate;
(j) Title Insurance Policies;
(k) Proprietary Lease and Stock Certificate for Cooperative Apartment;
(l) Employee Benefits Statement;
(m) Loans and debts owed to client;
(n) Loans and debts owed by client; and
(o) Custodian Accounts Established under any Statutes.
(3) Life Insurance:
(a) All Policies Owned by Client or Client's Spouse;
(b) All Policies Owned by Client or Spouse Insuring Someone Else's Life; and
(c) Premium Notice Regarding Insurance Policies.
(4) Other Insurance:
(a) Homeowner's Policy;
(b) Renter's Policy;
(c) Automobile Policy;
(d) Health, Hospitalization and Major Medical Policies;
(e) Disability Income Insurance;
(f) Umbrella (excess liability) Policy;
(g) Malpractice Insurance; and
(h) Annuity Contracts.
(5) Business Interests:
(a) Agreements Concerning Joint Ventures;
(b) Partnership Agreements;
(c) Shareholder Agreements; and
(d) Stock Redemption Agreements.
(6) Tax Returns:
(a) Copies of State and Federal Income Tax Returns for Past Three Years;
(b) Copies of State and Federal Gift Tax that have ever been filed; and
(c) Copies of Estate Tax Returns for those Estates in Which the Client has Received an Interest.

B. Scope and Timing of Discovery

A good starting point is Rule 26 as a whole, but Rule 26(b)(1) sets forth the general scope of discovery:

b) Discovery Scope and Limits.

(1) Scope in General. Unless otherwise limited by court order, the scope of discovery is as follows: Parties may obtain discovery regarding any non- privileged matter that is relevant to any party's claim or defense--including the existence, description, nature, custody, condition, and location of any documents or other tangible things and the identity and location of persons who know of any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. All discovery is subject to the limitations imposed by Rule 26(b)(2)(C).

As referenced in Rule 26(b)(1), Rule 26(b)(2)(A-C) sets a few limitations on the scope of discovery outlined above:

(2) Limitations on Frequency and Extent.

(A) When Permitted. By order, the court may alter the limits in these rules on the number of depositions and interrogatories or on the length of depositions under Rule 30. By order or local rule, the court may also limit the number of requests under Rule 36.

(B) Specific Limitations on Electronically Stored Information. A party need not provide discovery of electronically stored information from sources that the party identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the party from whom discovery is sought must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify conditions for the discovery.

(C) When Required. On motion or on its own, the court must limit the frequency or extent of discovery otherwise allowed by these rules or by local rule if it determines that:

(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;

(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or

(iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.

Federal Rule of Civil Procedure 26(d) states that, "[f]or parties joined or served later. A party that is first served or otherwise joined after the Rule 26(f) conference must make the initial disclosures within 30 days of being served or joined, unless a different time is set by stipulation or court order."

Federal Rule of Civil Procedure 29(b) states that, "other procedures governing or limiting discovery can be modified, but a stipulation extending the time for any form of discovery must have court approval if it would interfere for the time set to completing discovery for a hearing, a motion, or a trial."

C. Utility in Discovery - Balancing Cost and Effectiveness

Federal Rule of Civil Procedure 1 states that, "[t]hey should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding." It should a priority to get the evidence you need through any form of discovery, but it should be done in a effective and efficient manner. The Advisory Committee stated that the purpose of the language is to recognize the affirmative duty of the court to exercise the authority conferred by these rules to ensure that civil litigation is resolved fairly, and without undue cost or delay.

Even the 1993 Advisory Committee could not have imagined how prescient and relevant was its emphasis on cost-efficiency, or how far-reaching the scope of its mandate, in view of the explosion of electronic data that was about to happen. While "20 years ago PCs were a novelty and e-mail did not exist," by the mid-1990's most companies were fully embracing e-mail and other forms of ESI as essential components of business communications and operations. Today, e-mail is a fundamental and economical form of internal and external communication for many organizations. By some estimates, "more than 90 percent of all information is created in an electronic format."

As the veritable tidal wave of ESI hits, companies are learning of its dark side through the often painful experience of trying to harness it for use and production in litigation. In theory, at least, many of the problems caused by advances in technology also can be solved or at least minimized by those same advances. Electronic data can be difficult to manage, but it "can also greatly reduce the costs of discovery and facilitate the pretrial preparation process." When properly employed, "electronic discovery allows a party to organize, identify, index, and even authenticate documents in a fraction of the time and at a fraction of the cost of paper discovery while virtually eliminating costs of copying and transport."

There is no real dispute that keyword searching, along with traditional filters such as date, custodian, and file type, can streamline the production of ESI. Courts increasingly have endorsed the use of keyword searches and filters as a necessary component of discovery. The use of search terms to reduce the volume of ESI at issue in a particular litigation matter "strikes a reasonable balance" between a requesting party's needs and a producing party's burden. "Indeed, a principle advantage of electronic information is that high-speed methods exist to determine the existence of patterns of words, thereby allowing the narrowing of searches for relevant information."

A growing body of law acknowledges and endorses the use of "performing a key word search," to cull down the volume of ESI to be reviewed by attorneys, to "control costs" in the review and production of documents. The increasing familiarity of litigants with search technology-and with keyword searching in particular-has resulted in its adoption as an integral part of discovery in many cases. In Medtronic Sofamor Danek, Inc. v. Michelson, the court noted that "[p]roducing electronic data requires, at a minimum, ... designing and applying a search program to identify potentially relevant electronic files." Commentators proffer that "[n]o sophisticated party or attorney seriously contends that an electronic vetting process is unnecessary."

Case law makes it clear, however, that while keyword searches may be employed to more efficiently identify potentially relevant documents and cull down collections in a particular litigation, that should be done only after careful consideration of what keywords should be used. When keywords are properly developed, some courts are enthusiastic about the use of search terms in document review and production, deeming the procedure fair, efficient, and reasonable. It has also become common for courts and parties alike to fashion unique, individualized discovery protocols incorporating the use of keyword terms.64

There is a key question, however, that has not yet been addressed in depth by courts: may a responding party act "unilaterally" in creating and deploying search terms to winnow down a pool of data, or must there be a "bilateral" agreement between parties regarding search criteria before action is taken?

A good-faith unilateral approach to the development of keywords for filtering and culling ESI should be defensible in light of the well-established principle that it is the province of the party producing material to "determine what is responsive to discovery demands." As one court noted, this may "range from reading every word of every document to conducting a series of targeted key word searches," but either way, "the producing party unilaterally decides on the review protocol." The review protocol to be unilaterally developed by the producing party logically should include "defining the set of data" to be reviewed by selecting "reasonable search criteria, including search terms." Sedona Principle No. 6 acknowledges the soundness of this approach: "[r]esponding parties are best situated to evaluate the procedures, methodologies and technologies appropriate for preserving and producing their own electronic data and documents."

Some courts have endorsed a unilateral approach to deciding upon and employing search terms. Others, however, have required that the requesting party have an opportunity to provide "input ... regarding proposed search terms." Interestingly, even those courts still acknowledge that the producing party, "as custodian[] of the computer files," "shall be responsible for ... sifting through the data for responsive information" and may do so "in the most efficient manner possible." Thus while it may be permissible for a producing party to develop a list of keywords unilaterally to structure its search for responsive ESI, it may be preferable for that party to make some sort of effort to involve the requesting party in bilateral discussions before the search terms are deployed.

Treppel v. Biovail Corp. is an example of this approach. In Treppel, the court first relied on a line of cases to conclude that, compared to "hard copy" document review and production, keyword searching to filter and cull down a document collection is "more appropriate in cases involving electronic data, where the number of documents may be exponentially greater." Biovail, the producing party, initially sought the plaintiff's input in "defining the scope of any review of electronic records by stipulating which files would be searched and what search terms would be utilized." Treppel declined, however, "apparently believing that 'the use of search terms has no application to the standard discovery process of locating and producing accessible hard copy and electronic documents."' The court deemed that a "missed opportunity" for the plaintiff, but still chided Biovail for failing to deploy its search protocol, noting that "[a]bsent agreement" with the plaintiff, "Biovail should have proceeded unilaterally" and produced "all responsive documents located by its search." The court then ruled that Treppel could weigh in with "any specific concerns about the scope of the search."

Likewise, in In re CV Therapeutics, Inc. Sec. Litig., the court ordered the defendant to disclose to the plaintiff the search terms it used to reduce the "universe of extant electronic records in this case," to give the plaintiff "an avenue to test or assess the scope of the search terms" used. When the plaintiff contested the adequacy of the search terms, however, the court held that the defendant's unilateral development and use of keyword searches was a "reasonable means of narrowing the production in this instance" in light of the requesting party's failure to "set forth an alternative search methodology" or otherwise bring any "specific challenge to the search terms."

Many cases are even more explicit about requiring parties to negotiate a mutually agreeable keyword list for filtering and culling as part of the discovery planning process, rather than proceed unilaterally. The trend toward bilateral discussions regarding, and/or mutual agreement in, the use of keyword search methodologies may find additional support in the recent amendments to the FRCP concerning discovery of electronically stored information, effective December 1, 2006 ("Amendments"), which place emphasis on addressing discovery protocols openly, and as early as possible, in the litigation.

There are, in sum, no bright-line rules regarding the development and use of keyword searches by a producing party. It may well be that as the volume of ESI exponentially increases and it becomes more and more infeasible to conduct attorney review of ESI without first substantially culling down the data, keyword searching will become a standard component of litigants' joint discovery plans. In the meanwhile, producing parties should be free to take the lead in selecting and deploying keyword terms, keeping in mind that they may best follow the spirit and directives of F.R.C.P. 1 by being up-front with the opposing party regarding proposed search terms (and receptive to its input). Where that is not possible, the producing party should, in an organized, methodical, and defensible fashion, unilaterally develop and use a keyword list to reduce the costs and burdens associated with attorney review of ESI.

While keyword searching has been embraced by courts, counsel, and parties alike, it is by no means an "e-discovery panacea." There are challenging problems associated with using keyword searching, many of which are inherent to the available technology. Perhaps foremost among the limitations of keyword searching is the risk that the chosen search terms will result in a low recall rate of potentially relevant documents. Lawyers and experts struggle with formulating keyword search terms that will locate the largest possible number of potentially relevant documents without generating so many "hits" that the company essentially must preserve or review everything.

First, people often do not use the same terms to describe the same idea. It can be very difficult, if not impossible in some circumstances, to identify every single word that relates to a relevant topic. Consequently, keyword searches often fail to be as broad as a particular concept requires. For example, a keyword search could include "car," but neglect "automobile," "Jeep," or "wheels." Because a keyword search is only as broad as the exact terms used, it is safe to assume that it will miss, or fail to recall, many relevant documents.

Second, anyone who has ever used a Boolean search engine knows the importance and the difficulty of framing queries to maximize the recall rate of responsive documents. Building proper queries is a crucial step in the discovery process when keyword searches are employed to locate relevant documents. It "requires mastering the subtleties of ANDing and ORing terms in order to arrive at a list of documents worth reviewing." In addition, varying search engines often require slightly differing syntaxes for the construction of Boolean search terms. Accordingly, converting document requests into "a syntactically correct Boolean query" can challenge "even the most seasoned expert searcher." In the words of one court, "[k]eyword searches are limited because they are literal and search only for an exact sequence of characters. Thus, they do not pick up variations or misspellings of words or names." These kinds of errors easily can lead to protracted discovery disputes later on down the road.

Third, keyword searching naturally results in "false positives," making any given search over inclusive from the outset. For example, the word "water" may also bring up search results that are totally unrelated to the meaning of the word you are searching for, such as "Water St.," "watered down," or "John Waters." When dealing with a large universe of documents, it can be problematic when a keyword search generates "large numbers of nonresponsive records (along with responsive ones), all of which [need] to be sorted out through a labor-intensive manual review process." This kind of result may, to some extent, defeat the efficiency rationales behind using a keyword search in the first place.

Finally, it is important for a company to recognize that in all likelihood it will need to perform multiple keyword searches across its various data systems, as equipment and platforms are not always compatible. "Unfortunately, there is no simple 'universal translator' for all this information." When electronic information is maintained in different formats and stored in multiple locations, separate searches are typically required for each format and location. In many locations, keyword searching may not be feasible at all.

The search terms employed "must be reasonably calculated to return relevant data." It may even be necessary to engage an expert who could ensure that the search terms are properly constructed and are compatible with all relevant systems. If the search is not done properly, courts may order additional searches, which will increase the cost and burden of discovery."

There can be no doubt that electronic search methodologies, as a means of culling down a data set for discovery, are here to stay. While keyword searching certainly has its place in winnowing down ESI in a cost-effective and speedy manner, and the technology currently is available through many vendors and software providers, it also leaves something to be desired in terms of both recall and precision. Another, more recent development in search technology is concept searching, a promising alternative or complement to keyword searching.

Concept searching is able to do what keyword searching does, and more. Among experts, it is thought to be a better and more useful application in that it may offer parties a better chance than keyword searching of locating relevant documents. A concept search will return documents that relate to the same idea as the query word, sentence, or paragraph, making it arguably a more reliable method of locating responsive documents.

Keyword searching is a great "brute force" way to find exact matches. If litigants need to identify documents containing certain names or terms, then keyword searching can be an essential and powerful tool to find that information. If, on the other hand, a party needs to identify responsive documents and has a less refined sense of which documents could be responsive, then concept searching might be a better option. For example, upon receiving a document request, rather than constructing and executing complex keyword searches, concept searching would let a party copy and paste the relevant part(s) of the request into the search software. Shortly thereafter the party would have a list of every conceptually-related document, including documents that didn't contain any of the specific words that were "pasted" into the software.

The use of concept searching in discovery is, to the knowledge of the authors, currently limited to attorney review and (in fewer instances) pre-review culling. As the technology becomes more widely available, however, it also could be useful in identifying documents to preserve for anticipated litigation. As discussed above, the preservation obligation presents a vexing challenge for large companies that, at the time the duty to preserve arises, may not have received a complaint or preservation letter. Yet, they are nevertheless expected to identify and safeguard all information that may turn out to be potentially relevant. Concept searching could be used as a tool or safeguard mechanism in this context by counsel, along with traditional preservation methods, to ensure the widest recall of potentially relevant documents. For example, counsel could paste phrases and paragraphs from a complaint, preservation letter, or newspaper article into the search tool, and the concept search would identify relevant documents and further detail which custodians had the greatest number of relevant document "hits." This could serve as a starting point for preservation, or as a final sweep, depending on the situation.

Using concept search technology instead of keyword searching is particularly appropriate in cases that cannot be easily reduced to specific terminology, or that are complex in nature. For example, in cases that center on wrongful behavior, such as sexual harassment, it can be challenging to identify search terms that adequately describe harassing behavior. Concept searching could locate relevant ESI that relates to, rather than contains, specific words.

Concept search technology could also be used to further minimize the risk that the most sensitive documents-those that are privileged, private, confidential, or otherwise protected from discovery - do not get into the hands of the opposing party. Some commentators suggest that the nature and volume of discovery in the era of electronic information make it likely that old attorney-client privilege issues will need to be examined in a new light. As the volume of documents requested and produced increases, the results are twofold in the privilege context. First, privilege review is more costly and time-consuming than ever. Second, even with a comprehensive privilege review, the sheer volume of documents requested and produced increases the risk of inadvertent disclosure of privileged information. Instead of entering into potentially risky "quick peek" agreements and in addition to "clawback" agreements, parties could use concept search technology to supplement attorney review to guard against the inadvertent disclosure of privileged and confidential documents. This would be especially appropriate in a large matter, where all of the confidential terms, such as attorneys' names, are not known, and therefore could be missed using a keyword search.

Litigants have increasingly turned to "sampling" methodologies "to narrow the burden of searching voluminous electronic data for relevant information." Sampling typically involves analyzing a small subset, or sample, of a large amount of ESI, to assess the extent to which relevant documents likely would be found within the remainder of the data. Like concept and keyword searching, sampling is a method to help identify what relevant data may reside in a given population, thereby reducing the potential costs of ESI discovery. Unlike search technologies, however, the goal of sampling is not solely to find potentially relevant data in a way that lives up to performance measurement standards, but rather to make a qualitative judgment as to whether it is worthwhile to conduct further searches of stored electronic data. "By reviewing an appropriate sample of a large body of electronic information, litigants can often determine the likelihood that a more comprehensive review of the materials will yield useful information."

Sampling methodologies increasingly have been accepted by courts as an appropriate component of a strategy for determining the scope of potentially relevant ESI in computer network backup tapes. Sampling can greatly reduce discovery costs by determining which backup tapes are likely to contain relevant documents, thereby potentially eliminating the costly process of restoring large numbers of tapes and reviewing massive amounts of data. Sampling further provides parties with an assessment of the costs required to restore and review ESI. Armed with that knowledge, courts can make a judgment first as to whether further discovery is warranted, and second, as to which party should bear the costs of restoration, review, and production. Accordingly, the growing trend is for courts to use sampling methodologies to inform cost-shifting analysis in discovery.

A long-standing federal presumption, articulated by the U.S. Supreme Court in Oppenheimer Fund, Inc. v. Sanders, holds that that the party responding to a discovery requests pays all related production expenses. Modern courts, however, have shown an increased willingness to issue cost-shifting orders to reduce the burden of discovery for parties that otherwise would be saddled with huge discovery costs given the scope of the discovery requests and/or the inaccessibility of the potentially relevant ESI. This trend recognizes that a party should not be able to strategically abuse the Oppenheimer presumption by issuing broad discovery requests to drive up opponents' litigation costs and force settlements.

Cost-shifting battles are hotly contested and for good reason: decisions on motions regarding who will be required to pay for discovery responses (the cost of which may run into the hundreds of thousands, if not tens of millions, of dollars) can impact severely how an action proceeds and in fact may be outcome-determinative in some cases.

It is important to remember that cost-shifting arguments are only a back-up to asking the court to deny burdensome discovery requests outright. In some cases, outright denial may be more appropriate protection from burdensome discovery requests than a cost-shifting order. Attorneys should not become so enamored with the idea of shifting discovery costs that they neglect to consider protesting the underlying request in the first instance. Rule 26(b)(2)(C) and 26(c) provide that a court may modify or deny a discovery request if the requesting party has had ample opportunity to obtain discovery, if the material sought is available elsewhere, or if the request is unduly burdensome. Two cases show district courts deciding to deny discovery instead of shifting costs, based on those policy grounds.

In In re General Instrument Corporate Securities Litigation, the court denied discovery of e-mails from back-up tapes even though production would not be unduly expensive, because the projected benefit failed to outweigh the burden and ample opportunity for discovery had been availed. The defendant had already produced 110,000 pages from one year of back-up tapes when the plaintiffs moved to compel further production, despite having stated at an earlier status conference that discovery had concluded. As to the benefit, the court found that the large number of documents already produced made it unlikely that additional documents were necessary, and that the plaintiffs had failed to identify "any specific factual issue" that would make it so. As to the burden, the court found that it would be significant given the volume of the e-mail at issue and the necessity of reviewing it for privilege and responsiveness. With expert discovery beginning, the court concluded that "[f]orcing defense counsel to engage in document review would necessarily distract their energies from the other parts of this ongoing litigation."

In Cognex Corp. v. Electro Scientific Industries, Inc., the court denied plaintiffs' motion to compel restoration and production of data from 820 back-up tapes covering a period of nine years, even where plaintiffs offered to pay the full cost and even though such a broad search would inevitably unearth relevant documents. For one, the defendant had "already conducted an extensive search for relevant documents" and produced thirty boxes of documents from every employee who had worked on the product in dispute. "At some point, the adversary system needs to say 'enough is enough' and recognize that the cost of seeking every relevant piece of discovery is not reasonable." The court also found there would be limited benefit derived from the discovery, distinguishing the patent infringement case before it from employment discrimination cases where relevant e-mails might be deleted by guilty individuals but remain on backup tapes. Finally, noting that willingness to pay does not waive limits on the number of interrogatories and depositions a party can take, the court concluded that "[t]here is something inconsistent with our notions of fairness to allow one party to obtain a heightened level of discovery because it is willing to pay for it," and that "[t]he sense of fairness underpinning our system of justice will not be enhanced by the courts participating in giving strategic advantage to those with deeper pockets."

The outright denial of superfluous or unduly burdensome discovery requests serves FRCP 1's policy goals of speedy cost-efficient resolution. It also prevents the potential unfairness of allowing parties to "buy" disproportionate discovery, which would represent a serious mishandling of the cost-shifting principles inherent in Rule 26 and applied in federal case law.

D. Effective Interrogatories and Requests for Production of Documents in Divorce

Drafting well-written discovery requests takes practice. The first step is often analyzing what information you are seeking. In all cases consider the Who, What, When, Where, Why, and How of your case. This will vary depending based on the case. Even two dissolutions of marriage for instance can present very different issues. Once you have determined what you need to seek you then need to determine what discovery tool is best suited for your needs. As discussed the most commonly used are interrogatories, requests for production, and depositions. A lesser used, but at times very effective tool is the request for admissions.

There are countless examples of form interrogatories out there and it is perfectly acceptable to use your opponent's current or past questions against them. However, for the skilled paralegal this is where the fun begins. Most paralegals take great excitement in using their writing and investigation skills to write interrogatories. Paralegals can be little detectives and rummage through a file and talk with a client to develop questions that we need answers to. A paralegal's first stop on where to start with drafting interrogatories should be the Petition. What are we arguing and what might we need to justify or stance. If we say we want our client to have custody of the children, we need to show why that is true, so we would want to make sure that we ask questions related to that. If our client wants custody and isn't concerned about money or property then we shouldn't be asking questions about the other party's 401k. Once we determine what type of questions we are going to ask, we need to determine what we know and what we might want to know more about. Back to the custody issue, if our client thinks the opposing party does drugs, this is the place to ask if he/she does and if so, how often, with who and where. These are questions that if our client just asked the opposing party, it is likely that they wouldn't answer and certainly not truthfully.

We have the be careful as some jurisdictions limit the number of questions allowed, required that only form interrogatories be used, or require the propounding party to first answer their own questions. These mechanisms limit an attorney's attempt to beleaguer the opposing party with redundant and lengthy interrogatory requests, but it may also force you to carefully consider how you allocate your questioning.

Sometimes the requirement that the propounding party to first answer their own questions can be a disadvantage and may require the paralegal to be more detailed. If our client does drugs as well, the paralegal may need to get more specific. If our client smokes marijuana but believes that the opposing party may do cocaine or heroin, then our question should be crafted in such a way that our client can say no but the opposing party would have to answer yes and the follow up of how often and where.

The clients also develop a close relationship with your paralegal as the case goes on. As most of the time, the client is talking to the paralegal on a day to day basis rather than the attorney. This can be a huge advantage, as it is possible that the client will tell the paralegal information that they might not feel comfortable telling their attorney, for whatever reason. This again, may lead to information and questions that we want from the other party.

Many jurisdictions will also allow you to define your own terms. This can be a tremendous tool of simplification. It eliminates verbosity that may seem lawyerly, but is really just confusing and annoying. This becomes particularly useful because another key to drafting effective discovery is the inclusion of relevant time and location limiters. Repeating the same parameters over and over can be burdensome, but it can also be crucial. Limiting your requests in this regard will confine your analysis to relevant materials and help ensure your requests are not objectionable as overly broad or burdensome.

Depending on the issues and technological savvy of the opposing party you might pose very detailed questions or limit yourself to broad coverage. In that regard, requests for production typically follow interrogatories or some sort of locally mandated initial disclosures. They can, of course, be sent in conjunction with interrogatories if you are already aware of likely sources of useful information, however it is not necessary. The purpose in waiting to send the request for production is to better target your requests to documents specifically needed based on the answers to the Interrogatories.

Often the key to effective discovery drafting is clear and concise questions. At trial you will be only able to ask yes or no questions, this is the time to get information and get the opposing party to "talk". However, you must be clear in your questioning, if the party cannot understand what you are asking them then it is unlikely you will get your desired response. This is particularly true when drafting deposition questions because the party does not have the luxury of re-reading the question at their own pace to understand its meaning.

The impact of discovery is probably most felt in fashioning request for production. Common objections for Requests for Production are that they are too burdensome or costly. A party is permitted to utilize information from "reasonably accessible" sources of electronically stored information to respond to all forms of discovery. This is true so long as the sources sought are not identified as inaccessible by the responding party. Inaccessible sources are those which impose "undue burden or cost." A requesting party may nonetheless obtain discovery from inaccessible sources by filing a motion to compel and "showing good cause, considering the limitations of Rule 26(b)(2)(C).

Technology is always playing an increasing roll in discovery and always redefining what is "reasonably accessible." While there are several approaches out there, but it is still essentially a proportionality scale. The more likely the discovery or relevant and useful material that cannot be found elsewhere the more intrusive a discovery request will likely be permitted. In Zubulake v. UBS Warburg, which is still cited as a guide in this area, the court identified five categories of data ranging from most accessible to least accessible: "active, online data;" "near-line data;" "offline storage/archives;" "backup tapes;" and "erased, fragmented or damaged data." 217 F.R.D. 309, 321-22 (S.D. N.Y. 2003). The emerging question is as technology makes more data regularly accessible do we allow more data to be discovered or do we keep the level of discoverable data constant but allow for lower discovery costs.

E. Use of Requests for Admission in Divorce

These requests can be issued as a matter of right without obtaining a court order. Any matter admitted in response to a request for admission is conclusively established for the pending action against the party making the admission, with some limited exceptions. Make sure to check your local rules for any of said exceptions.

In general, requests for admissions are not used to discover facts, but to establish the existence or nonexistence of facts. They may also be used to authenticate documents. Use caution when drafting a request for admission to make sure it is worded effectively without leaving the responding party with any wiggle room to admit or deny the admission. If you want to establish that the other spouse has improperly used marital money to buy gifts for a lover, you might use a series of statements like these:

1. You have used Visa 12345 during personal travel with M. Lover at least once in the last 12 months.

2. You have used Visa 12345 to pay for a hotel room during personal travel with M. Lover at least once in the last 12 months.

However, you would not want to ask the other the following:

1. You have purchased personal meals or hotel rooms during personal travel at least once in the last 12 months.

If the other spouse answers "Yes" to this question, then that is an ambiguous response which is not worth the paper it is written on because it will not be clear whether the admission refers to purchasing meals or hotel rooms with M. Lover or without.

Requests for admission can be a great tool to use in a family law case to narrow the contested issues to resolve the case at mediation or trial. Best of all, requests for admission are much cheaper than deposing the other party.

F. Assisting Attorneys with Depositions

Depositions are conducted by parties to a legal action to obtain information that cannot as readily be learned through written records or general investigation. During a deposition, the lawyer for one side orally questions a witness on the opposing side. During a deposition, each side learns facts and makes judgments about the arguments and evidence supporting their opponent's case. The oral testimony is taken under oath and every word spoken is transcribed with the transcript available to potentially be introduced in court as evidence if the case proceeds to trial.

Taking a deposition is easy, but taking a good deposition requires methodical preparation. First, figure out what your purposes are in taking the deposition. Here are some things to consider:

· Is the deponent an adverse party, an unfavorable witness or a friendly witness?

· Are you taking the deposition to gather information, or to perpetuate trial testimony?

· What information are you looking for?

· What documents do you need the witness to authenticate, or explain?

· Can the witness help you obtain or defeat a summary judgment (or other pretrial) motion?

Second, it is a good idea to outline the deposition questions. Start with some background questions asking the witness about their personal and educational background. If the witness is an expert witness, and especially if his or her qualifications are an issue, you will want to go into detail about the educational background. Other topics for your deposition outline might include documents to be identified, authenticated, or explained (you should have a chronological stack of all the documents that the witness authored or received), as well as key factual issues. It is important to bring a copy of the deposition subpoena, and any witness fees that you might be obligated to give to the witness. Also, bring a business card to give to the court reporter so that they have contact information for your office.

G. Proper Objections and Responses in Discovery

Responding to discovery lends itself to a baseball analogy. Based your knowledge of procedural and substantive law you object and do not answer requests or pitches that are clearly off of the plate. This can be requests for privileged information or those that are clearly irrelevant. Those requests that are on the corners are a bit tougher to lie off. Perhaps you answer those in good faith, but still object so that the opposing party cannot contend you consented if the matter comes before the judge at trial. Knowing the parameters of discovery objections can even save you time in answering and drafting your own requests.

At the outset you need to know the basic requirements for discovery responses and objections. Rule 26(g) of the Federal Rules of Civil Procedure imposes a signature and certification requirement on attorneys in responding to discovery. The rule provides:

(g) Signing Disclosures and Discovery Requests, Responses, and Objections.

(1) Signature Required; Effect of Signature. Every disclosure under Rule 26(a)(1) or (a)(3) and every discovery request, response, or objection must be signed by at least one attorney of record in the attorney's own name--or by the party personally, if unrepresented--and must state the signer's address, e-mail address, and telephone number. By signing, an attorney or party certifies that to the best of the person's knowledge, information, and belief formed after a reasonable inquiry:

(A) with respect to a disclosure, it is complete and correct as of the time it is made; and

(B) with respect to a discovery request, response, or objection, it is:

(i) consistent with these rules and warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law, or for establishing new law;

(ii) not interposed for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; and

(iii) neither unreasonable nor unduly burdensome or expensive, considering the needs of the case, prior discovery in the case, the amount in controversy, and the importance of the issues at stake in the action.

(2) Failure to Sign. Other parties have no duty to act on an unsigned disclosure, request, response, or objection until it is signed, and the court must strike it unless a signature is promptly supplied after the omission is called to the attorney's or party's attention.

(3) Sanction for Improper Certification. If a certification violates this rule without substantial justification, the court, on motion or on its own, must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both. The sanction may include an order to pay the reasonable expenses, including attorney's fees, caused by the violation.

Note too that the signature requirement also pertains to the propounding party. The responding party has no duty to act until the requests have been certified.

As mentioned, knowing when to object requires some knowledge of procedural or substantive law. If you do not know local rules you may end up answering far more interrogatories than the opposing party was actually allowed. If you do not understand what the parties must prove to make their respective cases you will not know which discovery requests are irrelevant. If you do not know the technology you will not know which requests are overly burdensome.

Moreover, it is important to avoid making your own boilerplate objections. Boilerplate objections typically sound something like this, "overbroad," "irrelevant," or "privileged." The objection should state how the request is deficient and how the party will be harmed if forced to answer it. Under Rule 26(b), "[t]he party who resists discovery has the burden to show discovery should not be allowed, and has the burden of clarifying, explaining, and supporting its objections."

Rules 33 and 34 also address how to respond to interrogatories and requests for production respectively. Rule 33(b) provides:

(b) Answers and Objections.

(1) Responding Party. The interrogatories must be answered:

(A) by the party to whom they are directed; or

(B) if that party is a public or private corporation, a partnership, an association, or a governmental agency, by any officer or agent, who must furnish the information available to the party.

(2) Time to Respond. The responding party must serve its answers and any objections within 30 days after being served with the interrogatories. A shorter or longer time may be stipulated to under Rule 29 or be ordered by the court.

(3) Answering Each Interrogatory. Each interrogatory must, to the extent it is not objected to, be answered separately and fully in writing under oath.

(4) Objections. The grounds for objecting to an interrogatory must be stated with specificity. Any ground not stated in a timely objection is waived unless the court, for good cause, excuses the failure.

(5) Signature. The person who makes the answers must sign them, and the attorney who objects must sign any objections.

The rule requires that interrogatories be answered by the party they are directed at, that they be answered in a timely manner (30 days), that each be answered fully in writing, and that any objections be stated specifically. Again, check local rules for variations.

Rule 34 governing requests for production is in many respects similar. Rule 34(b)(2) provides:

(b)(2) Responses and Objections.

(A) Time to Respond. The party to whom the request is directed must respond in writing within 30 days after being served. A shorter or longer time may be stipulated to under Rule 29 or be ordered by the court.

(B) Responding to Each Item. For each item or category, the response must either state that inspection and related activities will be permitted as requested or state an objection to the request, including the reasons.

(C) Objections. An objection to part of a request must specify the part and permit inspection of the rest.

(D) Responding to a Request for Production of Electronically Stored Information. The response may state an objection to a requested form for producing electronically stored information. If the responding party objects to a requested form--or if no form was specified in the request--the party must state the form or forms it intends to use.

(E) Producing the Documents or Electronically Stored Information. Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information:

(i) A party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request;

(ii) If a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms; and

(iii) A party need not produce the same electronically stored information in more than one form.

Rule 34 by contrast does not contain a signature requirement for requests for production. Further, Rule 34 does not contain the same language that objections must be stated with specificity. However, on many occasions courts have read into Rule 34 the same specificity requirement found in Rules 26 and 33. See Fronteir-Kemper Constructors, Inc. v. Elk Run Coal Co., 246 F.R.D. 522, 528 (S.D. W. Va. 2007); Sabol v. Brooks, 469 F. Supp. 2d 324, 329 (Md. 2006); St. Paul Reinsurance Co. v. Commercial Fin. Corp., 198 F.R.D. 508, 514 (N.D. Iowa 2000).

Also, at this point note that Rule 26(b)(5) governs privilege objections and will be discussed in part V.

Returning to our baseball analogy, if you decide a pitch is off the plate here is the recommendation of one federal court when it comes to making a proper objection to a discovery request:

(1) a recital of the parties['] claims and defenses, (2) a summary of the applicable statutory and/ or case law upon which the parties claims and defenses are predicated including the elements of each claim or defense, (3) a discussion of Court decisions considering the breadth or scope of discovery and any limitations upon discovery in the same or a similar type of case and (4) a statement respecting how and/or why the request seeks information which is irrelevant or will not likely lead to the discovery of relevant information or is vague, overly broad, burdensome or interposed for an improper purpose.

Mills v. E. Gulf Coal Preparation Co., 259 F.R.D. 118, 132 (S.D. W. Va. 2009).

Further, beyond making an objection Rule 26(c) allows a responding party to seek a protective order limiting what, when, and to whom an item may be disclosed. It even allows for an outright prohibition of disclosure. Rule 26(c) provides:

(c) Protective Orders.

(1) In General. A party or any person from whom discovery is sought may move for a protective order in the court where the action is pending--or as an alternative on matters relating to a deposition, in the court for the district where the deposition will be taken. The motion must include a certification that the movant has in good faith conferred or attempted to confer with other affected parties in an effort to resolve the dispute without court action. The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense, including one or more of the following:

(A) forbidding the disclosure or discovery;

(B) specifying terms, including time and place, for the disclosure or discovery;

(C) prescribing a discovery method other than the one selected by the party seeking discovery;

(D) forbidding inquiry into certain matters, or limiting the scope of disclosure or discovery to certain matters;

(E) designating the persons who may be present while the discovery is conducted;

(F) requiring that a deposition be sealed and opened only on court order;

(G) requiring that a trade secret or other confidential research, development, or commercial information not be revealed or be revealed only in a specified way; and

(H) requiring that the parties simultaneously file specified documents or information in sealed envelopes, to be opened as the court directs.

Finally, what if you simply decide not to answer? Well the first step is the opposing party's lawyer will have to contact you in an attempt to resolve the issue. If you still do not respond, or do not respond completely the opposing party may file a motion to compel. If you still fail to deliver, then that failure will likely open up the ability to seek sanctions. In many instances that can be accomplished by the opposing party filing a motion for sanctions, but also in some instances the court can issue sanctions sua sponte.

The ability of a court to issue discovery related sanctions is frequently governed by local rules. Typically though, one will have to show that the noncompliance was willful, not inadvertent or unintentional. The clearest case of this is an outright refusal to respond, but a pattern of evasive or incomplete answers can also demonstrate that the party is simply seeking to frustrate discovery.

The severity of the sanctions will also depend on a number of factors. Bad faith is typically the predominant factor, but courts will also consider the reason for the violation, the importance of the sought after information, the severity of the impact on the opposing party, the duration of evasion, and the quantity of violations. The efforts or complacency of each counsel can also be at issue.

Keeping your side on task is vital. Sanctions in the extreme can result in the denial of the right to contest the suit or denial of the ability to present evidence on a given issue. Other serious, but perhaps less severe sanctions include being held in contempt, having the trial court resolve factual disputes in favor of the opposing party, or having attorney's fees and costs awarded to the opposing party. Ultimately, you need to take discovery disputes seriously before procedural disputes adversely affect your client's interests.

Bottom line: make every effort you can to minimize your discovery responses, but do so within the framework of the rules. If as a paralegal you see obviously objectionable material or even material that is border line flag it for your attorney. Discuss the questioned/objectionable request with the opposing law office. The court wants to remain as much as possible above the discovery fray. When you do not have a legitimate grounds with which to object answer, and answer in a timely and complete manner. Discovery rules much smoother when everyone just follows the Rules.

H. Document Production Best Practices and Software

Document production has become focused on electronic documents and discovery more than ever. The Sedona Conference has outlined principles for the best practices and managing these ever-increasing electronic documents to maximize efficiency and effectiveness in the practice of law. The Sedona Principles for Electronic Document Production follow as such:

1. Electronic data and documents are potentially discoverable under Fed. R. Civ. P. 34 or its state law equivalents. Organizations must properly preserve electronic data and documents that can reasonably be anticipated to be relevant to litigation.

2. When balancing the cost, burden, and need for electronic data and documents, courts and parties should apply the balancing standard embodied in Fed. R. Civ. P. 26(b)(2) and its state law equivalents, which require considering the technological feasibility and realistic costs of preserving, retrieving, producing, and reviewing electronic data, as well as the nature of the litigation and the amount in controversy.

3. Parties should confer early in discovery regarding the preservation and production of electronic data and documents when these matters are at issue in the litigation, and seek to agree on the scope of each party's rights and responsibilities.

4. Discovery requests should make as clear as possible what electronic documents and data are being asked for, while responses and objections to discovery should disclose the scope and limits of what is being produced.

5. The obligation to preserve electronic data and documents requires reasonable and good faith efforts to retain information that may be relevant to pending or threatened litigation. However, it is unreasonable to expect parties to take every conceivable step to preserve all potentially relevant data.

6. Responding parties are best situated to evaluate the procedures, methodologies, and technologies appropriate for preserving and producing their own electronic data and documents.

7. The requesting party has the burden on a motion to compel to show that the responding party's steps to preserve and produce relevant electronic data and documents were inadequate.

8. The primary source of electronic data and documents for production should be active data and information purposely stored in a manner that anticipates future business use and permits efficient searching and retrieval. Resort to disaster recovery backup tapes and other sources of data and documents requires the requesting party to demonstrate need and relevance that outweigh the cost, burden, and disruption of retrieving and processing the data from such sources.

9. Absent a showing of special need and relevance a responding party should not be required to preserve, review, or produce deleted, shadowed, fragmented, or residual data or documents.

10. A responding party should follow reasonable procedures to protect privileges and objections to production of electronic data and documents.

11. A responding party may satisfy its good faith obligation to preserve and produce potentially responsive electronic data and documents by using electronic tools and processes, such as data sampling, searching, or the use of selection criteria, to identify data most likely to contain responsive information.

12. Unless it is material to resolving the dispute, there is no obligation to preserve and produce metadata absent agreement of the parties or order of the court.

13. Absent a specific objection, agreement of the parties or order of the court, the reasonable costs of retrieving and reviewing electronic information for production should be borne by the responding party, unless the information sought is not reasonably available to the responding party in the ordinary course of business. If the data or formatting of the information sought is not reasonably available to the responding party in the ordinary course of business, then, absent special circumstances, the costs of retrieving and reviewing such electronic information should be shifted to the requesting party.

14. Sanctions, including spoliation findings, should only be considered by the court if, upon a showing of a clear duty to preserve, the court finds that there was an intentional or reckless failure to preserve and produce relevant electronic data and that there is a reasonable probability that the loss of the evidence has materially prejudiced the adverse party.

Today you can find more pre-crafted legal document assembly systems for sale than ever before. You can buy a canned document assembly system from LexisNexis ( www.lexisnexis.com), West Publishing ( www.west.thomson.com), BlumbergExcelsior ( www.blumberg.com), Basha Systems (www.bashasys.com), InterActive Legal Systems ( www.ilsdocs.com), or a number of other content publishers.

These systems can give you a complete set of estate planning forms, state-specific probate forms, family law documents, or real estate forms. You will get the benefit of the expertise of other lawyers embodied in both the words of the documents as well as the logic that drives the document assembly system.

With each of these systems, you will get the ability to select a document, answer a series of questions, and produce a complete, ready-to-use document in less than 15 minutes.

The main advantage of these pre-built systems is "out-of-the-box" gratification. Install them and away you go. The disadvantage, of course, is that you are largely limited to the content provided in the format provided. Some of these systems will allow you to alter the underlying templates to apply some of your own language to the forms, but if you are a very particular lawyer or very attached to your own work product developed during years of practice, pre-canned templates may not work for you.

Whether for pride of ownership, or marketing, or "integrity," some lawyers choose to build their own automated templates.

The do-it-yourself (DIY) approach has the benefit of using your own words, your own rules, and your own intake forms. As when you build your own house, you get exactly what you want, within your budget and your time frame.

You can build your own automated templates using desktop tools such as HotDocs (www.hotdocs.com), which is the market leader. HotDocs 2008 includes a model document toolbar that lets you automate a document by simply marking up an existing document with an easy-to-remember syntax. Pathagoras ( www.pathagoras.com) offers a simple system based on MS Word. A "clause-based" document assembly system, Pathagoras programs more easily than HotDocs, but it works basically as a knowledge base of pre-built clauses that you can mine. D3 (www.microsystems.com/d3) from Micro-system provides an enterprise-level clause manager.

More and more document assembly is moving to web-based solutions. DealBuilder ( www.business-integrity.com), with its simplified document markup and Lexicon feature that enables multi-language prompts, would prove useful to attorneys with an international practice. DealBuilder Server and HotDocs Server require your firm to configure and set up your own web server. You also can find a hosted solution, through which the vendor supplies the web server and software for a monthly fee; such vendors include QShift ( www.ixio.com) and DocsEngine (www.accudraft.com/products/de_main.asp).

A word of caution: Although DIY tools have gotten much easier to use, the approach requires a substantial amount of time to produce results equivalent to purchased forms.

The project leader should oversee the automation of the case, including, but not limited to: (1) picking any necessary scanning vendor, (2) setting up training schedule, (3) coordinating with trial technology consultants and equipment vendors, and (4) coordinating with court staff. But don't spread the project leader too thin if he or she has any other (non-technological) duties as part of the trial team.

Whether you buy or build, document assembly tools bring real value to your practice. Processes that took hours now take minutes. Document assembly shows us the future of legal document production. Modern attorneys should not ask "why" but "how"-and they should ask it soon, before they become as antiquated as Edward Bulwer-Lytton's pen.

I. Discovery Motions

The types of discovery should be tailored to each case. Your discovery options are set out in the rules of Civil Procedure; however, in a divorce case, the following are regularly used:

(1) Deposition;|
(2) Deposition - Subpoena Duces Tecum;
(3) Interrogatories;
(4) Requests for Production of Documents;
(5) Requests for Admissions;
(6) Requests for Entry Upon Land; and
(7) Requests for Examination.

If you start from day one with a good roadmap of what needs to be accomplished in the case, you should be in good shape when conducting discovery. Again, tailoring your discovery to meet your needs and tracking discovery are effective tools. Discovery can, at times, be overkill; however, if you are in a position where you do not have sufficient information you have to cast a wide enough net to capture what your client needs for their case.

J. Model Requests and Motions

Refer to: 2(J)(1) - Deposition;

2(J)(2) - Deposition Subpoena Duces Tecum;

2(J)(3)(a) - Opening Interrogatory;

2(J)(3)(b) - Dissolution of Marriage Interrogatory;

2(J)(4) - Request for Production;

2(J)(5) - Request for Admission;

2(J)(6) - Request for Entry Upon Land; and

2(J)(7) - Request for Examination; and

2(J)(8) - Motion to Compel - refer to examples at the end of this document.

K. Organizing Discovery Documents: Tips for Family Law Paralegals

In the same manner that a paralegal stores all information from the client, the paralegal must also store information received from the opposing party. All of this information should be maintained in a central location; however documents received from your client also need to be separated from those provided by the opposing party. This needs to be accomplished with electronic documents as well as paper documents. Again, it is not a bad idea to duplicate materials so that you have a complete electronic file and a separate, but identical paper file.

The key to the organization of discovery is to set up a consistent protocol. This effort can be aided by having the paralegal serve as the party principally responsible for tracking discovery. This means anything discovery related goes straight to the paralegal. The process was simple before the advent of email. The paralegal was simply tasked with receiving all mail addressed to their attorneys. If the item was discovery related the paralegal documented its receipt, perhaps copied it, filed it, and notified the attorney. Now that same process holds true, only it is a good idea to scan and upload the materials received through the mail as well. Again, some would even have you Bates stamp them on the day of their arrival.

Now though you also need a protocol for electronic communications as well. Many times correspondence will be sent electronically but also some discovery items may arrive through email or facsimile. Electronic communications can be a bit more difficult for the paralegal to intercept and therefore the paralegal will need the assistance of their lawyer. The easiest solution is for the lawyer to get in the habit of forwarding almost all correspondence to their paralegal so that the paralegal can maintain a complete file for the lawyer's later use. If the opposing law offices are in regular communications the lawyer might simply have the opposing side copy their paralegal on all exchanges.

It is vital that in one way or another, all discovery information gets to the paralegal. The paralegal needs to track not only discovery responses from the opposing party but also discovery requests. Indeed, it is a good idea to subdivide the opposing party discovery file into their requests and their responses. (i.e. Respondent's First Interrogatories Aimed at Petitioner are kept separate from Respondent's Response to Petitioner's First Interrogatories). Indeed, missing a deadline to respond may be even more harmful than misplacing something that you were already provided. In that regard you need to calendar all due dates as well as perhaps a reminder a few days before they're actually due. Also, as an aside, some will simply file requests from the opposing side in a subfolder marked pleadings, while accurate, it is nice to copy the requests and file them with discovery as well so that you are not constantly bouncing back and forth through the file to match questions with responses. Received documents can be further divided into particular discovery mechanisms, (i.e. Respondent's Response to Petitioner's First Interrogatories is kept separate from Respondent's Response to Petitioner's First Request for Production). Keeping a log apart from the documents themselves detailing what was received, when it was received, and when any type of response is due is invaluable. Sometimes the ability to rapidly pull something up or even just the appearance of detailed organization is enough to move the opposing party towards settlement.

Finally, while it may be crucial that all material reach the paralegal first, do not forget that ultimately all materials must reach the attorney as well. Remember discovery is a team effort, both the attorney and the paralegal need to be aware of everything. In other words the paralegal's job does not end once they have received and cataloged something. This means setting all events and deadlines on both of your calendars, and the attorney needs to be promptly notified of an item's receipt in case an issue is particularly sensitive. Remember, error on the side of over organization and notification.

Managing electronic documents in discovery can be quite challenging. Challenges with electronic documents are they can come in from different sources, at different times, and in different formats. Establishing consistent protocols can combat some of the challenges. Getting into a consistent routine can help ensure things are not misplaced when things get hectic. For electronic documents, just as with paper documents, this means doing the same thing with each particular item received.

The first step is to verify what you have. This means opening the email and downloading the attachment to verify that you have what you are purported to have. There is nothing worse than recording the receipt and later realizing that the attached file was corrupted or not there.

Once you are certain of the materials, the next step is to convert them into a consistent format. In most instances, that is converting them to .TIFF or .PDF formatting. These formats essentially take a snapshot of whatever document you happen to be viewing. This preserves the exact content of the document as it was when you received it. If you are responding to discovery, the simplest method of doing this is printing the document which you have received from your client (which also gives you a hard copy) and then scanning the document on your office machine. Once scanned, you can then download the .TIFF or .PDF image file onto your computer. Some software programs like Adobe Acrobat can convert files to .PDF without printing.

One upside to formats like .PDF is that it prevents the materials from being altered either accidentally or purposefully. It is easy to mistakenly type something or delete something from a word processor or spreadsheet document. Unlike a conventional paper document, alterations are not easy to spot. Additionally, since Rule 34 allows the responding party to produce materials in the form in which it is ordinarily maintained or one that is "reasonably usable," it is likely that many documents will come in an image file format. This reason for this in large part two fold. Yes, it prevents the receiving party from altering the document, but also it often removes metadata (data about data) embedded in the native formatting.

Once you have your documents in the proper format, it is time to consider storage. Whether requesting or responding you need to keep record of your materials sent or received. Some offices may even invest in software packages that create electronic files, folders, and subfolders for each individual client. The documents are then uploaded into a client's workspace and appropriate folder. There are several advantages to this type of system. It creates a centralized application for managing a client's documents and many come with templates commonly used by law offices. Further, if cloud based they can allow for remote access to a client's file by both the law office and the client. The downside is that these programs can be costly and apart from the remote access most of this organization can be accomplished through the creation of your own folders on your computer desktop.

If you are dealing exclusively with paper files you may want to create a sort of file check out system. This is particularly valuable if there are many attorneys or many paralegals working on the case. Before you realize it, different people have pulled different parts of the file and borrowed various portions to complete various tasks. This is a recipe of misplacing discovery documents. It may seem like a hassle, but forcing everyone to record what and when a file was pulled may help in keeping that file organized.

This also highlights a benefit of having a complete parallel e-file. For one, if the entire file is accessible across a network, then multiple people can be using the materials at the same time without the risk of someone forgetting to put the materials back. Second, if you do misplace something from the paper file, you can likely just reprint the missing portion from your online archive.

III. Subpoenas to Appear and to Produce in Divorce Litigation

A. Proper Process of Service (In and Out of State)

The first step after obtaining a fully executed subpoena is to get it properly served. The requirements for service of a subpoena are guided by Federal Rules of Civil Procedure (FRCP) 45. Under FRCP 45, any person over the age of 18 years old and not a party to the action may serve a subpoena in the United States. Service of a subpoena requires delivering a copy to the named person, and if the subpoena requires the person's attendance, tendering the fees for one day's attendance and the mileage allowed by law. The amount for the mileage and fee for attendance will vary by state. Note that FRCP 45(c )(1)(A), limits the area where a nonparty witness can be required to travel for a deposition or hearing to a one-hundred mile radius from where the person, "resides, is employed, or regularly transacts business." The rule is similar for parties with the exception that in addition to the one-hundred mile radius the party can be required to appear for a hearing or deposition in the state where the person resides, is employed, or regularly conducts business in person.

The use of a professional process server for service, instead of someone within the firm, is recommended in order to limit the ability of the person being sued to quash the subpoena on the grounds of improper service. A professional process server increases the likelihood that the requirements in FRCP 45 are adequately met. Additionally, a professional process server often has years of experience, which can be valuable when attempting to serve a difficult witness.

FRCP states only that the person must be "delivered" the subpoena with no real guidance on what this means for each jurisdiction. Most jurisdictions determine that by "delivered" the FRCP requires personal service of the subpoena. Courts disagree however, on whether certified mail counts as sufficient service. Alaska courts rules for service are fairly relaxed and allow service by certified mail and private mail service. However, the Comment C45-9 for the FRCP suggests that personal service is the only appropriate service available under this rule. Service by fax or through regular mail will generally not be held to be sufficient service because the court has no outside guarantee that the person received the subpoena. This is in line with FRCP 45(e)(2), which does not allow for substitute service. For instance, it is not sufficient service of a subpoena to leave a copy at the person's residence who is being subpoenaed or to leave a copy with a registered agent of the individual. FRCP specifies that the subpoena must be delivered to the individual being served. The service requirements for subpoenas are stricter than the general service requirements of FRCP 4 which currently, in some situations, allows some service by mail and the ability to serve a person of suitable age and discretion at the person's residence who is being served.

The Federal Rules do not specify any time requirement for when the subpoena is delivered to the person being served or when the date may be set for compliance. The rule requires service within a "reasonable time." Courts are able to grant motions to quash a subpoena if the person being served is not given a reasonable amount of time to comply with the terms of the subpoena. The comments to FRCP 45 suggest that what is a reasonable time of service is dependent on several factors including whether the person is being summoned to appear at trial or if it is for a pre-trial deposition. When the person is being subpoenaed for trial, the amount of time needed between the delivered subpoena and the trial may sometimes have a shorter length of time than if an attorney is subpoenaing a witness for a pre-trial deposition. Whether or not the time between service and the required compliance will be determined to be reasonable or unreasonable can vary based on the circumstances in the case.

The requirements for service differ based on jurisdiction and can be more lenient than what is established by FRCP 45. For instance, in Washington State, a copy of a subpoena can be left at the person's dwelling home or abode with a person of suitable age and discretion residing at the same location. Minnesota courts also allow subpoenas to be served by leaving a copy with a person of suitable age and discretion residing in the same place as the person named in the subpoena. Prior to 2006, all service on subpoenas had to be in person to the person whose name was included in the subpoena. State statutes were changed to be in compliance with Minnesota Rules of Civil Procedure 45. Other states follow the FRCP 45 more closely and do not allow service other than to the person mentioned in the subpoena. For instance, in New Jersey, "Service of a subpoena shall be made by delivering a copy thereof to the person named together with tender of the fee allowed by law, except that if the person is a witness in a criminal action for the State or an indigent defendant, the fee shall be paid before leaving the court at the conclusion of the trial by the sheriff or, in the municipal court, by the clerk thereof."

Proper process of service is addressed in the F.R.C.P, Rule 4, which states that:

(a) Contents; Amendments.

(1) Contents. A summons must:

(A) name the court and the parties;

(B) be directed to the defendant;

(C) state the name and address of the plaintiff's attorney or-if unrepresented-of the plaintiff;

(D) state the time within which the defendant must appear and defend;

(E) notify the defendant that a failure to appear and defend will result in a default judgment against the defendant for the relief demanded in the complaint;

(F) be signed by the clerk; and

(G) bear the court's seal.

(2) Amendments. The court may permit a summons to be amended.

(b) Issuance. On or after filing the complaint, the plaintiff may present a summons to the clerk for signature and seal. If the summons is properly completed, the clerk must sign, seal, and issue it to the plaintiff for service on the defendant. A summons-or a copy of a summons that is addressed to multiple defendants-must be issued for each defendant to be served.

(c) Service.

(1) In General. A summons must be served with a copy of the complaint. The plaintiff is responsible for having the summons and complaint served within the time allowed by Rule 4(m) and must furnish the necessary copies to the person who makes service.

(2) By Whom. Any person who is at least 18 years old and not a party may serve a summons and complaint.

(3) By a Marshal or Someone Specially Appointed. At the plaintiff's request, the court may order that service be made by a United States marshal or deputy marshal or by a person specially appointed by the court. The court must so order if the plaintiff is authorized to proceed in forma pauperis under 28 U.S.C. §1915 or as a seaman under 28 U.S.C. §1916.

(d) Waiving Service.

(1) Requesting a Waiver. An individual, corporation, or association that is subject to service under Rule 4(e), (f), or (h) has a duty to avoid unnecessary expenses of serving the summons. The plaintiff may notify such a defendant that an action has been commenced and request that the defendant waive service of a summons. The notice and request must:

(A) be in writing and be addressed:

(i) to the individual defendant; or
(ii) for a defendant subject to service under Rule 4(h), to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process;

(B) name the court where the complaint was filed;

(C) be accompanied by a copy of the complaint, 2 copies of the waiver form appended to this Rule 4, and a prepaid means for returning the form;

(D) inform the defendant, using the form appended to this Rule 4, of the consequences of waiving and not waiving service;

(E) state the date when the request is sent;

(F) give the defendant a reasonable time of at least 30 days after the request was sent-or at least 60 days if sent to the defendant outside any judicial district of the United States-to return the waiver; and

(G) be sent by first-class mail or other reliable means.

(2) Failure to Waive. If a defendant located within the United States fails, without good cause, to sign and return a waiver requested by a plaintiff located within the United States, the court must impose on the defendant:

(A) the expenses later incurred in making service; and

(B) the reasonable expenses, including attorney's fees, of any motion required to collect those service expenses.

(3) Time to Answer After a Waiver. A defendant who, before being served with process, timely returns a waiver need not serve an answer to the complaint until 60 days after the request was sent-or until 90 days after it was sent to the defendant outside any judicial district of the United States.

(4) Results of Filing a Waiver. When the plaintiff files a waiver, proof of service is not required and these rules apply as if a summons and complaint had been served at the time of filing the waiver.

(5) Jurisdiction and Venue Not Waived. Waiving service of a summons does not waive any objection to personal jurisdiction or to venue.

(e) Serving an Individual Within a Judicial District of the United States. Unless federal law provides otherwise, an individual-other than a minor, an incompetent person, or a person whose waiver has been filed-may be served in a judicial district of the United States by:

(1) following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made; or

(2) doing any of the following:

(A) delivering a copy of the summons and of the complaint to the individual personally;

(B) leaving a copy of each at the individual's dwelling or usual place of abode with someone of suitable age and discretion who resides there; or

(C) delivering a copy of each to an agent authorized by appointment or by law to receive service of process.

(f) Serving an Individual in a Foreign Country. Unless federal law provides otherwise, an individual-other than a minor, an incompetent person, or a person whose waiver has been filed-may be served at a place not within any judicial district of the United States:

(1) by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents;

(2) if there is no internationally agreed means, or if an international agreement allows but does not specify other means, by a method that is reasonably calculated to give notice:

(A) as prescribed by the foreign country's law for service in that country in an action in its courts of general jurisdiction;

(B) as the foreign authority directs in response to a letter rogatory or letter of request; or

(C) unless prohibited by the foreign country's law, by:

(i) delivering a copy of the summons and of the complaint to the individual personally; or

(ii) using any form of mail that the clerk addresses and sends to the individual and that requires a signed receipt; or

(3) by other means not prohibited by international agreement, as the court orders.

(g) Serving a Minor or an Incompetent Person. A minor or an incompetent person in a judicial district of the United States must be served by following state law for serving a summons or like process on such a defendant in an action brought in the courts of general jurisdiction of the state where service is made. A minor or an incompetent person who is not within any judicial district of the United States must be served in the manner prescribed by Rule 4(f)(2)(A), (f)(2)(B), or (f)(3).

(h) Serving a Corporation, Partnership, or Association. Unless federal law provides otherwise or the defendant's waiver has been filed, a domestic or foreign corporation, or a partnership or other unincorporated association that is subject to suit under a common name, must be served:

(1) in a judicial district of the United States:

(A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or

(B) by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process and-if the agent is one authorized by statute and the statute so requires-by also mailing a copy of each to the defendant; or

(2) at a place not within any judicial district of the United States, in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i).

(i) Serving the United States and Its Agencies, Corporations, Officers, or Employees.

(1)(A) United States. To serve the United States, a party must:

(i) deliver a copy of the summons and of the complaint to the United States attorney for the district where the action is brought-or to an assistant United States attorney or clerical employee whom the United States attorney designates in a writing filed with the court clerk-or

(ii) send a copy of each by registered or certified mail to the civil-process clerk at the United States attorney's office;

(B) send a copy of each by registered or certified mail to the Attorney General of the United States at Washington, D.C.; and

(C) if the action challenges an order of a nonparty agency or officer of the United States, send a copy of each by registered or certified mail to the agency or officer.

(2) Agency; Corporation; Officer or Employee Sued in an Official Capacity. To serve a United States agency or corporation, or a United States officer or employee sued only in an official capacity, a party must serve the United States and also send a copy of the summons and of the complaint by registered or certified mail to the agency, corporation, officer, or employee.

(3) Officer or Employee Sued Individually. To serve a United States officer or employee sued in an individual capacity for an act or omission occurring in connection with duties performed on the United States' behalf (whether or not the officer or employee is also sued in an official capacity), a party must serve the United States and also serve the officer or employee under Rule 4(e), (f), or (g).

(4) Extending Time. The court must allow a party a reasonable time to cure its failure to:

(A) serve a person required to be served under Rule 4(i)(2), if the party has served either the United States attorney or the Attorney General of the United States; or

(B) serve the United States under Rule 4(i)(3), if the party has served the United States officer or employee.

(j) Serving a Foreign, State, or Local Government.

(1) Foreign State. A foreign state or its political subdivision, agency, or instrumentality must be served in accordance with 28 U.S.C. §1608.

(2) State or Local Government. A state, a municipal corporation, or any other state-created governmental organization that is subject to suit must be served by:

(A) delivering a copy of the summons and of the complaint to its chief executive officer; or

(B) serving a copy of each in the manner prescribed by that state's law for serving a summons or like process on such a defendant.

(k) Territorial Limits of Effective Service.

(1) In General. Serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant:

(A) who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located;

(B) who is a party joined under Rule 14 or 19 and is served within a judicial district of the United States and not more than 100 miles from where the summons was issued; or

(C) when authorized by a federal statute.

(2) Federal Claim Outside State-Court Jurisdiction. For a claim that arises under federal law, serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant if:

(A) the defendant is not subject to jurisdiction in any state's courts of general jurisdiction; and

(B) exercising jurisdiction is consistent with the United States Constitution and laws.

(l) Proving Service.

(1) Affidavit Required. Unless service is waived, proof of service must be made to the court. Except for service by a United States marshal or deputy marshal, proof must be by the server's affidavit.

(2) Service Outside the United States. Service not within any judicial district of the United States must be proved as follows:

(A) if made under Rule 4(f)(1), as provided in the applicable treaty or convention; or

(B) if made under Rule 4(f)(2) or (f)(3), by a receipt signed by the addressee, or by other evidence satisfying the court that the summons and complaint were delivered to the addressee.

(3) Validity of Service; Amending Proof. Failure to prove service does not affect the validity of service. The court may permit proof of service to be amended.

(m) Time Limit for Service. If a defendant is not served within 90 days after the complaint is filed, the court-on motion or on its own after notice to the plaintiff-must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period. This subdivision (m) does not apply to service in a foreign country under Rule 4(f) or 4(j)(1) or to service of a notice under Rule 71.1(d)(3)(A).

(n) Asserting Jurisdiction over Property or Assets.

(1) Federal Law. The court may assert jurisdiction over property if authorized by a federal statute. Notice to claimants of the property must be given as provided in the statute or by serving a summons under this rule.

(2) State Law. On a showing that personal jurisdiction over a defendant cannot be obtained in the district where the action is brought by reasonable efforts to serve a summons under this rule, the court may assert jurisdiction over the defendant's assets found in the district. Jurisdiction is acquired by seizing the assets under the circumstances and in the manner provided by state law in that district.

B. Drafting Letters Rogatory

Refer to example 3(B)(1) at the end of this document for an example of a Letter Rogatory.

C. Subpoenaing Individuals

When you are attempting to depose a nonparty at a deposition, a subpoena is generally required to compel their attendance. In addition to the subpoena, a notice of deposition is required to be prepared and served to all parties to the action or their counsel of record. Obviously, if your witness will cooperate and will consent to a Notice of Deposition, there is no need for a subpoena whether they are in your trial state or not. However, when the witness is not cooperative and lives in a different state, it may be necessary for you to file a Motion to obtain a subpoena in that state. As discussed above, it may or may not be necessary to hire counsel to do this; you also may or may not need to request a Commission in your home state. The procedure on getting a subpoena may be very different than you are used to. There are some jurisdictions that have a majority of their forms online, and it is as simple as filling in the blanks and sending them to the out of state court for issuance. Some require a lot of research and back and forth pleadings to get a subpoena issued. You may want to look into how badly you need these records for your case as the issuance of a subpoena can be very costly for your client. When you consider the time it will take you to draft the Motions, subpoenas, and notices of deposition and filing fees, the evidence may not worth the cost. Most likely, filing fees for filing a subpoena would be nominal but in some states, the filing fees can be pricy. For example, Connecticut's filing fee for an out of state subpoena is $350.00. You will want to check with the court clerk on these issues and filing costs.

Regardless, all states generally require that a subpoena be issued by the clerk in the state where the witness is located. Federal Rule 45(a)(2) states that a subpoena must issue from the court where the action is pending. You could likely assume that the this Rule is the reason behind having to request authority from the pending court before requesting another court to issue the subpoena.

According to the Federal Rules, the subpoena must contain the text in 45(c) and 45(d). The Federal form already includes the required text. As a general rule, most states have the same basic requirements for this Motion. You must:

· fill out a motion for each person/corporation you wish to be subpoenaed;

· list the parties to the originating action;

· say why you want to have the person to testify;

· say what type of case it is for;

· list any documents or information that you want the person to bring;

· list the date and time you want them to come; and

· list the location of the deposition.

To illustrate, South Carolina's Subpoena Rule states: that "every subpoena shall:

(A) state the name of the court from which it is issued; and

(B) state the title of the action, the name of the court in which it is pending, and its civil action number; and

(C) command each person to whom it is directed to attend and give testimony or produce and permit inspection and copying of designated books, documents or tangible things in the possession, custody or control of that person, or to permit inspection of premises, at a time and place therein specified; and

(D) set forth the text of subdivisions (c) and (d) of this rule."

A subpoena can also specify the form in which any requested information may be produced.

You will then need to file the application with the clerk who will either sign or obtain a judge's signature and issue a subpoena. Federal Rules allow an attorney as an officer of the court to issue and sign a subpoena on behalf of a court in the district in which the action is pending and the attorney is authorized to practice. If you are filing in federal court and issuing a subpoena to a witness in a different state, then as long as your attorney is licensed in federal court, no outside counsel is generally needed. Since most states model their Rules off the Federal Rules, you would likely assume that the states will allow the same. When you pull a state's pre-printed subpoena forms, most forms either have a preprinted clerk's signatures or a spot for your attorney to sign. However, although the state court gives an attorney the ability to sign a subpoena from that state, it will not authorize an out of state subpoena because the court will still need to establish jurisdiction over the witness.

Once you file your request for a subpoena with all necessary copies, then obtain the judge's or clerk's signature, you will need to be prepared to have it served properly. And as stated above, you will want to check the court's rules on service of subpoenas. The rules of the witness's state must be followed for proper service of a subpoena. Just because your state may allow service by certified mail, it is possible that the witness's state requires personal service of subpoenas.

With the ease of technology, the need for out of state subpoenas will continue to grow. The popularity of the internet and mobile sites it is possible and convenient to sign up and manage accounts without being anywhere near the actual company or business location. However, legal professionals need to be apprised of the process in each individual state that they are issuing the discovery. As in the cases of those states who have not adopted the UIDDA, those states have their own procedures in place that must be followed.

D. Subpoenaing Bank Records; Credit Card Statements; Investment Accounts

Frequently, an attorney simply will fire off a subpoena with a 14-day response time and then cross his/her fingers hoping that the bank complies. This is a near-surefire way either to cause the bank to ignore your subpoena entirely or to draw a motion for a protective order. If you did not plan to pay for all of those records, or get your client's approval to do so, you might have another problem. And, if the customer whose records are sought is not a party to the case, there is another set of steps you must take.

Finance Code Section 59.006 expressly provides the "exclusive method" for obtaining discovery of customer records from a financial institution in litigation. Section 30.007 of the Texas Civil Practice and Remedies Code states that "civil discovery" of such records is governed by Section 59.006.

In order to properly seek customer records from a bank, you should be aware of these three keys to serving effective subpoenas under Section 59.006:

· Mandatory response time-The statute requires at least 24 days for the bank to comply. Texas courts have found that a subpoena that does not provide at least 24 days to comply is invalid. This is important because many attorneys simply assume such third-party subpoenas fall outside of 30-day response requirements for requests for production.

· Cost of compliance-The statute also requires the party requesting the records pay the bank's "reasonable costs of complying with the record request" before any records must be produced. This expressly includes costs of reproduction, postage, research, delivery and attorneys' fees. Texas courts have held that failure to pay these costs relieves a bank of any obligation to respond and is valid basis for a protective order. Lawyers should carefully consider and reasonably tailor their record requests to banks because broader subpoenas will likely incur additional investigation, production costs and attorney review, resulting in a larger bill.

· Additional steps when customer is not party to the lawsuit-If the records sought are from a bank customer who is not a party to the case, the requesting party also must: (1) give notice to the customer of their rights under Section 59.006(e) and provide copy of the request; (2) file a certificate of service indicating the customer was served with the notice; and (3) request the customer's written consent to authorize the production. If the customer grants written consent, all is well, but this rarely occurs. More likely than not, the customer will ignore the request. If the customer refuses written consent, the requesting party "may" file a motion for in camera inspection of the record "as its sole means of obtaining access to the record." These steps can be laborious, and it makes sense to start very early in the process if the customer is not party.

Keep in mind that there are several exemptions from coverage found Section 59.006(a), including criminal investigations and garnishment proceedings where the bank is the garnishee and the customer is the debtor. Most civil proceedings, however, will fall under the statute's coverage.

And while the statute specifically provides that it does not create a right of privacy in the records, its requirements often create a stumbling block for litigators seeking customer records to prove their case, particularly when there is a deadline approaching.

E. Subpoenaing Cellphone Records, Pictures and Text Messages

Text messages are used often in family law cases, particularly in divorce and child custody litigation. However, anyone that has ever tried to obtain text messages through a court proceeding knows how difficult, and usually impossible, it can be.

The most important concept to understand about text messages is that the content of text messages (i.e., the message communicated by one person to another through a cell phone) is only kept by the cell carrier for two to three days. This provides a very limited time frame to obtain the data from the carrier directly.

Moreover, carriers often rely on the federal Stored Communications Act to refuse to comply with state court-issued subpoenas. Federal law requires the cell phone subscriber consent to the request before a carrier is obliged to provide any information. So how do you get text messages by subpoena?

1. First, it is best to try and get the cell phone company to retain the content of the text messages by sending a letter to the carrier explaining that the text messages are evidence and must be preserved. It is wise to have an attorney draft and send the letter, citing the relevant provisions of the Stored Communications Act and applicable state law. The letter should be sent certified by overnight delivery.

2. Second, prepare the subpoena to seek the relevant text message(s).

3. Third, file an ex parte motion with your divorce court and request that court order the other party to sign a notarized consent to release the text messages.

4. Fourth, serve the subpoena. This may be tricky depending on what state your divorce is being handled, as the rules for service vary from state to state. You may need to have a "commission" set up in the state that the cell carrier's records are kept to ensure the subpoena is properly served.

Obviously, this is a significant amount of work. Fortunately, there are far better options.

Alternatives to Subpoena

There are two significantly better alternatives than sending a subpoena to a cell carrier.

First, the recipient of the message will have a copy of the text message (which might be you). You can print off the text messages and produce those as evidence. The recipient of the message can "lay the foundation" for the message by establishing that the message was sent by a specific phone number to their phone number.

Second, get the text message from the sender. This can be accomplished a number of ways. Most often, divorce attorneys can prepare and send a "Demand for Inspection and Production of Documents or Things" to serve on the opposing party, which can include a request for copies of text messages or better, the opposing party must actually produce his or her cell phone for inspection. If the sender of the text message is not a party to the case, your divorce attorney can send a deposition subpoena and have the person appear in the attorney's office for a deposition.

Keep in mind that while the text message content may be difficult to obtain, the fact that a text message was sent on a specific date and time can be obtained on the subscriber's cell phone bill. That is helpful in some situations, such as domestic abuse cases where one party sends hundreds of text messages to their spouse or significant other to harass or threaten them.

Another Useful Tip to Print Text Messages from Your Device. Do you have an iPhone? Download and use iExplorer, which is a file transfer app that helps create printable pages for your text messages. Gone are the days of having to take a picture of a text message and then emailing that picture so you are able to print.

F. How to Subpoena Social Media and Other Internet Companies

Once you have decided that social media content will be or could be important to your case, you have several initial options. First, you can obtain the consent of the other party to produce the requested data. Second, you can attempt to subpoena the provider. Finally, you can attempt to compel the opposing party to produce the data.

Your best two options are typically to acquire consent or to subpoena the opposing party. If you subpoena the opposing party, you may be forced to explain to the judge why such materials are relevant, and you may have difficulty with access and the formatting of information. Users are only able to provide the information in screenshots and may not even have access to all of their historical data. Even still, user consent or a subpoena to the user may be your best option, because often social media providers are not particularly cooperative, and even if they are helpful, they are still expensive. For example, Facebook, at one time, charged a non-refundable $500 processing fee in addition to a $100 notarized declaration of the records authenticity. Additionally, in the case of Facebook, you need either a valid California or federal subpoena.

Even if you are successful in subpoenaing Facebook, you may receive limited information. The company has over 30,000 servers located in several data centers across the United States. If the company responds, it may provide a "Neoprint," which it describes as an expanded view of a given user profile. This may include the user's physical address, e-mail address, phone number, and IP address. Facebook also may provide a "Photoprint," which is a "compilation of all photos uploaded by the user that have not been deleted, along with all photos uploaded by any user which have the requested user tagged in them. "Some speculate that in the wake of Crispin and the SCA that it appears unlikely that MySpace and Facebook would divulge private content, subject to a civil subpoena, without the user's consent. In fact, Facebook's own policy seems to answer this question: "Federal law prohibits Facebook from disclosing user content (such as messages, Wall (timeline) posts, photos, etc.) in response to a civil subpoena." "Specifically, the Stored Communications Act, 18 U.S.C. §2701 et seq., prohibits Facebook from disclosing the contents of an account to any non-governmental entity pursuant to a subpoena or court order." Now, an individual's entire Facebook profile is downloadable by the user, thus mitigating the need to subpoena the provider.

Other social media websites, such as MySpace, pose even greater difficulties as they require additional information, such as user id, password, and birth date. Even once you have gathered such information, you are likely to run into issues with what information contained in the profiles is discoverable.

Many Computer and E-discovery issues are covered by federal statutes and the Federal Rules of Civil Procedure. However, it is also vital to check local rules of civil procedure in your jurisdiction. Below are various applicable Federal Rules of Civil Procedure that sometimes mirror state rules:

· Fed. R. Civ. P. 1001(1) - Writings and recordings includes computers and photographic systems.

· Fed. R. Civ. P. 26(a)(1)(C) - Obligates parties to provide opponents with copies of or descriptions of documents, data compilations, and tangible things in a party's possession, custody, or control.

· Fed. R. Civ. P. 34 - Permits a party to serve on another party a request to produce data compilations (subpoena).This can include word processing files, spreadsheet files, investment data or databases, calendars, browser histories, contact lists, digital photographs, email and social media. These and other miscellaneous information can be found on: hard drives, floppy disks, optical disks, flash drives, network storage, remote storage, cell and smart phones and virtually any electronic source.

The Stored Communications Act ("SCA") can also come into play in a variety of electronic discovery settings. An "electronic communication service" ("ECS") is defined as "any service which provides to users thereof the ability to send or receive wire or electronic communications." A "remote computing service" ("RCS") is defined as one that provides "computer storage or processing services by means of an electronic communications system." ECS providers are prevented from knowingly disclosing the contents of an electronic communication while in electronic storage by that service. A provider of a remote computing service is permitted to release the contents of a communication to the addressee or intended recipient, but cannot disclose electronic communications carried or maintained by that service solely for the purpose of providing storage or computer processing. Several courts have held that data held by an ECS are exempt from the reach of subpoenas in civil actions.

G. Subpoenaing Medical Records, Police Records, Employment Records, etc.

In 1996, Congress enacted the Health Insurance Portability and Accountability Act ("HIPAA") to improve the efficiency and effectiveness of the health care system. If Congress did not enact privacy legislation within three years of HIPAA's passage, HIPAA required the Secretary of Health and Human Services to issue privacy regulations governing individually identifiable health information. Because Congress failed to enact this privacy legislation, the Department of Health and Human Services developed a proposed rule and released it for public comment. The enactment of the final regulation, known as the Privacy Rule, occurred on December 28, 2000. A major goal of the Privacy Rule was to assure that individuals' health information be properly protected-while also allowing the flow of health information needed to provide and promote high quality health care-and to protect the public's health and well-being. The Privacy Rule provides federal protections for personal health information held by covered entities and gives patients an array of rights with respect to that information. The Privacy Rule strikes a balance that permits important uses of medical information while protecting the privacy of people who seek care and healing. The Ohio case, Turk v. Oiler, 732 F. Supp.2d 758 (N.D. Ohio 2010), offers a practical example of HIPAA's application and the resulting protection of personal health information. In Turk, the patient sued the Cleveland Clinic alleging a violation of privacy rights due to its release of medical records in response to a grand jury subpoena. The Clinic moved for judgment on the pleadings, which the Court ultimately denied.

Say, for example, you come down with aching pain around your naval and abdomen area that is tender to the touch. The pain seems to worsen when you cough and even when you walk. You seem to be running a low-grade fever and have a loss of appetite. The above would lead you to go to your local hospital for treatment of the symptoms. Although the above symptoms seem like a routine bout of appendicitis, what if you came down with a more serious or debilitating disease or illness? Cancer? Infertility? AIDS? Due in part to Congress passing HIPAA in 1996, when you decide to go to the hospital, any medical information and records resulting from the visit are confidential. Documentation of medical diagnostic and treatment services is an essential part of modern health care. Whether the reason is to ensure quality of service, prevent fraud and abuse, obtain accurate billing information, or defend against legal action, all of these entities require that detailed records be kept concerning the services provided.

However, the rules protecting health information prohibit healthcare providers and organizations from releasing to third parties any personal health information that may lead to the identification of an individual without that individual's express consent. Congress recognized the need to maintain strict privacy protection for health information and therefore authorized the Department of Health and Human Services to promulgate regulations, codified in the Code of Federal Regulations at 45 C.F.R. §§ 160 and 164, collectively known as the aforementioned Privacy Rule. The Privacy Rule creates national standards to keep individuals' medical records and other personal health information confidential. It restricts and defines the ability of health plans, health care clearinghouses, and most health care providers to divulge patient medical records. Even though "the Privacy Rule does not require consent for release of protected health information, it does require the covered entity to provide the individual with a notice of its privacy practices concerning the uses and disclosures that may be made of such information."

HIPAA's purpose "is 'to ensure the integrity and confidentiality of patients' information and to protect against unauthorized uses or disclosures of the information."' The intention of HIPAA was not to "alter the substantive rule of waiver of confidentiality by interjecting one's medical condition into litigation, but [rather] provide procedural protections to ensu[r]e disclosures are limited to relevant information, even within the context of litigation." Moreover, "HIPAA allows production of medical records by a statutorily appropriate consent from the patient, by order of a court of competent jurisdiction, or by court process, such as subpoenas or requests for production, when certain preconditions are met."

"Preemption is a legal doctrine based on the supremacy clause of the U.S. Constitution, which states that when federal and state laws are at odds, federal law takes precedence." HIPAA's preemption mechanism "allows the Privacy Rule to preempt state privacy laws that are less protective of patient privacy than HIPAA." Specifically, "45 C.F.R. 160.203 provides that '[a] standard, requirement, or implementation specification adopted under this subchapter [Part 160, Subpart B] that is contrary to a provision or State law preempts the provision of State law."' However, "if the provision of State law relates to the privacy of individually identifiable health information and is more stringent than the Privacy Rule, the preemption provision does not apply." HIPAA preempts the medical privacy laws of states that apply less stringent standards. Thus, if a state applies a stricter standard of protection for a patient, that state law applies instead of the applicable federal law. As a result, inconsistency can arise throughout the country. HIPAA was originally enacted "'to improve the efficiency and effectiveness of the health care system,"' which seems contradictory because of the variety of states that have less stringent and more stringent medical privacy standards for its residents.

To determine if the Privacy Rule preempts a state law, the Court utilizes a two-step analysis. First, the court "must determine whether the State law is contrary to the Privacy Rule." The finding of this contradiction occurs if either complying "with both the State and Federal rule would be impossible or whether the State law is an 'obstacle to the accomplishment and execution of the full purposes and objectives of the Privacy Rule."' If the court determines the State law is in fact contrary to the Privacy Rule, the second step is to determine whether one of the exceptions applies. The general rule under 45 C.F.R. § 160.203 mentioned above applies, except if one or more of the following conditions is met:

(a) A determination is made by the Secretary under § 160.204 that the provision of State law:

(1) Is necessary:

(i) To prevent fraud and abuse related to the provision of or payment for healthcare;

(ii) To ensure appropriate State regulation of insurance and health plans to the extent expressly authorized by statute or regulation;

(iii) For State reporting on health care delivery or costs; or

(iv) For purposes of serving a compelling need related to public health, safety, or welfare, and, if a standard, requirement, or implementation specification under part 164 of this subchapter is at issue, if the Secretary determines that the intrusion into privacy is warranted when balanced against the need to be served; or

(2) Has as its principal purpose the regulation of the manufacture, registration, distribution, dispensing, or other control of any controlled substances (as defined in 21 U.S.C. 802), or that is deemed a controlled substance by State law.

(b) The provision of State law relates to the privacy of individually identifiable health information and is more stringent than a standard, requirement, or implementation specification adopted under subpart E of part 164 of this subchapter.

(c) The provision of State law, including State procedures established under such law, as applicable, provides for the reporting of disease or injury, child abuse, birth, or death, or for the conduct of public health surveillance, investigation, or intervention.

(d) The provision of State law requires a health plan to report, or to provide access to, information for the purpose of management audits, financial audits, program monitoring and evaluation, or the licensure or certification of facilities or individuals.

The HIPAA exception analyzed here is that which occurs when a covered entity is allowed to release private and confidential health information, even without written authorization of the patient. A covered entity "may use or disclose protected health information to the extent that such use or disclosure is required by law, and the use or disclosure complies with, and is limited to, the relevant requirements of such law." Something is "required by law" if there is a mandate contained in the law that compels an entity to make a use or disclosure of protected health information that is enforceable in a court of law.

The HIPAA regulations permit the disclosure of medical information in response to a subpoena, discovery request, or other lawful process, so long as the patient first receives sufficient notice in order to have an opportunity to object to the court. Under HIPAA's allowance of disclosures for judicial and administrative proceedings, "a covered entity may disclose protected health information in the course of any judicial or administrative proceeding in response to an order of a court or administrative tribunal, provided that the covered entity discloses only the protected health information expressly authorized by such order." A covered entity may also disclose protected health information "in response to a subpoena, discovery request, or other lawful process, that is not accompanied by an order of a court or administrative tribunal, if the covered entity receives assurance from party seeking information that reasonable efforts have been made to ensure notice has been give to the individual who is subject of the protected health information; or if the covered entity receives assurance from the party seeking the information that reasonable efforts have been made by such party to secure a qualified protective order."

An important provision in this statute notes that a covered entity may disclose protected health information in response to lawful process without receiving satisfactory assurance, if the covered entity makes reasonable efforts to provide notice to the individual.

Another important explicit HIPAA exception is that of disclosure for law enforcement purposes, including compliance with a grand jury subpoena. Although the patient has an obvious interest in maintaining privacy in personal dealings with a physician, there is counter-interest of the State in maintaining the breadth of the grand jury's power to conduct investigations and review documents. In sum, health care providers and other entities covered may disclose protected health information in judicial proceedings without patient consent.

For subpoenaing police records, your local courts will have specific rules and police precincts will have specific guidelines for subpoenaing records. The following is an example of how the Chicago Police Department has laid out their guidelines for subpoenas.

SUBPOENA REQUEST GUIDELINES

- Direct all subpoenas for documents and witness appearances to:

Chicago Police Department
Records Service Division, Subpoena Unit 163
3510 S. Michigan, 1st Floor, Room 1027
Chicago, IL 60653
(312) 745-5603 and 745-5604

- Subpoenas can be mailed to or dropped off at the address provided above.

- Do not address a subpoena for documents to an individually-named member of the CPD.

- The Cook County State's Attorney's Office has access to many of the below-listed reports which may negate the need for a subpoena on a criminal case.

- Items the Subpoena Unit can provide copies of:

o Arrest Reports;

o Case, Incident, and Supplemental Reports;

o Criminal History Reports;

o Inventory Slips;

o Traffic Crash Reports;

o Tactical Response Reports; and

o Officer Battery Reports.

- When the item requested is kept by another unit within CPD, the Subpoena Unit will forward the subpoena to the appropriate unit for handling. Items maintained by other units include, but are not limited to, the following:

o Area Investigative Files;

o DUI Case files;

o In-car Camera Video (90 day retention period); and

o Photographs and Crime Scene Video.

- Describe only the specific item(s) you are requesting. The CPD response to your request will be unnecessarily delayed if you include language that you seek any and all documents related to a matter when you are only seeking a specific type of document.

When involved in a legal dispute, you may need to subpoena another person's employment records. For example, if you think your former spouse makes more money than he claims or if you think your former employer fired you unjustly. The legal system classifies employment records as business records, so you must follow the subpoena process for that type of record. You can either request that the employer send the records for examination, produce them at trial or both. All follow the same basic process.

Read your state and local rules of court concerning subpoenas. Every state has slightly different requirements. You can find your state's laws in any law library or a state government website. The civil procedure portion of the code usually contains the information. Clerks of the court can supply you with local court rules. Some states have specific forms to fill out, which will contain the proper language for obtaining a subpoena. You will need to fill in the blanks with details like names and dates. Ask the clerk of the court for any forms.

Write the subpoena or fill out the form. Include the court information, case information, who you are, what records you are requesting, where you want the records produced and when, and where you want the person to appear to testify and when. You cannot require the employer to produce the records in an unreasonable time period. Check your state's laws to determine the minimum amount of time you must give the employer. Sign the subpoena. If you are not an attorney, your state might require that your signature be notarized.

File the subpoena with the clerk of the court handling your case. Ask the clerk for certified copies. Serve the subpoena on the employer by sending it through certified mail or having the sheriff serve it. Send a copy of the subpoena to the opposing party in the case or her attorney.

For an example of guidelines for subpoenaing employment records, it is useful to look at a state statute from Bender's Forms of Discovery Treatise.

§ 1985.6. Definitions; Subpoena for production of employment records; Application of section

(a) For purposes of this section, the following terms have the following meaning:

(1) "Deposition officer" means a person who meets the qualifications specified in Section 2020.420.

(2) "Employee" means any individual who is or has been employed by a witness subject to a subpoena duces tecum. "Employee" also means any individual who is or has been represented by a labor organization that is a witness subject to a subpoena duces tecum.

(3) "Employment records" means the original or any copy of books, documents, other writings, or electronically stored information pertaining to the employment of any employee maintained by the current or former employer of the employee, or by any labor organization that has represented or currently represents the employee.

(4) "Labor organization" has the meaning set forth in Section 1117 of the Labor Code.

(5) "Subpoenaing party" means the person or persons causing a subpoenaduces tecum to be issued or served in connection with any civil action or proceeding, but does not include the state or local agencies described in Section 7465 of the Government Code, or any entity provided for under Article VI of the California Constitution in any proceeding maintained before an adjudicative body of that entity pursuant to Chapter 4 (commencing with Section 6000) of Division 3 of the Business and Professions Code.

(b) Prior to the date called for in the subpoena duces tecum of the production of employment records, the subpoenaing party must serve or cause to be served on the employee whose records are being sought a copy of: the subpoena duces tecum; the affidavit supporting the issuance of the subpoena, if any; the notice described in subdivision (e), and proof of service as provided in paragraph (1) of subdivision (c). This service shall be made as follows:

(1) To the employee personally, or at his or her last known address, or in accordance with Chapter 5 (commencing with Section 1010) of Title 14 of Part 2, or, if he or she is a party, to his or her attorney of record. If the employee is a minor, service must be made on the minor's parent, guardian, conservator, or similar fiduciary, or if one of them cannot be located with reasonable diligence, then service must be made on any person having the care or control of the minor, or with whom the minor resides, and on the minor if the minor is at least 12 years of age.

(2) Not less than 10 days prior to the date for production specified in the subpoena duces tecum, plus the additional time provided by Section 1013 if service is by mail.

(3) At least five days prior to service upon the custodian of the employment records, plus the additional time provided by Section 1013 if service is by mail.

(c) Prior to the production of the records, the subpoenaing party must either:

(1) Serve or cause to be served upon the witness a proof of personal service or of service by mail attesting to compliance with subdivision (b); or

(2) Furnish the witness a written authorization to release the records signed by the employee or by his or her attorney of record. The witness may presume that the attorney purporting to sign the authorization on behalf of the employee acted with the consent of the employee, and that any objection to the release of records is waived.

(d) A subpoena duces tecum for the production of employment records must be served in sufficient time, as provided in Section 2020.410, to allow the witness a reasonable time to locate and produce the records or copies thereof.

(e) Every copy of the subpoena duces tecum and affidavit served on an employee or his or her attorney in accordance with subdivision (b) must be accompanied by a notice, in a typeface designed to call attention to the notice, indicating that (1) employment records about the employee are being sought from the witness named on the subpoena; (2) the employment records may be protected by a right of privacy; (3) if the employee objects to the witness furnishing the records to the party seeking the records, the employee must file papers with the court prior to the date specified for production on the subpoena; and (4) if the subpoenaing party does not agree in writing to cancel or limit the subpoena, an attorney should be consulted about the employee's interest in protecting his or her rights of privacy. If a notice of taking of deposition is also served, that other notice may be set forth in a single document with the notice required by this subdivision.

(f)

(1) Any employee whose employment records are sought by a subpoenaduces tecum may, prior to the date for production, bring a motion under Section 1987.1 to quash or modify the subpoena duces tecum. Notice of the bringing of that motion shall be given to the witness and the deposition officer at least five days prior to production. The failure to provide notice to the deposition officer does not invalidate the motion to quash or modify the subpoena duces tecum but may be raised by the deposition officer as an affirmative defense in any action for liability for improper release of records.

(2) Any nonparty employee whose employment records are sought by a subpoena duces tecum may, prior to the date of production, serve on the subpoenaing party, the deposition officer, and the witness, a written objection that cites the specific grounds on which production of the employment records should be prohibited.

(3) No witness or deposition officer shall be required to produce employment records after receipt of notice that such a motion has been brought by an employee, or after receipt of a written objection from a nonparty employee, except upon order of the court in which the action is pending or by agreement of the parties, witnesses, and employees affected.

(4) The party requesting an employee's employment records may bring a motion under subdivision (c) of Section 1987 to enforce the subpoena within 20 days of service of the written objection. The motion must be accompanied by a declaration showing a reasonable and good faith attempt at informal resolution of the dispute between the party requesting the employment records and the employee or the employee's attorney.

(g) Upon good cause shown and provided that the rights of witnesses and employees are preserved, a subpoenaing party must be entitled to obtain an order shortening the time for service of a subpoena duces tecum or waiving the requirements of subdivision (b) if due diligence by the subpoenaing party has been shown.

(h) This section may not be construed to apply to any subpoena duces tecum that does not request the records of any particular employee or employees and that requires a custodian of records to delete all information that would in any way identify any employee whose records are to be produced.

(i) This section does not apply to proceedings conducted under Division 1 (commencing with Section 50), Division 4 (commencing with Section 3200), Division 4.5 (commencing with Section 6100), or Division 4.7 (commencing with Section 6200) of the Labor Code.

(j) Failure to comply with this section shall be sufficient basis for the witness to refuse to produce the employment records sought by subpoena duces tecum.

(k) If the subpoenaing party is the employee, and the employee is the only subject of the subpoenaed records, notice to the employee, and delivery of the other documents specified in subdivision (b) to the employee, are not required under this section.

IV. Discovery of Social Media, Smartphone, Text, Email and Other Electronic Evidence

A. Where/What to Look for and How to Obtain it

Simply put, what to look for depends on what type of case you have and what types of allegations you are seeking to prove or disprove. Knowledge of what you need to prove your point is crucial because of the volumes of potential Electronically Stored Information (hereinafter referred to as "ESI") out there. Not only will a broad meandering search waste a lot of your client's money, but also such attempts are likely to be characterized as an impermissible fishing expedition by the court.

Let traditional sources inform your use of new electronic sources. If you would typically subpoena bank records and credit card statements you might consider examining a computer's spreadsheets for financial information. Or, perhaps you would consider looking for messages to or from known business associates. If you are looking to prove some sort of conduct between the parties, you might start with emails and text messages. Communications might provide for abundant examples of verbal abuse or promises broken. If allegations of substance abuse or adultery have been leveled, you might consider mining for geolocation data that can show husband or wife was at the bar instead of the soccer game. Finally, consider often-overlooked aspects of social media, like status updates and friends lists.

This means you even need to be efficient once you locate your ESI source. Careful selection of keyword searches can be crucial to obtaining information relevant to your case. Through the various social networking web pages valuable information can be obtained regarding adverse parties, key players in your case, and expert and non-expert witnesses. Keyword searches can be performed in various search engines, including Google, Yahoo or Bing. Research can also be performed on Westlaw. Through these vehicles, you can often find invaluable information including contact information, employment information, social information, and habits of various parties in your case.

Facebook is the unrivaled leader for turning virtual reality into real-life divorce drama. Examples of evidence on Facebook to be used in divorce: Husband sets his profile as single and childless while seeking custody. Husband denies anger management issues but posts on Facebook in his "write something about yourself" section: "If you have the balls to get in my face, I'll kick your a** into submission." Mom denies in court that she smokes marijuana but posts partying, pot-smoking photos of herself on Facebook.

There are some important basics to know about key word searching. For instance, it can sometimes be wise to focus on items most likely to be discarded or overwritten first, like emails, instant messages, and Facebook Messenger. For example, if the evidence of an instant messaging conversation on Facebook appears to no longer exist of the party in question's account, try seeking the information from the receiving party to see if they have the conversation archived. On Facebook, both or all parties privy to an instant messaging conversation must delete the conversation for it to appear to be non-existent. When doing so, and in searching in general, consider the Who, What, When, Where, Why, and How of your case. It might prove fruitful to search thorough known associates' profiles because the party in question may have been tagged or included in their posts, photos, and etc. Additionally, if at all possible, remember to discuss with the custodian of the system the possible abbreviations used by the party in question. Try to focus on important dates that might help sift through potentially voluminous amounts of information. Try looking for any known pseudo names or nicknames. It may aid your search to know important dates so you can tie them to photos that may provide circumstantial indicia.

B. Email Discovery

The use of email by opposing spouses falls within the interplay of Wiretapping and Electronic Stored Communications laws, and consequently, courts have had some difficulty in determining which, if any, apply. The predominant approach seems to be that that emails prior to being sent or once received do not fall within wiretapping statute. Take for example Evans v. Evans. There, sexually explicit emails offered by the husband in a divorce action did not violate ECPA where interception of emails was not contemporaneous with transmission. The emails were recovered from hard drive of family computer. To the paralegal, this means emails sent between the parties are fair game and likely any email calculated to be relevant that has already been read by the recipient.

However, one Florida Court has concluded that spyware capturing emails in a family law case did violate ECPA although admission of these emails was still within discretion of trial court. The court though did grant an injunction against using or disclosing the information gained.

Most spyware/keystroke capture programs remain legal as long as not capturing contemporaneous transmission of communication (outside of Florida). It is not, however, wise to advise a client to use these because the law on the topic is vague. You can counsel your client to search for spyware planted by the opposing party, but often such programs are not really there.

For the paralegal who is often tasked with putting together an exhibit book on the eve of trial, simple print outs of the emails are likely acceptable (do not forget to Bates stamp printouts of ESI for the attorney's easy reference at trial). They can typically be authenticated by testimony of either the sender or the recipient. Other methods may also be used, but those are the most common.

C. Facebook and Social Media: Discovery How-to's and Pointers

There are numerous social networking sites out there including: Facebook (over 750 million users); Twitter (over 200 million users); Google Plus; Linked-In; My Space; and a variety of others. People often use these websites daily and consequently they contain a treasure trove of information. As proof of this, eighty-one percent of American Academy of Matrimonial Lawyers (1600 surveyed) recently reported increased use of social media evidence. The reason for this is that discovery utilizing these websites may reveal: postings that display a time line of actions (time spent away from children or spouse); boastings of compensation, promotions, or use of unknown assets; photographs of inappropriate behavior; potential witnesses (thereby minimizing the need for private investigators); and/or extreme ideologies or beliefs.

Social media evidence can also prove to be the tipping point when alone it would be insufficient. For instance, in Leenhouts v. Leenhouts, a divorce action, were the wife placed a motion for default on husband's desk in the marital home. Husband several days later placed messages on Facebook to the tune of "you thought you had me" followed by several expletives. While court was hesitant to use the post as proof of service, husband's testimony that he could not recall who his Facebook post was directed at damaged his credibility to extent that the court believed he had received service.

In LaLonde v. LaLonde, the Court of Appeals of Kentucky considered pictures posted on Facebook when deciding a child custody case. The husband sought to introduce photos from Facebook to show his wife's alcoholism. The wife argued that the photographs could not be authenticated "because Facebook allows anyone to post pictures and then 'tag' or identify the people in the pictures." However, the court reasoned that "[t]here is nothing within the law that requires her permission when someone takes a picture and posts it on a Facebook page. Nor is there anything that requires her permission when she was 'tagged' or identified as a person in those pictures. Accordingly, the wife's testimony that she was the person depicted in the photographs and that the photographs accurately reflected that she was drinking alcohol, was sufficient to meet the standard of authentication.

For the paralegal, these examples showcase the importance of quizzing your client about all of the possible accounts and activities on these accounts. What you do not know certainly can hurt you and this is true from both perspectives. Your attorney needs to know what information your client has out there that could harm his or her case, and your attorney needs to have an idea about what possible accounts the opposing party may have out there as well.

The simplest method is of course simply asking the client. Once you have gathered that information, it may be used to help determine the level of further investigation needed. Then, you can begin crafting your interrogatories and requests for Production aimed at social media content and electronic sources in general. Bear in mind, there can be authentication difficulties with social media evidence. This may mean that you should consider drafting interrogatories or requests for admission where the opposing party admits to particular social media profiles. The opposing party may still claim someone else "hacked" their account. However, an innocent early question regarding the security of their computer accounts may prove useful when they attempt to disclaim authorship later. Depositions can also be useful for this.

Often, your best bets at obtaining social media evidence are through consent and printouts of the page from persons having general access. This is because subpoenaing Facebook and other social media providers can prove time consuming, costly, and ineffective. For example, Facebook at one time charged a non-refundable $500 processing fee in addition to a $100 dollar notarized declaration of the records' authenticity. Also, in the case of Facebook, you need either a valid California or federal subpoena. Now, though, an individual's entire Facebook profile is downloadable by the user thus mitigating the need to subpoena the provider. It can also minimize the chances that your attorney will have to explain why the sought after records are likely to be relevant. (The opposing party may still object but at least you do not have to battle the social media provider's legal staff).

What do you do if an account has been closed? Well, consider other sources. Often people will have shared information be it text, photo, or video with other friends and acquaintances. It may be difficult for the attorney to get a court order for one of these devices or accounts, but it can certainly be worth attempting to gain consent. You never know, perhaps another individual is just as upset with the opposing party as your client is. Also, consider other devices. If it is a photo or video you are looking for, it may simply be located on another device.

Finally, a basic knowledge of what is discoverable within a social media profile can be helpful. Unfortunately, there is no clear answer. It often depends on both the facts and the reviewing courts. With that said, there have been a couple of approaches and leading cases.

For instance, in Crispin v. Christian Audigier, Inc., the court applied the Electronic Stored Communications Act to Facebook in quashing the portion of subpoena that applied to the communications in parts of the profile that the user had selected as private. The court held that general postings viewable to the public on Twitter or Facebook were discoverable, but private messages where the website served merely as a conduit were not.

Other courts have held the entire profile discoverable. In Romano v. Steelcase, the trial court ordered a personal injury plaintiff to give the defense access to her entire Facebook profile, including all deleted postings dating back to the time she opened her account. The court rejected the notion that the plaintiff's privacy settings should limit discovery, reasoning that litigants cannot reasonably rely on Facebook's privacy settings to bar discovery of information they did not intend to share through the website. Without a reasonable expectation of privacy, the defendant's need for access outweighed any privacy objections.

D. Smartphone/Tablet Discovery

Similar to dealing with home computers, two federal statutes also govern much of cell phone and tablet communications. Title III of the Omnibus Crime Control Act 1968-2522 and Electronic Communications Privacy Act of 1986 together prohibit interception of oral and electronic communication without consent of at least one party to the communication. Again, any instance of parties secretly recording each other is something that needs to be reported to your supervising attorney.

Apart from the legal issues dealing with interception of communications, smart phones and tablets are increasingly becoming valuable sources of information. Historically, the most common application for cell phones in a divorce matter was to subpoena the carrier for itemized billing. While that remains useful, the capabilities of these devices have expanded and so have their use by attorneys.

Messages sent over the Short Message Service or SMS Text messages are increasingly being utilized in court. For whatever the reason, people are often choosing to communicate through these short 224 character messages as opposed to the traditional phone call. For the paralegal/attorney, this has its benefits and it is a written transcript of what previously would have been an oral conversation. The attorney will have to worry about the admission of these messages into evidence, but for the paralegal as sort of the boots on the ground, you will be dealing with accepting all of these conversations. While there are a variety of ways to transfer text messages onto a computer, the most common method employed by clients is taking a screen shot of the message itself. The screen shot is then uploaded onto the computer and emailed to the paralegal/attorney. More often than not, a printout of the text conversation along with testimony from either the sender or recipient will satisfy the authentication requirements of the court.

With regard to a right of access or general discoverability, tablets and smartphones are often akin to a computer. In many respect this makes sense, because tablets are essentially a very portable computer and today's smartphones are almost a computer with voice communication capabilities. If the device is primarily work related, it will be difficult to acquire in a request for production if the opposing party objects.

You can of course still subpoena the provider. However, if you and your attorney choose to do, so you had better act quickly. Most carriers routinely delete text information for the very purpose of not being inundated with data requests (but there have been instances where data has lurked in servers for several years). If anything you are likely to get a "to" and "from", but not the desired substantive content. In many cases though subpoenaing the cell phone provider can be easier than subpoenaing social media providers because cell phone providers likely have a physical business location in the state. This means there is an address for you to serve your subpoena, or they have a registered agent who will accept service on their behalf. The Secretary of State's website in your state will likely have a list of corporations doing business in your state and their corresponding registered agents.

E. Instagram, Snapchat and Other Photo- and Video-Sharing Apps

Snapchat is a photo messaging, social media tool. Unlike other services, Snapchat seeks to provide impermanence. Users can share photos, record video, and add text for distribution to one or more recipients. Those shares are set to self-destruct or disappear up to 10 seconds after sharing. The app also includes features which require the recipient to prove they are using their phone. Notice is also provided to the sender of any users taking a screenshot. Snapchat is billed as providing two-way communication of photos and videos without leaving any incriminating evidence. Recently, there have been weaknesses revealed as to Snapchat's claims of destruction. Their own privacy policy acknowledges: "Although we attempt to delete image data as soon as possible after the message is received and opened by the recipient ... we cannot guarantee that the message contents will be deleted in every case ... Messages, therefore, are sent at the risk of the user."

There are additional methods of preserving videos. For example, recipients can simply take a screenshot of the message, although this will notify the sender. Alternatively, recipients can take a picture of their phone, thereby circumventing the screenshot notification. Even then, a more complicated approach exists. Snapchat saves [videos] on the phone's local memory, on some phone models, which you can then recall by installing a file browser, and plugging the phone into a computer. You then search through the file browser, copy and save the content to a computer, and you're done. Indeed a May 9, 2013, Forbes article detailed that one forensic firm was able to pull many Snapchat photos from a phone long after they were supposedly deleted. Also, Snapchat has stated that if a file is not viewed it will remain on their servers for 30 days.

Instagram, now owned by Facebook, is another online photo-sharing and social networking service that enables its users to take a picture, apply a digital filter to it and share it on a variety of social networking services, including Facebook. Unlike Snapchat, however, the data is stored on Facebook's servers and is not automatically deleted a few seconds after viewing. Access to the device should provide access, and materials that are deleted are likely recoverable by a forensic analyst. Further, one could subpoena Instagram, but one would likely face the same challenges one experiences when subpoenaing Facebook.

Vine is also a video sharing mechanism. Vine is a mobile app owned by Twitter that enables its users to create and post 6.5 second video clips. The service allows videos to be shared or embedded on social networking services such as Twitter and Facebook. Seemingly, more similar to Instagram than Snapchat, it would appear as though videos could be recovered both from the device and Vine's servers; although Twitter's website says deletion is permanent within a few minutes. Since the videos may be embedded in websites, the information might be recoverable from a personal computer by examining browser history as well. In addition, Twitter's website seems slightly more amendable to compliance with civil subpoenas than say Facebook. The website does mention that different types of data are retained on its servers for different amounts of time, thus again success depends upon rapidly securing the content.

YouTube is a video-sharing website on which users can upload, view, and share videos. The company uses Adobe Flash Video and HTML5 technology to display a wide variety of user-generated video content, including movie clips, TV clips, and music videos, as well as amateur content such as video blogging and short original videos. Most of the content on YouTube has been uploaded by individuals, although as part of the YouTube partnership program, media corporations including CBS, the BBC, VEVO, Hulu, and other organizations offer some of their material via the site. Unregistered users can watch videos, while registered users can upload an unlimited number of videos. Videos considered to contain potentially offensive content are available only to registered users at least 18 years old. In November 2006, YouTube, LLC was bought by Google for $1.65 billion, and now operates as a subsidiary of Google. Anyone can post a video on YouTube. As a result, attorneys would do well to search the site for potential evidence involving the parties or witnesses, especially in cases in which physical activity is at issue.

LinkedIn allows registered users to maintain a list of people with whom they have some level of relationship, called Connections. Users can view information about their Connections and contact them through the site. Users can invite anyone (whether a site user or not) to become a connection. This list of connections can then be used in a number of ways: A contact network is built up consisting of direct connections, the connections of each of their connections (termed second-degree connections), and also the connections of second-degree connections (termed third-degree connections). This network can be used to gain an introduction to someone a person wishes to know through a mutual contact. Users can upload their resume or design their own profile to showcase work, educational background, and community experiences. Users can post their own photos and view photos of others to aid in identification. Users can save (i.e., bookmark) jobs for which they would like to apply. Users often post full resumes with detailed histories of their past employment . LinkedIn is therefore an excellent resource that can be used to impeach a witness during a deposition or at trial if he or she contradicts information posted on the site.

If you know that you have deleted relevant data, or you suspect the opposing party has done so, you have several options. First, if you own the device or account in question, you may be able to personally contact the provider without the need for a subpoena. It is important to do this quickly before the service provider deletes the information from its servers. The same goes if you suspect the opposing party has deleted information, although in this case you will likely need a subpoena, but you can attempt to gain consent from the opposing party.

Additionally, and likely your best bet is to hire a computer forensic expert. As discussed above, they may be able to uncover data believed to have been deleted long ago, or they may uncover data that was merely hidden from the common user. They may also be able to provide insight as to the meaning of metadata discovered on various files.

Finally, do not underestimate the ability to locate information elsewhere. People often sync any number of devices to each other. For this reason, a home computer may be a better source of information than you might initially suspect. Also, beyond other devices consider other people. In the process of jubilant celebration or angry venting, people often write, forward, or post about their recent endeavors. You might discover that the photos you forwarded to a friend are still on their device or that text messages to a mistress deleted from the husband's phone are still located on the mistress' devices. In today's day and age, it is rare that a piece of ESI is truly gone forever. Just be prepared for any additional authentication issues you may have when locating data from an alternative source.

Discovery techniques for programs like Vaporstream and Wickr are extremely burdensome, costly, and in most cases, it is almost impossible to discover the communication or data. At this point in time, there is a lack of technology and procedure that makes preservation of this ephemeral data possible.

One potentially possible way to preserve the data of these ephemeral programs is to petition for preservation orders. There is a three part balancing test that assesses the applicability of the preservation orders in the hope that the evidence can be retained. The court first looks at the level of concern for the disappearing communication's existence and maintenance of the evidence without a preservation order. The court also looks to whether there is likely to be irreparable harm that is likely to result from the destruction of evidence, and the capability of the party to maintain the evidence sought to be preserved. "Preservation obligations should not impose heroic or unduly burdensome requirements.

Other courts have found that the ephemeral ESI is too fleeting to be reasonable to preserve. In Healthcare Advocates v. Harding, Early, Follmer,& Frailey, the plaintiffs alleged that defendants were liable for not preserving information that was stored in cache files. The court disagreed, because the plaintiffs made no active efforts to destroy or rid of any evidence.

Snapchat users won't have very much success with an argument against the preservation order. They have the ability to screenshot, save the snaps they send prior to delivery, and the ability to save the stories they post through the 24-hour life of the story - i.e. it is not unduly burdensome. As previously mentioned, there has been success with forensic experts and recovery of snaps.

Programs like Vaporstream prove more burdensome. The reason that it is burdensome is because the name of the sender is never of the same page as the message itself; therefore, a screenshot would not provide the evidence as sought.

The use of a deposition under Rule 27(a)(3) of the Federal Rules of Civil Procedure prior to filing the suit to determine the extent and nature of ephemeral data that may fall within the scope of potential discovery, and lay the groundwork for its timely preservation.

An agreement on the outset of litigation that states that both parties will retain any ephemeral data relevant to the matter can also provide attorneys with the sought after evidence they need. Additionally, a special data conference prior to commencing litigation under Fed. R. Civ. P. 16(a) could prove beneficial for attorneys. This would help to avoid spoliation sanctions for both parties, and could help prevent the loss of ephemeral data from the outside. The overall effect of this is that it would reduce the costs and time significantly invested into the process if there was an issue to arise over ESI.

F. Metadata and Its Complexities

Metadata can be vital to a discovery process. It can reveal information such as, who created a document, when they created it, what edits they made, and so much more. This is important to keep in mind when addressing authenticity issues.

Cell towers, GPS, and Wi-Fi all serve to create geological data. Geological data can provide substantial and compelling evidence of devices and persons being present at certain locations. Furthermore, most GPS enabled camera phone also embed longitude and latitude of photos when they were take. This data, is most commonly referred to as Exchangeable Image File Format (Exif) metadata. This data is typically not stripped when the image is e-mailed or uploaded. This allows for the verification of photos and videos without even having access to the devices that captured the image. Courts have held that system metadata involves neither a statement by a declarant, making it immune to the hearsay objection.

Metadata, or information about information, includes the information embedded in a routine computer file reflecting the file creation date, when it was last accessed or edited, by whom, and sometimes previous versions or editorial changes. Lawyers should also look to system data, which records creation or deletion of files, maintenance functions, and access to and from other computers. Files that are purposely deleted from a computer by the user can be discovered through metadata requests. Residual data also exists on the hard drive, and is most simply analogous to crumpled up newspapers used to pack boxes when one is moving. Expertise in metadata recovery is most likely required to discover this type of information.

The categories of metadata above are in order of cost and difficulty in discovering from least difficult to most difficult to acquire or discover. Attorneys should try to precisely and narrowly tailor their requests for metadata to avoid sweeping and unduly burdensome requests. The metadata information received from the precise and narrowly tailored requests will often reveal more sources of information that can be used to further a successful discovery process.

In White v, Graceland College Center for Professional Development & Lifelong Learning, Inc., an employee who brought a Family Medical Leave Act (FMLA) claim against her employer was entitled to compel her employer to reproduce in native format e-mails and attachments at issue. The creation date of the e-mails and attachments was disputed by the parties, the employee's computer expert noted discrepancies in the metadata as to the creation dates, and the employer did not adequately explain the discrepancies.

In exceptional circumstances, substantive review of metadata, among other things, can lead to dismissal of claims. In Rosenthal Collins Group, LLC v. Trading Technologies Intern, the defendant forensic expert reviewed one of the plaintiff's original zip drives with the source code versus zip drives produced by the plaintiff in 2006. The comparison showed that the plaintiff's expert changed the source code and manipulated last-modified fields and computer time clock. The court dismissed the plaintiff's claims.

G. Commonly-Overlooked Sources of Data

While social networking sites (also referred to as social media) are one of the most talked-about areas of content growth on the Internet, many lawyers still dismiss these sites as the realm of 13-20 year-olds. They do so at their own risk.

Lawyers "have a general duty to be aware of social media as a source of potentially useful information in litigation, to be competent to obtain that information directly or through an agent, and to know how to make effective use of that information in litigation." Social networking sites were originally the domains of the 20-and-under crowd, but a December 2013 report by the Pew Internet & American Life Project found that 73 percent of adults already online also use social networking sites.

While the term "social network" was coined in the mid-1950s by sociologist J. A. Barnes to describe interactions between people in the real world, when applied to the Web, it refers to Web sites where individuals with similar personal and/or professional interests can create an online "profile" and share information about those interests so others can read about them and interact. The information these individuals share via these sites can be very useful for background and investigative research, as well as holding significant evidentiary value. Even pay databases like TLOxp have added searches of social networking information to their product offerings. You can get a head start on uncovering this information for free, though, if you know how to coax the information out of the sites.

Social media evidence is persuasive, useful, and available. For example, Santa Barbara, California, prosecutors said information a woman posted about her partying lifestyle on Myspace was the difference between a judge ordering a prison sentence rather than probation in a drunken driving crash that killed her passenger. One attorney recently told us that his wife (also an attorney) was able to locate an elusive individual and serve her based on information the individual had posted in her Facebook profile. Another attorney was able to locate a missing witness using MySpace, even though the witness did not have a profile-her young daughter did.

Participants in these online social networks tend to share personal information freely in their profiles. Often this is because they forget that their intended audience members (e.g., their online friends) are not the only people who can see it. Depending on how these users set up their accounts, their profiles might be open to a viewing audience as wide as everyone on the Internet.

A much-reported survey from the American Academy of Matrimonial Lawyers (AAML) found that 81 percent of their members cited "an increase in the use of evidence from social networking websites" between 2005 and 2010. Two thirds of those respondents indicated that "Facebook [was]the primary source of this type of evidence," with MySpace following with 15 percent, Twitter at 5 percent, and other choices listed at 14 percent.

But family law is not the only application for this trove of information and evidence. Recently, attorneys have been able to find information in social networking profiles that has made a difference in the outcomes of other types of civil cases and criminal cases. Since 2011, e-discovery vendor X1 Discovery has reviewed "state and federal court cases with written decisions available online," looking for cases that "involved social media evidence in some capacity." For example, for the month of April 2014 alone, they found 112 cases (published on Westlaw) in which evidence from social media was a factor in the case. This represents a significant increase over past surveys. A similar survey covering the first half of 2012 discovered 319 cases, an 85 percent increase over the same period in 2011. The 2012 survey found, "Facebook is now far in the lead with 197 cases..."

Beyond using information from a party or witness social networking profile as evidence, lawyers also have used information from a judge's profile to get judges disqualified from cases (primarily based on bias). Law firm recruiters and even judges have been known to use social networking sites to sift through profiles of potential hires.

In a twist on researching a party or witness social networking profile to use as evidence at trial, we were recently brought in to conduct social media background research on potential jurors in a multi-million dollar personal injury case.

Lawyers cannot ignore the evidentiary value of the information that their clients, opposing parties, potential (and seated) jurors, and others post on social media. All lawyers should be aware of the ABA's recent changes to Comment [8] of its Model Rule of Professional Conduct 1.1, which instructs that lawyers "should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology." This implies that lawyers should be familiar with social networking sites and how the information they contain could be useful in matters they are handling. This comment has already been adopted by Delaware and Pennsylvania.

Some state bar associations have gone one step further. In addition to the advice offered by the New Hampshire Bar Association's Advisory Opinion 2012-13/05, the State Bar of California issued Proposed Formal Opinion Interim No. 11-0004, stating that, "Attorneys who handle litigation may not simply ignore the potential impact of evidentiary information existing in electronic form," as well as citing ABA Model Rule 1.1's Comment 8. As evidence from social media becomes even more prevalent, we expect to see other states take similar stances.

H. Electronic Spoliation and the Remedies Available

Fed. R. Civ. P. 37 governs sanctions for spoliation of evidence. A duty to preserve must have been attached prior to the destruction of evidence; the accused party must have acted with the culpable state of mind; and the other party must have been prejudiced by the destruction of evidence. There is an exception for failure to provide evidence under Fed. R. Civ. P. 37(e). "Absent additional circumstances, a court may not impose sanctions on a party failing to provide electronically stored information as a result of the routine good-faith operation of an electronic information system." Questions about what steps the party took the preserve the data, and did the party act affirmatively in destroying or altering data should be raised and answered in order to impose sanctions under this rule.

Another potential tool to combat the elusiveness of ephemeral data is the litigation hold. This triggers the duty to preserve the information in light of litigation. Holds can be used to establish the first element discussed under Fed. R. Civ. P. 37 that we mentioned earlier (the duty to preserve must have been attached prior to the destruction of evidence). Once an attorney sends out a litigation hold, that duty is attached to the party. More generally, the duty to preserve is triggered when litigation is reasonably anticipated.

There are many issues and topics within ESI and ephemeral data that the courts have yet to address. Does the use of applications like Snapchat, Vaporstream, and Wickr meet the culpable state of mind for spoliation? The argument tends to follow the logic that the individual intentionally chose the application for the ephemeral nature of communicating that it advertises.

The only clue we have to the future of ESI and ephemeral data is Gatto v. United Air Lines, Inc., a personal injury suit. The respondent asked access to Gatto's Facebook. Gatto saw that an unknown party was hacking his account so he deactivated it. Normally, 14 days after one deactivates their Facebook account, the information is permanently deleted. Gatto was found by the court to have been subject to spoliation sanctions because he intentionally used the deactivation feature.

When an attorney suspects the contents of the opposing party's social media accounts might be needed for discovery, the first step is to send out a preservation-of-evidence letter to the opposing counsel as soon as possible, says Peter LaSorsa, a Mapleton-based practitioner. You can use a standard lawyerly letter for other attorneys, but if you're sending one to an unrepresented party, make sure you're crystal clear.

"Make it in language that later on, they can't go into court and say, 'I didn't understand it. I don't know what preservation of evidence is,'" he says. "Spell it out so a high-schooler can understand it. It's the old [saying], 'Know your audience.'"

Sharon Nelson, president of Virginia-based digital forensics and information security firm Sensei Enterprises, recommends that attorneys download a guidebook called "The Perfect Preservation Letter" written by Craig Ball, a computer forensic analyst and former trial lawyer.

In the guidebook, Ball notes that preservation letters are intended to remind opponents to preserve evidence but also to serve as "the linchpin of a subsequent claim for spoliation, helping establish bad faith and conscious disregard of the duty to preserve relevant evidence." LaSorsa sends out such a letter any time he sends a demand. "Even before anything is filed, in the same envelope," he says, "so there can be no mistake what I want saved."

If you know that you have deleted relevant data, or you suspect the opposing party has done so, you have several options. First, if you own the device or account in question, you may be able to personally contact the provider without the need for a subpoena. It is important to do this quickly before the service provider deletes the information from its servers. The same goes if you suspect the opposing party has deleted information, although in this case you will likely need a subpoena, but you can attempt to gain consent from the opposing party.

Additionally, and likely your best bet is to hire a computer forensic expert. As discussed above, they may be able to uncover data believed to have been deleted long ago, or they may uncover data that was merely hidden from the common user. They may also be able to provide insight as to the meaning of metadata discovered on various files.

Finally, do not underestimate the ability to locate information elsewhere. People often sync any number of devices to each other. For this reason, a home computer may be a better source of information than you might initially suspect. Also, beyond other devices consider other people. In the process of jubilant celebration or angry venting, people often write, forward, or post about their recent endeavors. You might discover that the photos you forwarded to a friend are still on their device or that text messages to a mistress deleted from the husband's phone are still located on the mistress' devices. In today's day and age, it is rare that a piece of ESI is truly gone forever. Just be prepared for any additional authentication issues you may have when locating data from an alternative source.

I. Privacy, Trespass, Wiretapping Pitfalls

In Glazner v. Glazner, wife sued husband for violating Title III of Omnibus Crime Control & Safe Streets Act of 1968. Husband put a recording device on a telephone in the marital home. The device recorded conversations with wife and third parties without any parties' consent. Wife discovered and sued.

The rule that came out of this case was that Federal Wiretapping Statute does not contain a marital exemption that permits one spouse to record the other spouse's telephone conversations without the consent of the other spouse or any third party with whom she spoke.

Electronic interception of telephone conversations, whether or not instigated by a person's spouse, is proscribed by 18 U.S.C.A. §2511. Title III of the Omnibus Crime Control & Safe Streets Act (18 U.S.C.A. §2510), prohibits interception by one spouse of the other spouse's wire communications.

The Federal Wiretapping Act (18 U.S.C.A. §§2510 et. seq.) prohibits the intentional interception and disclosure of wire, oral, or electronic communications. Thus, a husband's record of telephone conversations of his wife violates the Federal Wiretapping Act even if the husband is not aware the interception is illegal. The law requires that only that the act of recording be intentional, without regard to motive. Furthermore, the Act applies to conversations between spouses despite a claim that such conversations are subject to interspousal immunity.

V. Reading Tax Returns, Bank Statements, Paystubs and Other Financial Documents

A. Prenuptial/Postnuptial Agreements - What to Look for

In general, a premarital agreement is a contract between prospective spouses made in contemplation of marriage and to be effective upon marriage. Parties to a premarital agreement may contract with respect to mutual property rights and obligations; rights to acquire, manage, and dispose of property; disposition of property on separation, dissolution, or death; modification or elimination of spousal support; wills and trusts; and death benefits from life insurance policies. Modern statutory and case law holds that in order for a premarital agreement to be enforceable, the parties must fairly disclose their respective financial status and other material information, the agreement must be voluntarily and freely entered, the division of property in the event of death or divorce must not be unfair, and the terms of the agreement may not otherwise be unconscionable at the time it is entered into or in some jurisdictions, at least as to support obligations, at the time of dissolution. If these and various other criteria are established, and the agreement is not otherwise subject to some invalidating cause, the agreement will be enforced, but if they are lacking the agreement will not be enforced.

There are some general requirements that the majority of states require in order for a Prenuptial Agreement to be valid. First, a prenuptial agreement should be in writing. Second, a prenuptial agreement must also be signed by both parties. Third, since the parties entering into a prenuptial agreement are entering into a contract, they must have general contractual capacity. The parties must be of legal age and competent to contract. Moreover, there must be sufficient consideration. Although the UPAA provides that an agreement will be enforceable "without consideration," it will only be effective "upon marriage." Thus, as under the common law of many states, the marriage is essentially the consideration.

When dividing assets, income, and debt of parties in a prenuptial agreement, parties have a large amount of flexibility. While the UPAA limits in the type of agreements to which it is applicable, it does not significantly limit what can be covered in a premarital Agreement. However, courts may invalidate an agreement for unfairness or lack of full disclosure of assets. Debts are often considered property in a prenuptial agreement. If there's no prenuptial agreement, creditors may be able to access marital or community property to satisfy the debts of just one spouse. However, parties may include terms within their prenuptial agreement to limit your liability for each other's debts.

Premarital agreements can include provisions that detail what financial responsibilities each party has during the marriage. Prenuptial agreements are designed to address financially based issues. Some common items included in prenuptial agreements include:

· Separate business;

· Income, deductions, and claims for filing your tax returns;

· Management of household bills and expenses;

· Management of joint bank accounts, if any;

· Arrangement regarding investing in certain purchases or project like a house or a business;

· Management of credit card spending and payments;

· Savings contributions; and

· Arranging putting one party or the other through school.

There have been a handful of prenuptial agreements that have allowed parties to regulate the ongoing marriage. One such agreement, drawn up by a New Mexico couple, has received national attention. The prenuptial that Rex and Teresa LeGalley created runs sixteen single-spaced pages and specifies minute details of their daily lives, such as how much money per week they get for expenses ($70), what kind of gas they will buy (Chevron unleaded), and how often they will engage in "healthy sex" (three to five times per week). Nevertheless, courts generally will not enforce provisions of prenuptials that regulate conditions of the ongoing marriage, citing the "well-established rule that it is improper for courts to intervene in a married couple's daily domestic affairs."

Section 10 of The Uniform Premarital and Marital Agreements Act lays out very specific provisions which are considered unlawful.

(a) In this section, "custodial responsibility" means physical or legal custody, parenting time, access, visitation, or other custodial right or duty with respect to a child.

(b) A term in a premarital agreement or marital agreement is not enforceable to the extent that it:

(1) Adversely affects a child's right to support;

(2) Limits or restricts a remedy available to a victim of domestic violence under law of this state other than this act;

(3) Purports to modify the grounds for a court-decreed separation or marital dissolution available under law of this state other than this act; or

(4) Penalizes a party for initiation a legal proceeding leading to a court-decreed separation or marital dissolution.

(c) a term in a premarital agreement or marital agreement which defines the rights or duties of the parties regarding custodial responsibility is not binding on the court.

Make sure that the terms of the agreement do not promote dissolution. While generally enforcing or promoting premarital agreements, courts have consistently held that agreements encouraging dissolution are unenforceable as against public policy. Moreover, it is essential to understand that the UPAA states that a modification or elimination of spousal support in a prenuptial agreement is not enforceable if it causes one party to the agreement undue hardship in light of circumstances not reasonably foreseeable at the time of the execution of the agreement. There is a long-standing consensus that premarital agreements may not bind a court on matters relating to children: agreements cannot determine custody or visitation, and cannot limit the amount of child support (though an agreed increase of child support may be enforceable). The basic point is that parents and prospective parents do not have the power to waive the rights of third parties (their current or future children), and do not have the power to remove the jurisdiction or duty of the courts to protect the best interests of minor children.

B. Individual Tax Returns (with Samples*)

In a family law case, it is usually wise for a client to employ a tax expert (forensic accountant or a personal accountant at a minimum) to help advise a client as to the tax consequences as to the effects of a divorce and the decisions a client will have to make as to possible resolutions to a case. Tax experts can often give client's tax advice that is valuable to the resolution of a case that a family law attorney simply cannot give.

Some common tax planning strategies that might come into play are as follows:

· Filing Status (Married or Single): A person is considered married for the entire tax year if they are married on December 31 of that year. If a divorce was granted before the last day of the year, then that person is considered single for that tax year. Thus, tax filing status can be an important strategic decision for many couples getting a divorce. Often, couples will hold finalizing a divorce after a settlement until the next year to take advantage of the marriage status. In contrast, changing to a single status is also a motivating factor for people to conclude their divorce before the end of the year.

· Tax Exemptions: Claiming children as a tax exemption is a matter that is determined by the Internal Revenue Code. In short, federal tax law provides that the parent with primary physical custody or the parent who the children live with for more than half the year are entitled to claim the children as a tax exemption. Interpreting this definition between parents who have a joint custody agreement can be difficult.

· Child Support or Alimony: Normally, child support is not considered taxable income to the recipient. It is also not considered tax deductible to the obligated parent. However, maintenance is considered taxable income to the recipient and is tax deductible to the obligated party. This is not true in every situation, including lump sum maintenance, which makes this distinction strategically important in settlement negotiations. While the division of property is not taxable to either party, there may be certain tax reasons to label certain payments as alimony as opposed to property division or child support. This must be weighed against the modifiable nature of alimony.

· Retirement Accounts: Normally, withdrawing money from a 401(k) or an IRA is considered a taxable event that requires a party to pay income tax on the funds contributed as well as penalties. When accrued during marriage, retirement accounts are also considered marital property and are subject to equitable division in family court. The Internal Revenue Code recognizes that a Qualified Domestic Relations Order ("QDRO") can divide funds in a 401(k) or similar retirement account. This allows the providers to roll funds into a retirement account for their spouse. While QDROs do not apply to Individual Retirement Accounts, a spouse can avoid a taxable event by rolling the divided funds into another qualified retirement account. Know that a spouse who converts any retirement funds to cash will be responsible for taxes and penalties for the account.

· Tax Refunds: A tax refund coming to married parties is considered marital property subject to an equitable division in state court. Additionally, tax debt is also considered a marital debt. Parties who file jointly receive a refund check issued in both names. Judgments should account for how a tax refund or tax debt is to be addressed.

· Maintenance Trusts: In divorces where high assets are involving, the use of a trust when structuring a support plan may be beneficial. A trust such as this can provide tax benefits by shifting income from a spouse in a higher tax bracket to a spouse in a lower tax bracket. It can also provide assurances that maintenance will be paid on time. I.R.C. § 682 of the Internal Revenue Code provides the requirements of Section 71 for maintenance paid through a trust in that it must be pursuant to a divorce or written separation agreement that is part of a divorce judgment. Some parties may consider a QTIP Trust ("Qualified Terminal Interest Property"). If child support is also paid out of a trust, it should be paid out of a separate trust from the one paying the maintenance obligation. Maytag v. C.I.R., 370 F.2d 914 (10th Cir. 1966).

· Annuities: Some taxpayers may satisfy their maintenance obligations by purchasing an annuity for the former spouse or by transferring an existing annuity to him or her.

*Refer to Example 5(b) at the end of this document for a sample of individual tax returns.

C. Business Tax Returns (w/Sample)

Refer to Example 5(c) at the end of this document for a sample of a business tax return.

D. Financial Account Statements (Bank Statements, Investment Statements, etc.)

Bank Statement usually refers to a statement from the bank showing the activity in a checking account which includes the deposits received by the bank, checks paid by the bank, bank service charges, and other amounts transferred into and out of the checking account. It is best practice in family law cases to subpoena bank and investment statements early in the process. In family law cases, money issues are often at the center and waiting too long to obtain these records can have a negative effect on your ability to find important financial information. These statements can show both marital and separate assets as well as where other assets could be hidden. They can also show spending habits of both parties. These can be valuable when trying to prove or disprove allegations often found in family law cases. When you receive bank statements, make sure to take the time to look through them for any red flags. Look for places where money is being spent regularly that are not typical. You can also find evidence of misconduct or extramarital affairs in these statements. The volume of statements can be large, however, it is important to go through them as you may find valuable evidence.

During a divorce, courts may look at a lot of information and evidence in order to ensure that people receive a just result when the divorce is finalized. Bank statements often become an important piece of information to look at.

In some cases, courts may order that the parties voluntarily exchange bank statements. In other cases, the parties may agree to exchange them by consent. There are other cases where the parties may issue requests for production upon each other to produce the bank statements.

Some parties going through a divorce may have joint bank accounts, while other parties may have had separate bank accounts during their marriage. This can lead to different levels of concern regarding the bank statements and also different levels of need to exchange the bank statement information.

What kind of information can bank statements show? Why are they important in a divorce case? These are some questions that many parties would ask.

Bank statements can show deposits into an account as it relates to spousal support and child support. They can be relevant where the income of the parties is a disputed issue. This is especially true where commission, tips or income from secondary employment is involved.

Spending habits can also show up on bank statements. This can be important as it relates to the expenses of parties in a divorce and the expenses can be important when trying to determine spousal support or child support.

Parties may either need to show recent bank statements or they may need to look at bank statements that go back some period of time. Each divorce case is different and each case will have different needs.

E. Bills, Loan Documents, Credit Card Statements, etc.

After a home sale, the security instrument -- either a mortgage or a deed of trust -- is filed and maintained by the county recorder, register or clerk. Along with identifying the borrower, the lender and the original loan amount, public property records detail property ownership history, maps of the property, a record of sales listings and historical tax assessment information. Records also note the assessed property value, the property square footage and the number of rooms the dwelling provides. Since mortgage records are public documents, you're free to inspect the records or request a copy. To obtain the mortgage record, contact the county recorder office with the full street address of the property. You can look at public records in person at a district office during normal business hours. Some counties maintain an online index of property records and allow you to place orders through the county website.

F. Deeds; Real Estate Documentation

The main source of information relating to property records is the local recorder of deeds office. The Office of Recorder of Deeds records and files documents of writing affecting real property or personal property, subdivision plats, federal and state tax liens, and other instruments of writing. These records are all public and are available to search. Property records can be used in family law to show ownership over a piece of land or property. They can also show a tax history of an individual as well as rental history. Another use for property records is to find where to serve an individual.

G. Earnings Statements - Standard and Complex (Teachers', Military, etc.)

A payroll earnings statement is a depiction of your gross pay (i.e. before taxes) and how your paycheck was calculated to arrive at your net pay (i.e. take home pay).

Although every company prints paychecks that are unique in their own way, there are some aspects of the employee paycheck that employers must include by law. Some paycheck stubs can be extremely detailed including such items as retirement plan contributions or accrued vacation time, and others will only detail the required information. The following items will appear on every paycheck stub and consumers need to fully comprehend their definitions and value:

Gross Pay: Includes the total amount of income that you earned during a particular pay period. A pay period is determined by your employer, but is typically bi-weekly or monthly. This figure does not factor in tax withholdings.

Net Pay: Includes the amount of income that you actually take home after all withholdings have been applied. It is the amount of money that you take straight to the bank.

Federal Tax Amount: When you were first hired by your employer, you were required to fill out a W-4 form. This form covers any tax that you may owe to the Federal government come tax time. It is deducted incrementally from each paycheck, and can vary depending on the number of exemptions you chose to claim.

State Tax: Depending on your state of residence, you may or may not be required to pay a state tax. Most states however, do participate, so this amount is deducted from your paycheck (the same way as Federal tax) to cover the amount of tax that you may owe to the state when your tax return is filed.

Local Tax: Although rare, a local tax is sometimes applied to employees of certain cities, counties or school districts.

Social Security: The Federal government requires every employee to have a certain percentage of their paycheck withheld for social security purposes.

Medicare: Like Social Security withholdings, Medicare withholdings are also mandatory.

Year-to-date (for pay and deductions): The year-to-date fields on a paycheck stub show how much you have paid toward a particular withholding at any point in the calendar year. This can be useful when budgeting for monthly expenses or long-term goals.

Overtime refers to time worked in excess of 40 hours per week. Whether or not employees are paid for overtime depends on each employee's job responsibilities and rate of pay-some employees are exempt from overtime pay and some are not.

There are several options when paying bonuses to employees including the bonus amount on the employee's regular paycheck, creating a separate paycheck for the bonus amount only, or reporting a cash or gift bonus through a paycheck. Regular deductions (retirement, health insurance, child support) may apply to the bonus amount.

DFAS will respond to a written request in the form of a subpoena for information regarding the pay of military personnel. This includes a printout of pay information for up to the last two years as well as individual Leave and Earnings Statements. The subpoena must be signed by a state of federal judge. It must include the service member's name and Social Security number. The request letter should be sent to the appropriate branch's DFAS center.

H. Employment Benefits and Records

In addition to life insurance and disability insurance, they include vacation pay, sick pay, severance pay, continued medical benefits, early retirement bonus, and employment bonus.

Vacation pay that is vested, or both vested and matured, is deferred compensation. The characterization of the asset depends upon when it was earned. If unused sick pay is vested, matured, and compensable, it is an asset; if it is forfeited if not used, or if is not vested and matured, it is not an asset. If it is an asset, its value will be the sum which the employee will receive, subject to deduction for taxes and Social Security.

If a spouse is not receiving severance pay at the time of the dissolution of the marriage, the possibility that the spouse may receive it in the future is not property, and if the pay is received after dissolution of the marriage due to events that occur after the termination of the marriage, the pay is separate property.

Often overlooked is the right of a retiree to continued medical benefits may be a very valuable right in light of the continuing increase in the cost of medical care and the premiums for medical insurance. This right may exist for a working employee and/or a retired employee who is receiving free or below market rate insurance as a result of a retirement package from a private employer or through government employment or the military. This right is an asset to the same extent that any other deferred compensation benefit is an asset. Further, this asset may be valued as is the case of any other deferred compensation benefit and should be done by an expert.

An early retirement bonus is a payment made to an employee to induce the employee to immediately leave the service of the employer even though the employee may not yet be qualified to receive retirement benefits. It may be in the form in a lump sum, monthly payments, or even an interim pension. In a dissolution of marriage proceeding, the characterization of the asset depends upon the purpose for which it is paid and whether post separation duties are required in order to qualify for it. If it is intended to replace future lost earnings, it is separate property. On the other hand, if it is merely compensation for past services, the portion of it earned during the marriage and prior to separation is community property. Further, if the employee must continue in employment to qualify for the early retirement, the early retirement bonus should be considered separate property since it represents post separation (and decree) services.

An employment bonus is compensation typically earned during employment and based on some performance standard. It is often thought of as compensation earned in addition to a wage, salary, or other "base" compensation. It can be based on many criteria, such as performance or longevity. An employment bonus may be valued as in the case of any other employment benefit. It is characterized pursuant to the time rule. That means that the portion of the bonus earned as compensation for services rendered before separation is community property and that portion of the bonus earned as compensation for services rendered after separation is separate property.

I. Stock Options

Stock option is a contractual right to purchase stock during a specified period at a predetermined price. Increasingly, corporations are granting stock options to employees as compensation for services that have been, or will, be performed. The increasing use of employee stock options has translated into expanding litigation concerning whether stock options are marital property, and if so, how they should be valued and divided.

In evaluating whether an employee stock option constitutes a "property" interest, the standard is whether it is "vested". A non-vested stock option is treated as a mere expectancy because the holder has no enforceable rights. Therefore, non-vested stock options are not "property" and are not subject to division, even though the ability to exercise the option is contingent on passage of time or continued employment. So long as the employer cannot unilaterally repudiate the option, it should be deemed "vested" and therefore "property" in divorce law. When the option-holder has the absolute right to exercise the option at any time by payment of the option price, the option is said to be both "vested" and matured. Once an option is determined to be "vested," and therefore a "property" interest, the next step is to classify that interest as either marital or separate property. On the other hand, an employee stock option granted in consideration of future services does not constitute marital property until the employee has performed those future services. Whether an employee stock option is characterized as being granted in consideration of past or future services depends upon the circumstances surrounding the grant and the effect of the option agreement. The determination may depend upon such factors as the flexibility and variety of option plans as well as the size of the company and its need to offer incentives to employees to remain as employees of the company. Options may be awarded as an inducement to lure an executive to a company.

Options are also an effective tool to provide incentives to an employee to stay with a company, especially in the competitive high technology industry. Options granted during a term of employment may be a reward or bonus for work well-done (i.e., for past services) or as "golden handcuffs" to keep an employee from accepting a lucrative offer elsewhere (i.e., for future services).

Once vested stock options have been classified as "marital" property, the court has discretion to determine the appropriate method for valuation and distribution. There are basically three approaches to valuation and division: (1) net present value, (2) deferred distribution, and (3) reserve jurisdiction.

The net present value approach results in immediate distribution to the nonemployee spouse. A lump sum that represents the net present value of the future benefit is determined and may be offset by the value of other property in the marital estate. If using this method, the trial court, guided by actuarial data, values the future benefit, considers a number of different factors, including certain risks, and accords a present value to the future benefit. The benefits associated with immediate distribution are compelling in those instances where the value of the stock options is minimal relative to the overall marital estate. The non-employee spouse exchanges future contingent post-dissolution enhancements for the benefits of immediate distribution, while the employee spouse reaps the benefit of potential enhancements that may occur post-dissolution. If the employee spouse foresees that the options may dramatically increase after the divorce, that spouse will want to "cash out" the non-employee spouse. The "Net Present Value" method serves the goal of finality and allows the parties to disentangle financially, providing some measure of closure. By immediately offsetting the value of the options with other marital property, the policy of judicial efficiency is served because the parties do not have to return to court at a later date. In circumstances where the marital estate is large enough to permit an offset with other marital property, the net present value method should be preferred.

One approach to assigning a value on stock options is to determine its intrinsic value, which is simply the market value of the stock, less the exercise cost of the option and any applicable financing costs. Courts and experts have also used more complicated mathematical formulae to determine a stock option's present value. Two main types of models exist: econometric and theoretical. Econometric models, or empirical models, use "regression analysis of historical relationships among economic variables to estimate statistically the expected value of an economic variable," in this case, the expected value of stock options.

The two most widely used econometric models to value stock options are the Shelton Model and the Kassouf Model. The Shelton model is especially useful for valuing stock options of closely held companies. Most models use a variable known as the volatility factor, which quantifies the historical fluctuations of the stock's price. The Shelton model does not use this variable. The information needed to determine the volatility factor is often not available when dealing with options issued by closely-held companies. Use of the Shelton model in this situation eliminates the need for the costly analysis, or outright speculation, which would be necessary to compute a volatility factor for the stock of closely-held companies. Theoretical models, or statistical models, rather than being based on historical observation, "are forward looking and attempt to determine what the option should sell for in the market given the option terms and the underlying stock's salient characteristics."

These models are based on a number of assumptions, one essential assumption being "that the price of the underlying stock behaves in such a way that possible future prices can be accurately modeled by some probability distribution." The other assumptions vary from model to model. The best known and most widely used, of the theoretical models is the Black-Scholes Model. Computer programs using the Black-Scholes Model are readily available. The Black Scholes Model accounts for the option price, the term of the option, the market value of the underlying security, a risk-free rate of return, and the underlying volatility of the stock option, in order to come up with a present value for the option. When using any of these approaches to value employee stock options, it is important to note that these models were generally designed to value marketable options. Usually, employee stock options are non-marketable, and a discount for lack of marketability should be utilized. Furthermore, valuation should not rely on use of only one model. Using at least two models will help to ensure that the valuation is relatively accurate. The practitioner should bear in mind that, if the circumstances do not warrant an immediate distribution because there are either insufficient assets to permit an offset or the present value is too difficult to ascertain, the trial court may use either the deferred distribution or reserve jurisdiction method.

Unlike the net present value method, the deferred distribution and reserve jurisdiction methods do not result in an immediate offset with other marital property. Under these approaches, the non-employee spouse will not receive any benefits until the benefits are actually paid to the employee spouse or the employee spouse becomes eligible to receive benefits. Under the deferred distribution method, the court pre-determines the percentage the non-employee spouse will be eligible to receive once the benefits are paid or the employee spouse is eligible to receive them. The percentage used is commonly based upon the "time rule" formula. The "time rule" formula was explicitly made applicable to the division of stock options in In re Marriage of Balanson .

One commentator has suggested that the time rule fraction should be as follows: Period of Employment During Marriage (numerator) Period of Employment From Hiring Until Vesting (denominator). No Colorado case has expressly determined whether the employee-spouse is required to exercise the options as soon as possible. Most stock options preclude the employee-spouse from transferring or assigning the option so that the trial court would not be able to simply order a division in kind. One solution under the deferred distribution method is to have the court require the employee spouse to make a payment in cash to the non-employee spouse, based upon the predetermined "time rule" formula, as soon as the options are exercisable, whether or not the employee chooses to retain the options. Another alternative is to order the employee spouse to exercise the options and then transfer the underlying stock or sale proceeds to the non-employee spouse. Each of these possible solutions involves potential future court involvement and issues of employer cooperation.

In Colorado, a court may also apply the "reserve jurisdiction" method of dividing stock options. Unlike the deferred distribution method, whereby the court predetermines the non-employee spouse's share, the reserve jurisdiction approach is effectively a "wait and see" method. If the court reserves jurisdiction, the marital portion of the options may be divided and distributed at a later date when they are exercised.

In In re the Marriage of Chen, the Wisconsin Court of Appeals upheld the use of the "if and when" method. The case concerned stock options that had been granted during the marriage but were not exercisable until dates after the divorce. The options were not transferable or assignable and expired if employment terminated. The trial court found that no reasonably accurate value could be assigned to these stock options, and therefore an award of a fixed sum would not be practical. The court then held that the employee spouse could exercise the options "if and when" he desired, subject only to employer and SEC regulations. Upon sale of the underlying stock acquired via exercising the options, the employee-spouse was to pay the non-employee spouse one half of the net profit. If the stock thus acquired had not been sold within 18 months of the date of exercise, the non-employee spouse could elect to be paid using the stock price 18 months from the date of exercise, or she could choose to wait until the stock was finally sold. If no net profit was made, no additional monies were due either party.

The Maryland Court of Special Appeals, in Green v. Green, approved a similar method of division. Just as in Chen, the employee spouse's stock options were not assignable and could not be sold. The court found that "although it is true that an unassignable, unsalable option has no fair market value, it is nonetheless an economic resource, comparable to pension benefits, to which a value can be attributed." The court approved an "if, as, and when" approach to the valuation and equitable allocation of the unexercised options, which applied to both matured and immature options. The trial court was to calculate a value of the options as of the date of the divorce decree. The court could then determine a percentage by which the profits should be divided if, as, and when the options are exercised. The court felt this was equitable as the employee spouse is under no compulsion to exercise his options. At the same time, however, the non-employee spouse's equitable interest in the options, if exercised, is protected.

In contrast to the Colorado appellate courts, the Illinois Court of Appeals in In Re Marriage of Moody found that stock options do not constitute property until exercised. It directed the trial court to retain jurisdiction until such time as the options were exercised or expired. If and when the options were exercised, the trial court was permitted to use its discretion in allocating an appropriate share of any profit realized by the employee spouse. This "if-and-when" approach subsequently withstood an argument that the court should have retained jurisdiction to permit the non-employee spouse to compel the exercise of her share of the options.

In Smith v. Smith, the Missouri Court of appeals upheld a trial court decree finding that the employee spouse had the right to decide whether or not to exercise his stock options. However, if the employee-spouse elected to exercise any of the options, he was to give the non-employee spouse 30 days notice before acting. During those 30 days, the non-employee spouse could provide the employee spouse with the cash necessary to buy a one-half interest in that option on her behalf. If she did not provide him with the cash, she forfeited her right to the one-half of that option. Each party was to pay a share of the income taxes on the options.

The "property" right at issue with regard to stock options is the right to choose whether or not to purchase stock shares which are offered at certain dates at specified prices. To divide this marital asset properly requires giving each spouse the right to choose whether or not to exercise the right to purchase the underlying stock. Because employee stock options are typically not assignable, and because division in kind is therefore not permissible, courts have developed alternative mechanisms to accomplish division. The "net present value" method of dividing stock options is the preferable method where the stock and the options are readily capable of valuation. In situations where the options are not capable of valuation, the deferred distribution or reserve jurisdiction methods more equitably serve to divide the options. Reserving jurisdiction to divide the options should be the last resort, since the goal of finality is contravened when parties will inevitably need to return to court to value and divide the options. Under most circumstances, the time-rule formula can pre-determine the non-employee spouse's share when options become exercisable and therefore is preferable to reserving jurisdiction.

J. Pension/Retirement Benefits

Individual Retirement Accounts (IRAs) are typically one of the items allocated in a divorce decree. An IRA is a type of custodial account or trust held for the benefit of an individual or their beneficiaries. It is created by a contract between the bank that manages the account and the owner (i.e. the depositor). Part of this contract includes the beneficiary/beneficiaries who will receive the balance of the IRA upon the owner's death. The beneficiaries are usually the owner's spouse or children. Upon dissolution of the marriage, the divorce decree will award the IRA to one of the parties, and whichever party receives it is able to change the beneficiaries. For example, if the husband is awarded the IRA in the divorce, he can substitute his children as the primary beneficiary for his ex-wife beneficiary.

It is important to change the beneficiary on an IRA as soon as possible. Beneficiary designations often trump provisions laid out in a will and if a beneficiary isn't changed, an ex-spouse can still have access to the IRA. A recent Missouri Court of Appeals case details this possibility. In 1996, the husband designated his wife as a beneficiary of a Fidelity IRA account. The couple divorced in 2000 and husband received the IRA in the property settlement. Several times over the years, the ex-husband contacted Fidelity for information on how to access the Beneficiary Change Form yet he never actually changed the beneficiary. When he died, a fight between his estate and ex-wife ensued over the IRA. The estate cited a Missouri statue that revokes an ex-spouse as the beneficiary on the date the marriage ended. Several states have such statutes, but they have not held up to judicial scrutiny. In the Missouri case, the appellate court referenced a U.S. Supreme Court case that held ERISA governed and overrides or pre-empts state statute to reduce administrative burdens in identifying the correct beneficiary. The circuit court had not addressed the Supreme Court case and instead awarded the funds to the estate based on the intent of the ex-husband. The Court of Appeals reversed and remanded the case to the circuit court with the specific instruction to enter a judgment in favor of the ex-wife including costs and attorney's fees.

This case is just one of many where failure to change a beneficiary designation results in an unintended transfer of assets. The circuit court seemed to do what it thought was just by awarding the IRA to the estate, but the law did not support the decision. In the Supreme Court case, the couple had only been divorced for two months and it was likely that the ex-husband did not have an opportunity to change designations before dying in an auto accident. That did not matter. Thus it is important to change beneficiaries as soon as possible after a Divorce becomes final.

Normally, withdrawing money from a 401(k) or an IRA is considered a taxable event that requires a party to pay income tax on the funds contributed as well as penalties. When accrued during marriage, retirement accounts are also considered marital property and are subject to equitable division in family court. The Internal Revenue Code recognizes that a Qualified Domestic Relations Order ("QDRO") can divide funds in a 401(k) or similar retirement account. This allows the providers to roll funds into a retirement account for their spouse. While QDROs do not apply to Individual Retirement Accounts, a spouse can avoid a taxable event by rolling the divided funds into another qualified retirement account. Know that a spouse who converts any retirement funds to cash will be responsible for taxes and penalties for the account.

6 USCA § 408 Individual Retirement Accounts.

§ 408(d)(6) Transfer of Account Incident to Divorce. The transfer of an individual's interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument ... is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse.

Qualified domestic relations orders (often called QDROs) create or recognize the existence of an alternate payee's right to receive all or a portion of the benefits payable under a retirement plan. They are complex matters orders or decrees that require an attorney's guidance in order to effectively transfer an interest in a qualified retirement plan. 401(K)'s, IRA's, Pension Funds can be split should both parties agree and file a qualified domestic-relations order (QDRO), a legal document that directs pension-plan sponsors how to pay out the funds. These funds are tax free if rolled over into your individual retirement account.

A domestic relations order (DRO) is an order that grants alimony and/or property rights to the pension owner's spouse, or child support under domestic relations law. For example, a property settlement could trigger the distribution of the retirement benefit plan to anyone who is not the plan participant. For the non-participant spouse to receive payment from the plan, the payment must be made in accordance with the qualified domestic relations order (QDRO). A DRO is qualified if it "(1) creates or recognizes the existence of an ultimate payee's right to, or assigns to an alternate payee the right to receive benefits with respect to a participant under the plan, and (2) complies with other statutory requirements." An alternate payee can be a spouse, a child, former spouse, or other dependent that is recognized by the QDRO as having a right to receive either a portion of or all of the benefits payable under the participant's plan.

For a domestic relations order to become qualified, the plan administrator must join the suit as a party, and then decide if the DRO is qualified, and be permitted to represent the important interests. When determining if the DRO is qualified the plan administrator must determine if it fulfills several requirements. First, there must be a transfer of ownership. Thus, the order must "be one which 'creates or recognizes the existence of an alternate payee's right to...receive all or a portion of the benefits' payable to the owner." Second, the DRO must specify the names and addresses of each participant in the suit and the alternate payee; the amount that each alternate payee will receive; the number of payments that the order will be effective for; and the exact retirement plan the order governs. Third, DRO must specify the amount and duration of the payments. Fourth, when talking about retirement plans, the DRO must "provide that the court may not order the plan to provide to an alternate payee any type, form, or amount of benefit not normally available to the owning spouse. It also may not order the plan administrator to provide to one alternate payee any benefit already being paid to an alternate payee under another QDRO."

Drafting a proper QDRO depends largely on the companies your clients have retirement accounts with. It is good practice to contact the companies where these accounts are located and ask if they have a sample QDRO they like their clients to use. Often this can save you and your client time and money. After you have drafted the QDRO but before you have a judge sign off on it, it is a good idea to send the QDRO to the plan administrator and see if it will be acceptable. The plan Administrator can then either approve the QDRO as is or make suggestions as to how to change the document. Following this extra step would prevent having to take multiple QDROs to the judge for their signature and it will often save you and your client time and money in the long run. Once the plan administrator informs you the QDRO will work, you can then proceed with obtaining a judge's signature.

K. Life Insurance Policies

Reading a life insurance policy can be time consuming but it can also provide an understanding of the rights and obligations of the insured individual. A life insurance policy contains the following parts:

· A cover page that identifies the insurance company and the type of plan.

· A schedule of benefits and specifications page that describes the amount of benefits, the premium and other charges, the insured, the issue date, the policy number, and the premium class (e.g., preferred, standard).

· Tables showing future premium projections or guaranteed cash values, depending on the type of policy.

· A section devoted to definitions of the terms used in the policy.

· A section that explains the rights as an owner. An owner has certain privileges of ownership, including the right to transfer or assign the policy, the right to change the beneficiary, the right to receive the cash value and dividends (if applicable), and the right to borrow against the cash value (again, if applicable).

· A settlement section that includes instructions on how to make a claim and information about the choices a beneficiary has regarding the death benefit.

· Riders (benefits added to the standard policy) or endorsements (changes to the standard policy), if any, will be attached to the policy along with a copy of the application.

· Policy provisions, which are another important part of a life insurance policy. Despite the lack of a uniform contract, most states have enacted legislation that makes certain policy provisions mandatory, and the commissioner of insurance must approve the final wording adopted by the insurance company. Even if certain provisions are not required by law, competition between companies generally forces them to be very similar.

Life insurance policies can be a valuable asset to distribute in a family law matter. Most often it is a whole life insurance policy with a cash value that is at issue in the property division in a divorce. Life insurance can be characterized as separate or marital property (in an equitable distribution state), or as separate or community property (in a community property state). Generally, a life insurance policy bought before marriage and paid for with separate funds remains separate property. Conversely, a policy purchased during marriage is entirely marital or community property if all premiums are paid with marital or community funds. Make sure to check state specific laws regarding the distribution of life insurance policies.

L. Health Insurance and Benefit Plans

When it comes to health insurance, parents should keep in mind that the associated costs are factored into child support payments. This means that if the mother has custody and the child is going to be on her health insurance plan, the cost the mother is paying for insurance will be factored in when a judge determines how much the father should pay in child support.

Typically, those medical costs that are not covered by insurance are ones that the parents split. However, keep in mind the split may not be right down the middle. Rather, how much each parent pays may be dependent upon his or her income. This means that if dad earns more, he could end up paying 70 or 80 percent of the bill, while the mother would pay the rest.

In general, when making health care decisions, keep in mind that under the Patient Protection and Affordable Care Act, children can remain on their parents' insurance until the age of 26. This is true regardless of whether or not the child is a student, is living at home or on their own, or is married or single.

When it comes to insurance decisions, make sure to update life insurance policies. Of course, this will mean changing the beneficiary. However, there may be rules imposed on a parent by the court too.

For example, in cases where one ex is paying child support and alimony, the courts may look at how much will be paid per year. This means that if a father will end up paying $120,000 in child support over a ten year period, and another $50,000 in alimony, the courts may order him to carry $170,000 in life insurance. As the amount gets paid down over time, the amount ordered to have in life insurance could then decrease.

Insurance can be the vehicle for hidden assets and can be a hidden liability in divorce. Divorcing parties need to change the beneficiaries and parties included on their insurance when they get divorced. This is important to protect their assets and not forget a hidden asset.

M. Business Organizational Documents, Profit/Loss Statements, etc.

The first thing to understand is "Fair Market Value" and what this term encompasses within your jurisdiction. The common definition for fair market value is "the price, expressed in terms of cash equivalence, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm's length in an open and un restricted market where neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts." The first place to look for your definition of value are state statutes, but often these can be confusing and require an examination of case law on the topic.

One of the toughest aspects in evaluating a family business is the "goodwill" of the business and some states include various types of goodwill in Fair Market Value Analysis. Some courts will differentiate between "enterprise" and "personal" goodwill. Personal goodwill (also known as "professional goodwill") attaches to a particular individual rather than to the business that the individual owns. Enterprise goodwill (or "business goodwill") is derived from characteristics specific to a particular business, regardless of who owns or operates it.

Twenty four states and the District of Columbia exclude personal goodwill from the marital estate; nineteen states include personal goodwill in the marital estate; and eight states have no formal precedent. As a general rule, if the buyer would pay very little for the business, due to expected losses of repeat customers or specific referrals to the newly formed competing entity, this points to a high degree of personal goodwill. If the selling owner would be unlikely to siphon business away from the entity that he or she sold, then there would likely be a higher degree of enterprise goodwill.

The common argument for the inclusion of good will in Fair Market Value is that otherwise the court is ignoring the contributions of the non-professional spouse to the creation of the professional spouse's business, earning capacity, and career. Common arguments against the inclusion of good will are that it is highly speculative, results in inflated values, and requires the professional spouse to compensate the non-professional spouse of earnings he or she may never acquire.

Additionally, on the federal level, Rev. Rul. 59-60 is the touchstone for understanding business evaluations and it also informs the law on a state level. The revenue ruling lists factors for valuation of stock in closely held corporation: (1) The nature of the business and the history of the enterprise from its inception; (2) the economic outlook in general and the condition and outlook of the specific industry in particular; (3) the book value of the stock and the financial condition of the business; (4) the earning capacity of the company; (5) the dividend paying capacity of the company; (6) whether or not the enterprise has goodwill or other intangible value; and (7) the market price of stocks of corporations engaged in the same or a similar line of business having their stock actively traded in a free and open market, either on an exchange or over the counter.

N. Divorce Financial Statements/Affidavits

In all contested (and some uncontested) divorces, the Courts require each spouse to file what's called a "Financial Affidavit," a formal document that details the typical financial factors that play a role in every marriage: how much you earn (income), how much you spend (expenses), how much you own (assets), how much you owe (liabilities/debt), etc. A Financial Affidavit provides the Courts with a snapshot, so to speak, of a couple's current financial picture. Plus, it compels both sides to swear they are telling the truth about their finances. Keep in mind that the requirements can vary from state to state and the document itself can be called different things in different states.

1) Income, Assets and Liabilities

In dissolution of marriage proceedings, the best practice is to list all assets and liabilities on financial affidavits--regardless of how they are titled. Listing out every asset and liability has multiple benefits, including:

1. Avoiding confusion, particularly when there are multiple accounts held at a single financial institution;

2. Facilitating the preparation of an equitable distribution schedule;

3. Making the financial affidavit a "one-stop shop" for the attorneys, parties, and judge; and

4. Confirming the attorney's due diligence when the client signs the affidavit as representative of all assets and liabilities.

In making sure the financial affidavit is all-inclusive, it is not unusual for mediators, experts, opposing attorneys, and judges to rely on my client's financial affidavit as the source or reference point for settlement, schedules, and orders and judgments.

Deciding date of value to include in the assets and liabilities section depends on the financial theory of the case. Some state statutes state that the cut-off date for determining marital assets and liabilities is the date of a valid separation agreement or the date of filing a petition for dissolution of marriage. Different assets may be valued as of different dates, as, in the judge's discretion, the circumstances require. When determining the appropriate date of valuation of an asset or liability, the attorney should consider factors such as the length of the parties' separation, issues of dissipation, or when assets such as bank accounts are used for normal and customary living expenses during pendency of the proceeding. It is commonplace for Florida judges to value different assets and liabilities on different dates depending on the active or passive appreciation or depreciation post-filing.

Whenever possible, it is best to verify the value of an asset or liability against a statement, document, or other reliable source and, when doing so, noting the source next to the value. For example, my firm lists the statement date next to values for bank, credit, and financial accounts. We also list the appraisal date whenever a value is based on an appraisal .

When a value is estimated in the asset or liability section, the best practice is to add a footnote to describe the basis for the estimate. By including the footnotes, it assists the client in refreshing his or her memory when testifying and often answers questions before they are even asked, saving everyone time and money.

Also, if an asset or liability has a non-marital portion to it, it is helpful to add a footnote to specify what portion is marital and what is non-marital. If that information is yet to be determined, state in the footnote that a portion is believed to be non-marital and that the non-marital portion is to be determined. The financial affidavit can be later amended to clarify the portion.

All things considered, the more footnotes used, assuming they are accurate, the more credibility is given to the financial affidavit, the more useful the affidavit becomes in settlement and trial, the easier it is for the client to provide testimony, and the less time and effort needs to be devoted by the attorney and client later in the process.

2) Itemizing Expenses
Direct expenses are the expenses incurred specifically for a particular family member. Indirect expenses are the costs for housing and other types of expenses necessary to maintain your family's lifestyle.

Examples of direct expenses are: tuition for a child to attend a private school, college tuition and room and board, clothing, medical expenses, and music lessons. Some indirect expenses are: rent, mortgage payments, utility bills, automobile loan payments, or insurance premiums. Once you have compiled the worksheets for your family's expenses, compute the average monthly total for the children's indirect expenses and direct expenses.

The following list is a non-exclusive itemization of expenses that may appear on your client's expense sheet:

· Residence

o Mortgage, Rent, Real Estate Taxes, Assessment, Insurance, Home Equity Loan, Condominium Fee

· Utilities

o Electricity, Natural Gas/Oil, Propane, Water, Sewer, Septic, Regular Telephone, Cellular Telephone, Long Distance, Voice Mail, Pager, Cable TV, Satellite TV, Internet Service, Firewood

· Home Care

o Maid, Housekeeper, Lawn Mowing, Lawn Fertilizing, Lawn Seeding, Landscaping, Snow Removal, Tree/Shrub Care, Chimney Cleaning, Window Cleaning, Gutter Cleaning, Carpet Cleaning, Rug Cleaning, Air Duct Cleaning, Floor Care, Wallpapering, Exterminator, Renovations, Interior Repairs, Exterior Repairs, Interior Furnishings, Exterior Furnishings, Furniture, Decorating, Window Coverings, Weatherizing

· Insurance

o Umbrella, Casualty, Life, Disability, Health, Dental, Vision, Prescription, Credit Card, Medicare Supplement, Travel Insurance, Vehicles, Vehicle Loan, Vehicle Lease, License, Taxes, Parts Replacement, Gasoline, Oil Changes, Insurance, Inspections, Repairs

· Personal Needs

o Groceries, Eating Out, Clothing, Dry Cleaning, Laundry, Medical Care, Dental Care, Vision Care, Orthodontia, Glasses/Contacts, Shoes, Beauty Shop, Barber Shop, Nail Salon, Jewelry, Over/Counter Medicines, Prescriptions, Cosmetics, Massage, Health Club, Exercise Equipment

· Recreation

o Relaxation, Hobbies, Entertainment, Sport Activities, Club Dues, Guests, Visiting, Short Trips, Vacation, Equipment, Clothing

· Education

o Tuition, Uniforms, Lunches, Room & Board, Books, Supplies, Fees, Club Dues, Frat/Sorority Dues, Class Rings, School Pictures, Year Book, Religion Classes, Summer Camp, Tutor, Counselor, Financial Aid, Advisor

· Child Care

o Nursery School, Day Care, Baby-sitter, After-school care, Before-school care

· Pets

o Veterinarian, Food, Grooming, Boarding, Equipment, Medical

· Special Needs

o Educational, Medical, Equipment, Accommodations, Elder Care, Home Nursing, Home Medical Care

· Professional Services

o Lawyer, Accountant, Financial Planner, Investment Advisor, Stock Broker

· Civic

o Political Contributions, Fund Raisers

· Charity

o Tithes, Contributions, Donations

· Taxes

o Federal Income, State Income, City Income, Personal Property, Real Property, Self Employment

· Debt

o Interest, Credit Card Balances, Personal Loan, Unpaid Bills, Penalties, Consumer Loan, Delinquent Taxes

· Holidays

o Decorations, Gifts, Cards

· Special Events

o Gifts, Invitations, Cards, Parties, Announcements, Decorations, Birthdays/Anniversaries

· Misc.

o Bank Fees, IRA Fees, Credit Card Fees, Tickets, Film Processing, Fines, Film, Video Tapes, Cassette Tapes, Linens, Kitchen Supplies, Bathroom Supplies, Cleaning Supplies, Laundry Supplies, Buying Club Fee, Warranty Extension, Computer, Purchase, Printer, Hardware Upgrades, Software, Software Upgrades, Diskettes, Paper, Printer Refill, Additional Phone Line, Ancillary Equipment, Home Modifications, Subscriptions, Magazines, Record Club, Book Club, Newspaper

· Legal

· Child Support, Spousal Support, Judgments

· Social

o Annual Fee, Initiation Fees, Club Membership

· Savings

o College, Emergency Fund, Short Term Goals, Intermed. Goals, Long Term Goals, Retirement

· Other.

3) Top Errors, Omissions, and Inconsistencies

If assets are omitted from a mandatory financial statement, the consequences can be significant. At least one court has held, in reliance upon a specific statute, that deliberate omission justifies awarding the innocent spouse 100% of any undisclosed assets. The court's holding is consistent with other cases making highly unequal divisions of concealed property. Failure to disclose material assets may also be sufficient to convince the court to reopen a final property division judgment for fraud or mistake. Contempt and monetary sanctions are also available as remedies where the error is found to be intentional.

In Smith v. Smith, the husband neglected to list certain CDs as separate property on his pretrial financial statement. Even though the CDs were unquestionably separate property, the court found that the incomplete statement barred the husband from introducing evidence tracing the CDs to a separate source.

Of course, when one party fails to include on a pretrial financial statement an asset owned or controlled by the opposing party, but not disclosed until after the date of the statement, it is error to impose any sanction on the first party. A contrary rule would penalize the first party for the second party's fraud.

What if both parties fail to disclose an asset on a pretrial financial statement? In Anderson v. Anderson, the court held no sanctions should be imposed. A strong dissent would have held that one party's failure to disclose the asset is no excuse for the other party's failure to disclose it. The majority's position seems more equitable, so long as the parties' overall level of fault is equal.

Failure to disclose information on a mandatory financial statement is harmless if the other party already knew information not disclosed. Irregularities in the form of the statement are probably also harmless error, so long as the necessary information is set forth somewhere in the statement. A required financial statement is not jurisdictional, so that failure to file the statement does not make the divorce decree or the property division order void or voidable.

Misstatements on a financial statement can also be legally binding. In Doyle v. Doyle, the husband's financial statement listed a vehicle at a value of $23,000, subject to a $28,000 debt. The statement also provided that there was $5,000 equity in the vehicle. The equity figure was probably a typographical error, with a minus sign omitted. The husband filed an amended financial statement which may have corrected the error, but it was not included in the record. The wife testified that $5,000 in equity existed, the trial court accepted her testimony, and the appellate court affirmed.

Doyle offers many lessons in financial statement practice. First, it is critical to scan the statement for typographical errors. Second, an amended financial statement should be filed as soon as an error is discovered. Third, an amended financial statement will have little effect unless it appears in the record. The safest option is to introduce the statement as an exhibit at trial. Finally, even without amending the statement, the husband could perhaps have recovered from the error by introducing positive evidence of the value of the car, such as the Blue Book value. The appellate court expressly noted that he did not do so, and the failure probably played some role in convincing the appellate court to affirm the trial court.

Finally, all of the above cases suggest the importance of drafting state and local rules so that mandatory financial statements can be amended. Nothing is ever 100% accurate all of the time, and mandatory financial statements are no exception. Inaccuracy is especially likely when financial statements must be filed early in the case, before discovery has been taken and all of the facts have been collected. If the parties are irrevocably bound by financial statements filed before discovery is taken, the net effect is to deny discovery, as the parties will be legally bound by the classifications and values stated on their pre-discovery financial statements. There is certainly reason to limit changes to financial statements immediately before trial. But at earlier points in the case, and especially before discovery is complete, the law should freely allow amendment of mandatory financial statements.

4) Software Tools for the Production of Financial Affidavits

Family Law Software (familylawsoftware.com) automatically calculates child support in 21 states: California, Colorado, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, North Carolina, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Texas, Virginia, and Washington. It also calculates child support in Canada. In all these places, if there is a statute relating to alimony/ spousal support/maintenance, the software does that as well. The software also prepares the state financial forms in California, Connecticut, Colorado, Florida, Illinois, New Jersey, New York, Ohio, Pennsylvania, and Rhode Island. This program is a download that is updated frequently for state law and tax law changes. As an example, Family Law Software released its update for the 2013 tax act within two weeks after President Obama signed the bill. You have the ability to prepare cash flow analysis, child support guidelines, alimony buy-out calculations, pension valuation, separate property carve outs, projection reports, tax answer reports, and a variety of "what if" reports for equalization payments, child support, and spousal support. Financial affidavits and child support guideline work sheets appropriate for court filing are at your fingertips. With different tabs for lawyers, mediators, and financial professionals, you can get the level of detail you need without getting bogged down with a level of detail that you don't need.

Puritas Springs Software (www.puritas-springs.com) has a host of products specific to federal and Ohio law. Specific to family law are document preparation and child support guideline work sheets. Family Law Practitioner's Apprentice (FLPA2) automates the preparation of your family law documents and pleadings. Mistakes are eliminated by the use of work sheets for basic information. This information is automatically transferred to various family law documents you create, such as the petition for dissolution, separation agreement, and judgment entry. Enter it once, and you don't have to worry about such easily overlooked errors as "child" versus "children." You also have global defaults available to populate more than 30 different documents. For example, if you always include certain provisions in your separation agreements, you can create a default file that includes your custom language.

In addition to FLPA2 for document preparation, Puritas Springs also offers the Ohio Spousal Support Calculator (MA) and Revised Ohio Child Support Guidelines (WROCSG). FLPA2 extracts the information from the other two programs, so you only need to enter data one time and all three programs can use it. The Spousal Support Calculator not only analyzes tax consequences, but lifestyle expenses and ability to pay are considered as well, providing a range of options because one size does not fit all. And the Child Support Guidelines do a very good job incorporating the cash medical support obligation. This is a downloaded product with periodic updates.

Floridom (floridom.com) was designed to be a complete family law case management system. Originally released in Florida, it has since expanded to include Colorado, Georgia, Illinois, Kentucky, Maryland, Michigan, Minnesota, North Carolina, New York, and South Carolina. It features a series of products:

· Divorce Power Analyzer (DPA), which performs all the major computational functions needed by professionals handling divorce cases: financial statements, child support calculations, alimony/maintenance calculations, and property division, as well as other major litigation functions related to filing suit, managing witnesses, and managing documents;

· Parenting Plan & Time Sharing Schedule Generator (PAR), a questionnaire-based program that allows clients or pro se litigants to answer a series of questions and then automatically produces a complete parenting plan to meet court requirements;

· Domestic Violence Document Generator (DVDG; Florida only), a questionnaire-based program that allows clients or pro se litigants to answer a series of questions and then automatically produces a complete petition for domestic violence, dating violence, sexual violence, or repeat violence as well as the court orders and judgments related to the case; and

· Contempt/Arrears Analyzer (CAA), a simple tool that computes the arrearage circumstances of people not in compliance with court orders.

Easy Soft (easysoft-usa.com) offers the ability to provide alimony payment scenarios and compute alimony based on the custodial parent's budget needs, alimony versus child support trade-offs, lifestyle analysis, pension valuation, the present value of alimony for buyout, and equitable distribution scenarios for all 50 states.

For New Jersey practitioners, Easy Soft offers its comprehensive NJ CIS software to provide calculations and scenarios for child support, spousal support, property division, and parenting plans. Document preparation is automated through its FamilyDocs module, which contains the entire library of the New Jersey Family Law Forms published by the New Jersey Institute for Continuing Legal Education.

For New York practitioners, Easy Soft offers EZSupport-NY, providing electronic data collection from clients, child and spousal support work sheets, automatic calculations for child support and spousal support scenarios, and 27 integrated interactive forms specific to New York.

FinPlan is offered by Thomson Reuters (legalsolutions.thomsonreuters.com/law-products/law-books/collections/finplan) and provides a full service suite of alimony and child support calculators, after-tax cash flow analysis, present values for alimony buyout, pension values, alimony recapture, and property division with equalizing payouts.

Add-on programs include Assets Plus to prepare financial affidavits, Equal Shares to automatically separate marital and nonmarital assets for an easier property division, and Divorce Math Arrearage Calculator and Parenting Time Calculator to keep track of payments and parenting times. FinPlan has versions for 42 different states. For the California practitioner, Thomas Reuters offers through its California Family Law Report (CFLR) the DissoMaster Suite, which calculates child and spousal support, property division, and support arrearages. For automated forms, Thomson Reuters offers ProDoc for California, Florida, and Texas.

VI. Locating People, Hidden Income and Assets: Tips, Tools and Techniques

Discovery is an important piece in litigation. Our courts are based on the belief that a free exchange of information will ultimately uncover the truth regarding any business interests in a divorce. For example, if your client knows that the other party has business interest, with the issuance of discovery, you would be able to uncover the type of business, the corporate structure, when it was created and other information related to income, expenses and/or assets. Discovery can give you the who, what, where, when and how.

The difficulty with cases involving alleged hidden assets is avoiding the assumption that hidden assets do, in fact, exist. When seeking hidden assets, it is first necessary for investigators (whether it be one of the divorcing parties, the attorney, or paralegal) to recognize the underlying factor that the possibility of hidden assets must exist before hidden assets can exist. Investigating under the sole assumption that hidden assets exist can result not only in wasted time and costs but also the risk of discovery abuse, such as placing an undue burden on the opposing party (OP). Therefore, the underlying mindset for investigators should always seek toD answer the question, "Is it possible that hidden assets exist?"

Whether it is known or merely suspected that the opposing party may be hiding assets and/or accounts, the process should begin by asking the client questions in order to establish a "profile" of the OP. Important questions include, but should not be limited to:

· Does the OP own their own business/self-employed? This is an important factor because it is often easier and in some cases more likely for an individual that owns their own business or is self-employed to hide assets or maintain offshore accounts.

· Please describe the lifestyle you (the client) and OP live or lived. The OP's lifestyle, or change in lifestyle, can also be an indicator of the possibility of hidden assets/accounts. For example, the OP may make expensive purchases (i.e., cars, homes, etc.) in an attempt to squander funds from hidden assets/accounts throughout the divorce process.

· What financial records/documents do you have in your possession and what accounts do/did you share with OP? Answering this question at the onset will be helpful once the discovery process begins so the attorney/paralegal will know what documents to request and where to look.

· Do you remain in contact the OP, and if not, do you know their home and work address? While this question may be basic, it is important to maintain a good idea of the OP's whereabouts in case they attempt to leave town (not uncommon in cases involving hidden assets/accounts).

Collecting basic information about the OP before beginning the discovery process is helpful and will aid you throughout the discovery process. Start with an initial checklist of background of the OP, such as place of employment, date of birth, social security number, and the individual's last known address. Also consider collecting information regarding the identities of the OP's close friends and relatives. This can often come into play because they will transfer or hide assets in those individuals' names in an attempt to avoid detection.

Checklist of Essential Documents to Obtain

The three primary sources with regards to the discovery process will be tax documents; financial documents including bank and credit card records, insurance policy information, retirement plan documentation, and any investment records; and email & text records. Of course, the relevant discovery requests will vary from case to case but this is a broad overview of the common sources for discovery of hidden assets and is similar to discovery in a standard divorce case. Each of these sources and specific discovery tactics will be analyzed more in-depth throughout the rest of the presentation.

The conventional ways to obtain information in divorce proceedings are well known: (1) Interrogatories; (2) Requests for Production; and (3) Depositions. The use of subpoenas can also be helpful. Typically, interrogatories are aimed at gathering initial information and facts that the opposing party could not recall without reference to particular documents. Interrogatories in conjunction with Requests for Production then serve to produce the traditional sources of information for a divorce attorney. Some staples may include:

· Bank Statements;

· Corporate Documents, including Articles of Incorporation, Minutes and By-Laws;

· Corporate or Partnership Tax Returns;

· Profit and Loss Statements;

· Documents relating to assets and debts;

· Rental or Lease Agreements;

· Appraisals of business assets; and

· Other relevant business records

The key sources of hidden assets include cash-either actual cash or cash converted into property (common method of hiding assets). The rationale of hiding assets is typically to convert an individual's income, wealth, etc. into forms that are either difficult to discover or perceived to not be of significant value. Assets such as cars and homes are more obvious forms of property with perceived value, but in some cases client may not be aware as to the OP's possession of such items. Somewhat to the contrary, clients may be aware of various investments, insurance policies, or memorabilia but not necessarily the value of those assets. Either way, these assets, no matter how obvious they might seem, should be considered when beginning the discovery process.

In some cases, assets may be overlooked rather than hidden-that being said, the OP is unlikely to voluntarily disclose such assets. Therefore, it is important to keep an "open-mind" throughout the discovery process; whether through document request, depositions, or interrogatories, consider assets that may be overlooked:

· Stock Options & Restricted Stock

· Capital Loss Carryover

· Cemetery Plots

· Collections or Memorabilia

· Intellectual Property

· Retained Earnings

· Credit Card Reward Points

· Country Club, Golf Course and Other Memberships

All of these examples may easily get overlooked but potentially carry significant value.

Electronic Information Resources and Discovery Tools

Now we have a broader array of materials with which we can target these traditional discovery tools. These new materials can be used for the same purposes. They include, but are not limited to:

· Home and work computers;

· Cell phones and tablets;

· Flash Drives and External Hard Drives; and

· Cloud storage/vendor's servers.

Keep in mind discovering all of the information in the world is no guarantee that your case will be successful. However, solid preparation will only increase your chances of success at settlement or at trial later.

Drafting well-written discovery requests takes practice. The first step is often analyzing what information you are seeking. In all cases consider the Who, What, When, Where, Why, and How of your case. This will vary depending based on the case. Even two dissolutions of marriage for instance can present very different issues. Once you have determined what you need to seek you then need to determine what discovery tool is best suited for your needs. As discussed the most commonly used are interrogatories, requests for production, and depositions. A lesser used, but at times very effective tool is the request for admissions.

Depending on the issues and technological savvy of the opposing party you might pose very detailed questions or limit yourself to broad coverage. In that regard, requests for production typically follow interrogatories or some sort of locally mandated initial disclosures. They can, of course, be sent in conjunction with interrogatories if you are already aware of likely sources of useful information, however it is not necessary. The purpose in waiting to send the request for production is to better target your requests to documents specifically needed based on the answers to the Interrogatories.

Another useful, but perhaps seldom utilized discovery tool is requests for admission. These are often most useful when dealing with less sophisticated clients, but of course any time you get an answer from the opposing party there is some utility. Often though litigants who are going it pro se will not realize that in particular jurisdictions a failure to author a timely response will result in the request being deemed admitted. This can then be a very cost effective method to achieve your clients' goals.

The impact of discovery is probably most felt in fashioning request for production. Common objections for Requests for Production are that they are too burdensome or costly. A party is permitted to utilize information from "reasonably accessible" sources of electronically stored information to respond to all forms of discovery. This is true so long as the sources sought are not identified as inaccessible by the responding party. Inaccessible sources are those which impose "undue burden or cost." A requesting party may nonetheless obtain discovery from inaccessible sources by filing a motion to compel and "showing good cause, considering the limitations of Rule 26(b)(2)(C).

The amount of electronically stored information today is staggering compared to say just twenty-five years ago. This is because in 1990, the cost of storing a gigabyte of data was approximately $20,000 while today that cost is under $1. This wealth of information becoming increasingly available for attorneys in dissolution proceedings. Today, in divorce litigation, the primary costs come from reviewing all of the data out there and that counsels a thoughtful approach. Securing access to these sources of data may lead to the discovery of:

(1) Emails;

(2) Cell phones and Text Messages;

(3) Social Media Use;

(4) Browser History; and

(5) Geolocation Data.

What Type of Information to Look For

Simply put, what to look for depends on what type of case you have and what types of allegations you are seeking to prove or disprove. Knowledge of what you need to prove your point is crucial because of the volumes of potential ESI out there. Not only will a broad meandering search waste a lot of your client's money, but also such attempts are likely to be characterized as an impermissible fishing expedition by the court.

Let traditional sources inform your use of new electronic sources. If you would typically subpoena bank records and credit card statements you might consider examining a computer's spreadsheets for financial information. Or, perhaps you would consider looking for messages to or from known business associates. If you are looking to prove some sort of conduct between the parties, you might start with emails and text messages. Communications might provide for abundant examples of verbal abuse or promises broken. If allegations of substance abuse or adultery have been leveled, you might consider mining for geolocation data that can show husband or wife was at the bar instead of the soccer game. Finally, consider often-overlooked aspects of social media, like status updates and friends lists. The uses for ESI are as broad, if not broader, than the traditional sources of information.

This means you even need to be efficient once you locate your ESI source. Careful selection of keyword searches can be crucial to obtaining information relevant to your case. Through the various social networking web pages valuable information can be obtained regarding adverse parties, key players in your case, and expert and non-expert witnesses. Keyword searches can be performed in various search engines, including Google, Yahoo or Bing. Research can also be performed on Westlaw. Through these vehicles, you can often find invaluable information including contact information, employment information, social information, and habits of various parties in your case.

There are some important basics to know about key word searching. For instance, it can sometimes be wise to focus on items most likely to be discarded or overwritten first, like emails, instant messages, and Facebook Messenger. When doing so, and in searching in general, consider the Who, What, When, Where, Why, and How of your case. Be sure to remember assistants or those who may handle your target's files or emails. Additionally, if at all possible, remember to discuss with the custodian of the system the possible abbreviations used by the party in question. Try to focus on important dates that might help sift through potentially voluminous amounts of information. Finally, do not be over confident in your search abilities based on Google, Yahoo, Bing or even Westlaw experience. Sifting through data on a computer can be an entirely different animal, so here are a few additional suggestions to fashion queries:

(1) Start with pleadings, interrogatories, and requests for production to see what information you already have;

(2) Seek input from key parties and witnesses;

(3) Examine what you've got and the tools you will use;

(4) Communicate and collaborate;

(5) Incorporate likely misspellings, abbreviations and synonyms;

(6) Filter and duplicate first;

(7) Tweak the queries and retest; and

(8) Check the discards.

If the opposing party is somewhat cunning or deceptive, you might need to partake in a somewhat more detailed examination.

Step-by- Step: Analyzing Tax Returns for Hidden Assets/Income

Probably the best tool for tracking down cash and other hidden assets are tax returns. This is because even a spouse who is attempting to hide assets or income through their business was probably not considering such action seven, five, or even three years ago. The first line of 1040 can be important because it provides a social security number which can be used for other searches. The W-2's for the spouse as an employee can also be important. How does the past compare to the present? Bank Statements and Credit Cards can also prove to be equally valuable. There are several key things to look for in this regard. Do deposits match invoicing or account receivable? Are wages to relatives or close friends comparable to others performing similar tasks? This can be common where there is an anticipation of the funds being gifted back later. Do known expenses not being paid out of any account signify cash transactions? Were abnormal bonuses paid out? Stock options? Do you know of personal use of company assets or perks? What is the value? Are there any transfers or deposits from unknown accounts? Do check registers or cancelled checks show previously unknown accounts? Are regular customers now late with payments delaying income? Has there been a sudden increase in liabilities or loans? An expert's cash flow analysis may uncover the answers to many of these questions. Hiring a forensic accountant or private investigator can also help to uncover hidden assets. You can also try to talk to other witnesses who may have an idea of where hidden income is coming from, such as business partner.

Finding Hidden Assets in A Spouse's Tax Return

Tax returns can give a divorcing spouse a lot of information on whether a spouse is hiding assets. The return is usually furnished voluntarily but may need to be obtained by the lawyer during the discovery process.

In W-2 forms, there is detail on salary received by the spouse and other benefits. These other benefits include 401Ks or 404(b) and fringe benefits. By looking at the W-2 form, a lawyer is able to obtain key information on how much money the spouse actually makes.

Another important place to look is prior tax refunds. This shows the history income and taxes paid. A spouse could have possibly overpaid taxes for previous years and be expecting to receive refunds as income after the divorce.

Schedule A reviews can reveal deductions or refinancing a spouse has done on assets. In a Schedule A, undisclosed loans and assets may be discoverable. Miscellaneous deductions can also be discovered in a Schedule A. An example of this is if the party took an estate planning deduction. This would be an indication that there is a hidden estate plan that contains hidden assets. In addition, Schedule A lists how the party paid state and local taxes. This section can be used to discover income earned in another state and income generating assets in another state.

Income earning investments can be discoverable in a tax return. The first page of the tax return lists interest income. A Schedule B is filed for entries over $400 requiring the party to identify the source of the income. The Schedule B allows for the discovery of hidden investments in a divorce action.

A Schedule C is for side businesses. This reveals the profits or losses from a business. One reason a spouse may have created a side business is to create a Keogh plan which would increase deductions for a retirement plan.

A Schedule D brings capital gains and losses to light. It reflects property sale for gain or loss and can be used to trace the money from the sale.

A Schedule E contains information on supplemental income and loss. This reveals rental properties, K-1 income from partnerships, S Corporations, estates and trusts. The Schedule E indicates existence of property and ownership in income generating endeavors and investments. A Form 1065 is used to report partnership income and Form 1120 is used to report corporate income. These can also be helpful in fully discovering assets.

Looking at the tax returns of your ex-spouse can reveal many hidden assets and income sources. It is important to dissect Schedules A, B, C, D, and E to find hidden assets and fully understand the financial state of your ex-spouse.

Tax Forms and Offshore Assets

There are several Tax Forms (other than the 1040) that may or may not be applicable. It's important to know the standard IRS forms required for offshore asset reporting and their purpose. Other than the standard 1040, there are 7 IRS forms applicable to offshore assets:

· FBAR (Foreign Bank Account Reporting ) Form: TD F 90-22.1 (Prior to 2014, FinCEN Form 114 (Present) are required for U.S. citizens who have foreign bank accounts;

· Form 8938-required under the Foreign Account Tax Compliance Act for individuals who own certain foreign financial accounts or assets with a total value of $75,000 or more at any time during the tax year.

· Form 3520-reporting requirement for U.S. individuals who receive a foreign gift or bequest valued at more than $100,000 from a foreign individual or estate.

· Form 3520-A-required reporting of a foreign trust with at least one U.S. owner to provide information such as the owners of the trust, the value of the owners' interest, and the FMV of distributions (if any).

· Form 5471-Requied for U.S. citizens and residents who are officers, directors, or shareholders in Certain Foreign Corporations (CFC).

· Form 8621-Required information return by a U.S. citizen or resident that is a shareholder of a Passive Foreign Investment Company (PFIC) or Qualified Electing Fund (QEF).

· Form 8865-Required return of U.S. persons with respect to Certain Foreign Partnerships.

However, requesting these tax forms during discovery, either from the individual or the IRS, is only effective if they have in fact been filed. Individuals with hidden assets typically do not adhere to tax reporting and filing requirements, hence the hidden classification. Therefore, requesting these tax forms is only the starting-point. These can be helpful because hidden assets are typically under a false name or entity but the individual is still likely to receive notifications to their personal email or phone. Resources such as a forensic accountant or a private investigator, while helpful, can also become very costly. Using such resources is primarily recommended in situations when it is known that OP has hidden assets in order to better find them.

Tax Audits Are a Common Result of Divorce

The last thing anyone wants to experience is a divorce. It's a process that everyone hopes to forget. However, one of the worst ways to be reminded of it is by receiving a "tax audit." The government takes its turn in examining the divorcing parties for hidden assets. And if you think this is something that could never happen to you, just look at the statistics. More than 50 percent of all marriages end in divorce. Based on CDC, 6.8 marriages per 1,000 people in the U.S. are married and 3.6 marriages per 1,000 people divorce.

You ask how does the IRS know that they should audit you from the divorce? Well, that's simple. While divorce often can be contentious and painful, things like hidden assets and undisclosed income will always be exposed in a divorce proceeding because of the required "forensic audit." These facts are reported by forensic accountants to determine the value of all income and assets for "equitable distribution." This then goes to the Judge who is required to review all facts and circumstances to determine the distribution or final judgment. The Judge is also required to report any inconsistencies to the IRS under their ethical requirements. In essence, the Judge is legally required to report these facts to the IRS for a tax audit.

After a divorce, the IRS has three years to audit your finances during the marriage. This period can be prolonged depending on the scale of "discrepancy" or the existence of "fraud." If there is a discrepancy over 25 percent, the review period or "statute of limitations" will be extended to 6 years. If fraud is involved, it could extend the review period indefinitely, thus causing the IRS to always audit you for fraud.

What happens if you are innocent but the IRS audits you because of an ex-spouse? In this case, an option that might be available to you is the "innocent spouse relief." In cases where you are completely innocent, you may ask the IRS to assign the fault to the "right" spouse or the spouse who is guilty. Three types of cases are possible: (1) innocent spouse relief, (2) separate of liability relief or (3) equitable relief.

If your spouse failed to report income, reported income improperly or claimed improper deductions or credits, Innocent Spouse Relief provides relief from additional tax you owe.

Separation of Liability Relief provides for the allocation of additional tax owed between you and your former spouse or from a current spouse whom you are separated due to an item not being reported properly on a joint return. You then are responsible for the tax allocated to you.

Equitable Relief may apply when you do not qualify for Innocent spouse relief or separation of liability relief for something not reported properly on a joint return and most generally attributable to your spouse. You may also apply for equitable relief if the correct amount was reported on your joint return but the tax was not paid with the return.

These are the general rules but qualifying for these types of relief is taken on a case-by-case basis. This is why it is important to discuss any tax scenarios regarding your ex with your divorce attorney or get professional help from an accountant who deals with matters like these specifically.

Analyzing Individual Financial Records

Calculating income for an individual can be difficult. What exactly is any entrepreneur's income for example? Some entrepreneurs never actually take a paycheck from the business. In fact, entrepreneurs are often advised to pay themselves just enough to get by, at least until the business begins to turn a profit. Some take a set amount each month, while others take variable amounts depending on how the business is doing. Even some of the most famous entrepreneurs have little cash on hand; the wealth is tied up in the company. Because entrepreneurs are not your typical w-2 employees with salaries that reflect their true earnings, it can be hard to agree on an income to incorporate into court documents. Often, the non-entrepreneur spouse will advocate that the entrepreneur makes more than the entrepreneur will claim.

As you consider how you plan to calculate your income for alimony or child support purposes, keep in mind the notion that your business may not have been thriving in the year leading up to your divorce.

Income is more than a salary; income includes commissions, bonuses, tips, rental income, royalties, interest, in-kind and fringe benefits, lottery winnings and even stock options. So, it is important to think beyond simply the salary that you take from your business venture when it comes to determine income. The way the business is organized and the accounting method used will also be factors to consider when trying determining income. This matters because tax forms are generally the first place to look when it comes to ascertaining a business owner's income. A sole proprietorship, corporation, partnership, and LLC each have certain tax forms that will report earnings in different ways. Additionally, whether you have chosen the cash method, the accrual method, or a hybrid method of accounting will also be important to consider while pouring through tax records. To actively hide income, individuals frequently have unreported income.

Checking and Savings Account Statements

First, you will need to retain all tax papers and 1099s to ensure that bank accounts wherein interest is documented have been listed. You will need to do the same for brokerage accounts, where dividends have been recorded.

Next, it helps to run a records search under your former partner's name. It is possible that the person owns property that was not initially uncovered.

It also helps to review pay stubs and other information that pertains to your spouse's income. Moreover, your professional should ensure that all income can be linked to a specific account deposit. The key is to uncover any undisclosed bank accounts where wages were deposited. You can also issue a subpoena to the employer of your spouse, which demands information regarding benefits, a deferred compensation program, retirement plans or stock options.

It also helps to investigate cancelled checks and other supportive documents for the payment of bills. This may include utilities, mortgage payments and the like. If you discover that the expenses were not paid out of disclosed bank accounts, there may be an uncovered financial account.

Another important trick is to look at family expenses. If the monthly bill exceeds average monthly wages, and if money from the savings account has not been used to support any deficits, money has probably been hidden. Furthermore, in some cases, there could be supplemental income that you did not know about.

A tedious but important job is to review account statements for bizarre money transfers to unknown accounts. If this is the case, subpoena the requisite documentation to observe the details of the account. For example, who owned the account? Was this a family member of your spouse?

Moreover, detail any credit card statements, wire transfers or cancelled checks for large purchases. This might be jewelry, art and more. If they have not been disclosed, these assets could be hidden.

These steps can help you in your journey to uncover hidden assets. However, the process is complex and involves a lot of detailed work. Your best bet is to consult with an attorney who knows how to access such information. He or she can help you with your divorce.

In the end, your spouse is responsible for being honest in disclosing assets and wealth. If he or she is dishonest, you could be entitled to 100 percent of the hidden assets. To learn more, seek legal guidance in your area.

What can Bank Statements Show in a Divorce

In a divorce, there is a lot of information and evidence that a court may look at in terms of helping insure a just result. One piece of evidence that can become important is bank statements.

In some courts, the courts may order the parties to exchange bank statements voluntarily. In some cases, the parties may agree to exchange bank statements by consent. And in other cases, the parties may issue requests for production upon each other to produce bank statements.

In some cases, the parties in a divorce may have jointly titled all their bank statements. In other cases, the parties may have had separate bank accounts during marriage. This can lead to different levels of concern in some cases - and different levels of need to exchange this information.

What can bank statements show? Any why can they be important in a divorce? These are questions many would ask.

As it relates to spousal maintenance and child support, bank statements can show deposits into an account. In cases where the income of the parties is a disputed issue, this can be particularly relevant. This can be particularly true where there is commission based income, tips, rental income or income from secondary employment.

Bank statements can also show spending habits. These spending habits can be important as it relates to determine the expenses of parties in a divorce. These expenses can be important as it relates to spousal maintenance. It can also be important as it relates to child support when the expenses relate to the children.

In some cases, the parties might need to show fairly recent bank statements. In some cases, it might be useful to go some period of time backwards in terms of looking at bank statements. Different facts can lead to different needs in divorce cases.

Loan Applications and Credit Reports

Every adult needs to take care of their credit rating, if they plan on buying a house or obtaining a credit card. Many times, employers do a credit check when evaluating job seekers.

Concerns over finances are often a root cause of marital discord. When you combine financial worries with a divorce, it can be a recipe for heartaches as well as headaches. Joint finances can be unwound, but there are certain important steps to take to protect your financial future during a contested Missouri divorce.

Take an honest look at your financial picture. Before making any decisions about your finances in the initial stages of your divorce, you have to have a clear understanding of your complete financial circumstances. Itemize all of your accounts, including:

· Bank accounts - checking and savings

· Investment accounts - IRAs or a Roth account

· Real Property - homestead and any investment properties

· Lines of credit - mortgages and any home equity lines of credit

· Credit cards - including rarely used store cards

This will provide you with an accurate picture of all assets and liabilities. Experts advise that you find out for sure if your accounts are single or joint accounts, which helps determine who will be responsible for paying what during the divorce.

Cancel joint accounts. If you have a joint checking or savings account or joint credit card, it is generally best to cancel those accounts in order to protect yourself.

Remember that during a divorce, emotions run high. If your former spouse is still angry, he or she may rack up purchases on a joint credit card and leave you to pay them. In other cases, money in a joint bank account could easily disappear.

Consider the tax ramifications of a divorce. Oftentimes, when people are going through a divorce, they may liquidate assets in order to divide the funds. When this happens, one spouse or both may end up having unexpected tax liabilities. Cashing out a retirement account generally comes with large tax penalties, whereas profits from the sale of a residence receive more favorable tax treatment.

Establish your own credit. If you have had joint credit cards during the course of your marriage, not only are you responsible if your former spouse does not pay the bills, but your credit rating could suffer. Although it may be difficult, especially if you did not have an independent credit history before you got married, the best thing you can do is begin to establish your own credit.

While divorce can be expensive, it can also lower -- or raise -- your rating in several ways. Here are four ways divorce can change your credit rating, as explained by U.S. News and World Report:

· Formerly joint accounts often become solo accounts, but not always. And if your ex promised to pay a particular joint account, but then falls behind, lenders will consider you to be equally responsible.

· You and your ex cannot agree whether to sell the house or other major joint assets. If the mortgage stays in both of your names, your credit rating will be vulnerable to your ex's ability to keep making payments on time, at least until he or she refinances.

· Going through divorce can put a temporary strain on your finances. Some people are tempted to skip a payment, though they would be wiser to contact the lender to work out a payment plan or other arrangement.

· On the other hand, divorce can be an opportunity to rebuild your credit rating, if financial problems during your marriage dragged it down. You can take control of your spending, open new accounts in your name and pay your bills on time.

There is more to marriage and divorce than money, but financial strains are a common reason people in Illinois get divorced. Having the right divorce attorney is an important way to set yourself up for financial success post-divorce.

Credit Card Statements

More and more couples are racking up excessive amounts of debt. To make matters worse, some debt, especially credit card debt, is hidden from the other spouse. Some blame this phenomenon on the fact that more marriages consist of two-income couples. Each spouse may find it difficult to relinquish control of his or her own money. But when divorce is on the horizon, how is this debt ultimately divided?

Many couples worry about the effect divorce will have on their credit card debt and their offsetting credit score. Some worry about how this debt will be divided. Some worry about a spouse running up significant charges during the divorce process. Others worry that certain credit cards or charges that have been hidden from their spouse will now be discovered or be forced to be made public--or the consequence of financial infidelity.

As a general rule in an equitable division state like Missouri debts incurred during the marriage for marital purposes is marital debt. This may hold true even if it's listed in one spouse's name only. The key requirements for a debt to be marital are: 1) it was incurred during the marriage and 2) for a marital purpose. However, in most cases, each spouse will be held responsible for credit card debt listed in his/her own name, but there is no guarantee that will happen.

Many couples open joint credit cards since both incomes can be used to establish a higher credit limit. These cards are usually considered marital and the court will decide how to divide the debt between parties based on what fits into the overall asset/debt distribution. But what about debt that is unknown to the other party?

Surveys indicate that 40-50% of all married people hide bills from their spouses. Sometimes this is the result of hiding expenses incurred during an extramarital affair. Sometimes this is the result of a spouse spending secretly to avoid the constraints of a couple's budget. Sometimes this is a spouse opening an account in the other spouse's name or in joint names and running up a bill...and the reasons go on. The question arises: Is financial infidelity a factor the court can take into consideration in determining property division including the division of marital debt?

Under Section 452.330 RSMo the court can consider the conduct of the parties during the marriage in determining the division of marital property and marital debt. In addition, the court is asked to consider the economic circumstances of each spouse at the time of the effective date of the division of property. Even though most individuals think that "conduct" refers to an affair or offensive treatment, financial spending and hiding marital debt is a major cause of divorce and what circumstance can be more disturbing than the disclosure of major, previously-unknown marital debt? So, what are your options?

· Determine all debt your spouse is hiding from you. Start with a credit report on yourself and one on your spouse. If there is a credit card or debt that you know nothing about, request copies of documents used in opening the account(s) and statements with itemized charges.

· Look further at bank and brokerage statements and cash withdrawals.

· Review your tax returns. Sometimes one spouse handles the finances and the other is kept in the dark. This excuse will not stand up in court.

· Gather all information regarding your finances. No guesses, just facts.

In addition, your spouse may agree to pay a joint debt or the judge may order the spouse to pay a joint debt. However, that liability remains a joint obligation to the creditor. Neither agreement binds the creditor who may sue should your ex default on payment. To avoid this contingent liability, get rid of joint accounts: through refinancing; paying off with funds from the divorce settlement; or by the other spouse opening a credit card in his/her name to transfer the balance from the joint account. It is critical that all joint credit card accounts be closed to all future charges when the marriage ends.

Divorce is challenging. The division of property and debt is stressful. But by reestablishing credit in your own name and monitoring your credit reports, you will be taking the first step in controlling your financial future.

Investment Account and Unvested Stock

How is unvested stock, accumulated over the course of the marriage treated? In Missouri, the property accumulated by spouses is divided into two categories, marital and non-marital. At a dissolution of marriage, marital property and debts shall be divided.

In Kuchta, the Missouri Supreme Court held that "the threatened presence of contingencies which may create differing degrees of 'risk of forfeiture' does not change the fact that many potential pension benefits have been and will be created by the joint efforts of both spouses and may be treated as marital property." That case offers up as a solution for handling such benefits to "establish a certain portion of the retirement benefits to be paid to the non-working spouse if and when the working spouse retires and begins to receive them." To do that would make it unnecessary for the court to either compute the present value of those rights or form a conjecture as to the future value, and it would also divide equally between the spouses the risk that the benefits will fial to mature.

The court in Lynch found that "the higher retirement benefits that may be realized by the husband by continued employment after the dissolution are made possible, in part, by his years of employment during the marriage. To preclude the wife from an opportunity to share in these increased benefits would be unjust and inequitable [...] A present division of those rights which allows the wife her share of the value, when and if they mature, does not award her after-acquired separate property of her former spouse."

The Eastern District of Missouri looked at the characterization of unvested stock. In Smith, two stock options were exercisable at the time of trial, with the rest maturing in the future. To be able to exercise each option, the husband only had to remain employed by his employer on the option date. The husband's argument was that the options should be classified as separate property that the exercise of those options was contingent upon his remaining employed with the employer, which thus makes them unvested stock. The court agreed that the stock was unvested, but held that the value of the stock was fixed, subject to only fluctuations in the market and was created by the joint effort of the spouses. The only contingency involved with the unvested stock would be that Husband could leave his employment with his employer prior to the date that he may exercise the options, which was the primary reason that the court decided to wait to distribute the options until such time as Husband actually would be able to acquire the stock.

In Warner, husband possessed unvested stock options that would be terminated upon him leaving his employment. Again, Husband's argument was that the only way that he could realize a benefit from the unvested stock option would be to work for the employer until that option is vested and then exercise the option. As part of the basis for its holding that the unvested stock was not separate property, the court stated that "the fact that entitlement to retirement benefits depends upon contingencies and by their nature are speculative - both as to future entitlement thereto, and as to the amounts - does not deprive them of their character as marital property."

Recently, the issue of unvested stock was addressed in Beecher v. Beecher. Citing both Warner and Smith, the court held that stock rights vesting after dissolution are to be considered marital property. The options were acquired during marriage and not by any method that would exempt them fro m being considered marital property under Missouri statute. "Missouri courts have uniformly and without exception held that property acquired during the marriage, including that acquired after the filing of a dissolution action but before the entry of the dissolution decree, is marital property." "[A]ll the employment stock options granted to the husband during the marriage was marital property even though a substantial portion of the options could not be exercised until after the termination of the parties' marriage and would be forfeited if the husband did not continue his employment."

Unvested Stock is treated the same as marital investment property and retirement accounts. It is marital and divisible upon dissolution. A spouse cannot hide their assets by keeping wealth in unvested stock.

Retirement Account Statements

Individual Retirement Accounts (IRAs) are typically one of the items allocated in a divorce decree. An IRA is a type of custodial account or trust held for the benefit of an individual or their beneficiaries. It is created by a contract between the bank that manages the account and the owner (i.e. the depositor). Part of this contract includes the beneficiary/beneficiaries who will receive the balance of the IRA upon the owner's death. The beneficiaries are usually the owner's spouse or children. Upon dissolution of the marriage, the divorce decree will award the IRA to one of the parties, and whichever party receives it is able to change the beneficiaries. For example, if the husband is awarded the IRA in the divorce, he can substitute his children as the primary beneficiary for his ex-wife beneficiary.

It is important to change the beneficiary on an IRA as soon as possible. Beneficiary designations often trump provisions laid out in a will and if a beneficiary isn't changed, an ex-spouse can still have access to the IRA. A recent Missouri Court of Appeals case details this possibility. In 1996, the husband designated his wife as a beneficiary of a Fidelity IRA account. The couple divorced in 2000 and husband received the IRA in the property settlement. Several times over the years, the ex-husband contacted Fidelity for information on how to access the Beneficiary Change Form yet he never actually changed the beneficiary. When he died, a fight between his estate and ex-wife ensued over the IRA. The estate cited a Missouri statue that revokes an ex-spouse as the beneficiary on the date the marriage ended. Several states have such statutes, but they have not held up to judicial scrutiny. In the Missouri case, the appellate court referenced a U.S. Supreme Court case that held ERISA governed and overrides or pre-empts state statute to reduce administrative burdens in identifying the correct beneficiary. The circuit court had not addressed the Supreme Court case and instead awarded the funds to the estate based on the intent of the ex-husband. The Court of Appeals reversed and remanded the case to the circuit court with the specific instruction to enter a judgment in favor of the ex-wife including costs and attorney's fees.

This case is just one of many where failure to change a beneficiary designation results in an unintended transfer of assets. The circuit court seemed to do what it thought was just by awarding the IRA to the estate, but the law did not support the decision. In the Supreme Court case, the couple had only been divorced for two months and it was likely that the ex-husband did not have an opportunity to change designations before dying in an auto accident. That did not matter. Thus it is important to change beneficiaries as soon as possible after a Divorce becomes final.

Normally, withdrawing money from a 401(k) or an IRA is considered a taxable event that requires a party to pay income tax on the funds contributed as well as penalties. When accrued during marriage, retirement accounts are also considered marital property and are subject to equitable division in family court. The Internal Revenue Code recognizes that a Qualified Domestic Relations Order ("QDRO") can divide funds in a 401(k) or similar retirement account. This allows the providers to roll funds into a retirement account for their spouse. While QDROs do not apply to Individual Retirement Accounts, a spouse can avoid a taxable event by rolling the divided funds into another qualified retirement account. Know that a spouse who converts any retirement funds to cash will be responsible for taxes and penalties for the account.

6 USCA § 408. Individual Retirement Accounts

§ 408(d)(6). Transfer of Account Incident to Divorce

The transfer of an individual's interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument ... is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse.

Qualified domestic relations orders (often called QDROs) create or recognize the existence of an alternate payee's right to receive all or a portion of the benefits payable under a retirement plan. They are complex matters orders or decrees that require an attorney's guidance in order to effectively transfer an interest in a qualified retirement plan. 401(K)'s, IRA's, Pension Funds can be split should both parties agree and file a qualified domestic-relations order (QDRO), a legal document that directs pension-plan sponsors how to pay out the funds. These funds are tax free if rolled over into your individual retirement account.

A domestic relations order (DRO) is an order that grants alimony and/or property rights to the pension owner's spouse, or child support under domestic relations law. For example, a property settlement could trigger the distribution of the retirement benefit plan to anyone who is not the plan participant. For the non-participant spouse to receive payment from the plan, the payment must be made in accordance with the qualified domestic relations order (QDRO). A DRO is qualified if it "(1) creates or recognizes the existence of an ultimate payee's right to, or assigns to an alternate payee the right to receive benefits with respect to a participant under the plan, and (2) complies with other statutory requirements." An alternate payee can be a spouse, a child, former spouse, or other dependent that is recognized by the QDRO as having a right to receive either a portion of or all of the benefits payable under the participant's plan.

For a domestic relations order to become qualified, the plan administrator must join the suit as a party, and then decide if the DRO is qualified, and be permitted to represent the important interests. When determining if the DRO is qualified the plan administrator must determine if it fulfills several requirements. First, there must be a transfer of ownership. Thus, the order must "be one which 'creates or recognizes the existence of an alternate payee's right to...receive all or a portion of the benefits' payable to the owner." Second, the DRO must specify the names and addresses of each participant in the suit and the alternate payee; the amount that each alternate payee will receive; the number of payments that the order will be effective for; and the exact retirement plan the order governs. Third, DRO must specify the amount and duration of the payments. Fourth, when talking about retirement plans, the DRO must "provide that the court may not order the plan to provide to an alternate payee any type, form, or amount of benefit not normally available to the owning spouse. It also may not order the plan administrator to provide to one alternate payee any benefit already being paid to an alternate payee under another QDRO."

Drafting a proper QDRO depends largely on the companies your clients have retirement accounts with. It is good practice to contact the companies where these accounts are located and ask if they have a sample QDRO they like their clients to use. Often this can save you and your client time and money. After you have drafted the QDRO but before you have a judge sign off on it, it is a good idea to send the QDRO to the plan administrator and see if it will be acceptable. The plan Administrator can then either approve the QDRO as is or make suggestions as to how to change the document. Following this extra step would prevent having to take multiple QDROs to the judge for their signature and it will often save you and your client time and money in the long run. Once the plan administrator informs you the QDRO will work, you can then proceed with obtaining a judge's signature.

Insurance In General

There is no one-size-fits-all approach to handling the many types of insurance after a divorce. Typically, especially when a couple has children, there's car insurance, life insurance and health insurance that all need to be addressed when coming to agreements and the divorce settlement.

If parents have a teenage driver in the family, the car insurance dilemma will need to be figured out. The first thing to keep in mind is that driving is a privilege. This privilege means, typically, a judge is not going to address how car insurance should be handled for the teen driver.

Instead, parents need to come to some sort of an agreement. For example, is the teen or the parents going to be responsible for the cost of car maintenance and repair? What about gas costs? How is car insurance going to be handled?

Once all of these issues are decided and agreed upon by the parents, it may end up being included in the divorce settlement. However, keep in mind that there are plenty of cases where this agreement is left out of the settlement.

In terms of the actual car insurance, how custody is divided up will most likely play a role. For example, if dad has full custody, the teen driver should be on his policy. But, if parents share custody, the teen driver should be on both parents' policies.

When making these decisions, keep in mind that the cost of insurance is determined by where the policy holder lives. This means that adding a teen driver may be more costly for dad than mom or vice versa.

When it comes to health insurance, parents should keep in mind that the associated costs are factored into child support payments. This means that if the mother has custody and the child is going to be on her health insurance plan, the cost the mother is paying for insurance will be factored in when a judge determines how much the father should pay in child support.

Typically, those medical costs that are not covered by insurance are ones that the parents split. However, keep in mind the split may not be right down the middle. Rather, how much each parent pays may be dependent upon his or her income. This means that if dad earns more, he could end up paying 70 or 80 percent of the bill, while the mother would pay the rest.

In general, when making health care decisions, keep in mind that under the Patient Protection and Affordable Care Act, children can remain on their parents' insurance until the age of 26. This is true regardless of whether or not the child is a student, is living at home or on their own, or is married or single.

When it comes to insurance decisions, make sure to update life insurance policies. Of course, this will mean changing the beneficiary. However, there may be rules imposed on a parent by the court too.

For example, in cases where one ex is paying child support and alimony, the courts may look at how much will be paid per year. This means that if a father will end up paying $120,000 in child support over a ten year period, and another $50,000 in alimony, the courts may order him to carry $170,000 in life insurance. As the amount gets paid down over time, the amount ordered to have in life insurance could then decrease.

Insurance can be the vehicle for hidden assets and can be a hidden liability in divorce. Divorcing parties need to change the beneficiaries and parties included on their insurance when they get divorced. This is important to protect their assets and not forget a hidden asset.

It is common for many couples to take out a life insurance policy on themselves, with their spouse listed as the beneficiary upon death. In the event of divorce, most spouses may cancel the policy or change beneficiaries to an immediate family member. When a life insurance policy has been set up to secure a long term obligation for a spouse, however, the policy may be characterized as marital property and subject to continuation under terms of the property settlement.

In addition, most couples commingle their income during the marriage and use their joint resources to pay the premiums on the life insurance policy. Over the duration of the marriage, the value of the whole life insurance policy may have increased substantially. No matter which spouse holds the policy, or how long they have had the policy in their name, all or some of its appreciated value must be characterized as joint marital property and subject to equitable distribution.

Is it Always a Good Idea to Liquidate Life Insurance Policies for a Divorce?

Depending upon your age, health and goals for the policy benefits, it may serve you better to leave a life insurance policy in place and include all or part of the future benefits as part of your financial settlement.

The amount of life insurance is available from the insurer. To find these, examine checking account records to verify that the policy exists and to determine premium payments and policy loans. Insurance policies can accumulate cash value through payments in the form of returns. The dividends paid increase the cash value of the policy. No other transfer will indicate the existence of the policy. Dividends from life insurance also may not be taxable under I.R.C. section 72.

Looking at financial documents will at least indicate an initial transfer. You can find it during discovery by requesting estate planning documents. If the amount is found to be a loan, it is excluded from the amount of net family property according to s.4(2) of the Family Law Act. If, however, the money is put into the matrimonial home or spent, then it cannot be excluded from the marital property.

Outstanding Loans to Family & Friends

Loans acquired from family and friends during the course of a marriage may cause problems when separating because a spouse may deny taking the loan or claim that it was not a loan but a gift made to the couple.

This creates the issue of whether the money given was a loan or a gift. When a loan comes from a family member or friend there is often no documentation or contracts created to show evidence that the transfer was indeed a loan.

Discovering Offshore Accounts & Assets

A spouse may try to hide assets by transferring them to another country. Locating the assets can be tricky. For example, look for suspicious account transfers. Again, look to bank statements and records to identify the movement of money. Look closely at checks made to unknown entities. Look at the withdrawals and travel schedule.

Secondly, look at receipts of funds and loan forms. Lastly, look to the other countries laws. There may be reciprocal laws allowing for the sharing of bank account information.

Business Divorce: Identifying Red Flags

It is easy to hide income and assets when you are a business owner, and many business owners are particularly tempted to do this once divorce proceedings have begun. The less the business is worth, the less the entrepreneur will have to pay his property division. The less income the entrepreneur makes, the less he will owe in child support and spousal support. It is obvious why an entrepreneur may intentionally hide business related assets and earnings.

Income can be hidden in the following ways:

· Depreciation and expensing for tax purposes.

· Pass through entity distributions.

· False lease of office space/rental of equipment.

· Loans between owners or close friends and family member.

For divorces involving business, it is almost always wise to begin working with a business valuator from the beginning of the case before discovery commences. This can ensure that the proper and appropriate business information is obtained and/or sought from the beginning.

On the federal level, Rev. Rul. 59-60 is the touchstone for understanding business evaluations and it also informs the law on a state level. The revenue ruling lists factors for valuation of stock in closely held corporation: (1) The nature of the business and the history of the enterprise from its inception; (2) the economic outlook in general and the condition and outlook of the specific industry in particular; (3) the book value of the stock and the financial condition of the business; (4) the earning capacity of the company; (5) the dividend paying capacity of the company; (6) whether or not the enterprise has goodwill or other intangible value; and (7) the market price of stocks of corporations engaged in the same or a similar line of business having their stock actively traded in a free and open market, either on an exchange or over the counter.

The first thing to understand is "Fair Market Value" and what this term encompasses within your jurisdiction. The common definition for fair market value is "the price, expressed in terms of cash equivalence, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm's length in an open and un restricted market where neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts." The first place to look for your definition of value are state statutes, but often these can be confusing and require an examination of case law on the topic.

One of the toughest aspects in evaluating a family business is the "goodwill" of the business and some states include various types of goodwill in Fair Market Value Analysis. Some courts will differentiate between "enterprise" and "personal" goodwill. Personal goodwill (also known as "professional goodwill") attaches to a particular individual rather than to the business that the individual owns. Enterprise goodwill (or "business goodwill") is derived from characteristics specific to a particular business, regardless of who owns or operates it.

Twenty four states and the District of Columbia exclude personal goodwill from the marital estate; nineteen states include personal goodwill in the marital estate; and eight states have no formal precedent. As a general rule, if the buyer would pay very little for the business, due to expected losses of repeat customers or specific referrals to the newly formed competing entity, this points to a high degree of personal goodwill. If the selling owner would be unlikely to siphon business away from the entity that he or she sold, then there would likely be a higher degree of enterprise goodwill.

The common argument for the inclusion of good will in Fair Market Value is that otherwise the court is ignoring the contributions of the non-professional spouse to the creation of the professional spouse's business, earning capacity, and career. Common arguments against the inclusion of good will are that it is highly speculative, results in inflated values, and requires the professional spouse to compensate the non-professional spouse of earnings he or she may never acquire.

For an example of the importance of properly valuing a business, look at Wood v. Wood. This case involved a valuation of closely held company performed by both the husband's and the wife's competing experts. The husband's expert engaged in a full assessment of the company to determine FMV while the wife's expert relied on a Buy-Sell Agreement's formula to determine the company's value and the husband's interest. The majority opinion found that the trial court misapplied the law in relying on wife's expert because of the failure to determine fair market value. The mistake for the wife was costly as the court adopted the husband's valuation at $325,000 as opposed to the wife's valuation at over one million. The dissent stated that a Buy-Sell Agreement is an accepted methodology for valuing goodwill. A closely held company, like goodwill, is difficult to value but the methodology was acceptable and the trial court was entitled to rely on it. While the dissent did not prevail here, pay attention to the dissenters, for they may become the majority a la Justice Hugo Black in Betts v. Brady, 316 U.S. 455 (1942) and Gideon v. Wainwright, 372 U.S. 335 (1963).

Another common issue is the application of Fair Market Value to professional practices or businesses that cannot be sold either by law or by contract. In Hamby v. Hamby, the court concluded that the husband's insurance practice, which was inalienable pursuant to his agreement with Nationwide, still had a fair market value. Fair Market Value represents a "hypothetical" sale for equitable distribution purposes, the fact that the business could not be sold in real life was immaterial, and thus the value of the business was more than the agency's fixed assets. In contrast, in In re Marriage of Robert E. Zeigler, the court held that the husband's "captive" agency had no goodwill as all goodwill belonged to the parent company, which was State Farm. Valuation was essentially limited to his income which was a result of his "skill, knowledge, and hard work." Goodwill was separate and belonged to company. Therefore it is again key to examine the precedent in your jurisdiction when conducting or cross examining a business evaluator.

Often, the largest asset in a case where one spouse owns a business is the business itself, and often the biggest assets of that business are not liquid. Marital property and debt is to be divided in accordance with the law in your particular state. However, in a general sense, in a dissolution of marriage action, assets and debts have to be divided in a just manner or as set forth by the laws in your state. In order to achieve a just division, it is vital to have a business properly valuated to achieve that end. Common issues are then:

Valuation disputes: The standards are often governed by local rules. Typically, valuation is considered to be Fair Market Value ("FMV"), but even how FMV is calculated or what can be considered in FMV varies by jurisdiction.

Division of the business: Will business be able to continue operating if forced to liquidate assets?

Tax ramifications: Section. 1041 of the Internal Revenue Code states: "[n]o gain or loss shall be recognized on a transfer of property from an individual to (or in trust for the benefit of)-(1) a spouse, or (2) a former spouse, but only if the transfer is incident to the divorce." According to Sec. 1041(c), a transfer is incident to the divorce if it occurs within one year after the divorce or "is related to the cessation of the marriage."

In addition to the relevant tax forms, be prepared to consider the following four financial statements: the balance sheet, income statement, statement of cash flows, and the statement of equity. Each of these also has financial data that is helpful in deciphering an entrepreneur's true income. Specifically for business owners, the income used to calculate child support should be calculated on actual cash flow rather than income reported on a tax return

A practicing divorce attorney will typically confront several typical interests in closely held corporations. These interests can be: (1) stock in the corporation; (2) membership in an LLC; (3) a partnership stake in a partnership; or (4) an ownership interest in a closely held family business.

Being able to represent a client who is either the business owner or the spouse of the business interest owner requires a basic ability to read business statements. Here are a few basic starting points. A "C" Corporation must file a separate tax return. Income earned by corporation that does not flow through to an individual's return, except to the extent that a spouse is paid wages or compensation that will be on the spouse's W-2 or 1099 forms. On the other hand, "S" Corporations, LLC's, and Partnerships must file informational tax returns. There, income earned from these entities flows directly to the taxpayer and will be reflected in the individual's tax return. Income from a single-member LLC should almost always be reflected in a Schedule C of the individual's tax return. For a closely held family business, some basic documents are: (1) Corporate or Partnership Tax Returns; (2) Periodic Profit and Loss Statements; (3) Balance Sheets for the Business Entity; and (4) Inventory Reports, Accounts Receivable, Accounts Payable, Buy-Sell Agreements.

Financial Statements Analysis

The Market approach is a fundamental method for estimating the value of an interest of a closely-held entity is an analysis of prices paid by investors for companies in the same or similar lines of business. Two common methods are:

· The Guideline Transaction Method involves searching databases for transactions in companies that are determined to be similar to the subject company. Ratios from these transactions (ex. price to discretionary earnings) are then applied to the subject company to estimate value.

· Guideline Company Method involves searching for comparable publicly-traded companies. If similar companies can be identified, certain ratios relative to these companies (ex. price to earnings) are then used as a basis for estimating the value of a subject company.

The asset approach is defined in the International Glossary of Business Valuation Terms as "a general way of determining a value indication of a business, business ownership interest, or security using one or more methods based on the value of the assets net of liabilities." The approach uses the books of the company to identify the fair value of the assets, both tangible and intangible, and the liabilities to determine a net value for the company. Whereas the market and income approaches both focus on income statement activity, the asset approach primarily utilizes the company's balance sheet. The asset approach is often utilized when a company is no longer operating as a going concern and is preparing for liquidation. Other times the asset approach can be used is when the business is based on assets, such as an investment vehicle, and not on income, such as a production company.

Steps in employing the asset approach are:

· Start with the balance sheet - ideally this will be "as of" the same date as the valuation date

· Restate assets and liabilities to fair market value where necessary - this can be the most judgmental step in the asset approach

· Identify unrecorded assets and liabilities and what their impact will be on the valuation - these may be off-balance sheet commitments or assets that are not on the balance sheet.

Most of the items on the balance sheet are valued in a very straightforward nature. Cash is cash. Marketable securities can also be as easy as cash to value due to a stated market value. Accounts Receivables and Prepaid Expenses typically have a fairly easy valuation. Property, Plant & Equipment ("PPE") and Inventory of a company can be more difficult to value. These categories of assets should be considered carefully and valued appropriately.

There are times when a third party may be used to value certain elements of the balance sheet. PPE is a good example of this. For example, most valuation specialists are not specialists at valuing land and many companies may own land. The same can be true for a machine used in production. A company may have purchased the machine for one price and depreciated it to another. However, the value of the machine may different from either of these values based on what it could be sold for on the open market.

Liabilities can also provide similar judgmental decisions for a valuation specialist. While accounts payable and many accrued expenses are straightforward in their value due to a specific amount stated on an invoice, a liability such as a warranty accrual or a litigation accrual can be far less clear in its fair value and what it should be carried at during a valuation. Significant consideration should be given to these more opaque items on the balance sheet when performing the valuation.

A last item where judgment may come in to play is with intangible assets, such as trademarks. Self-created intangibles are not put on the balance sheet of a company and therefore do not automatically require valuing and adding to the balance sheet. However, intangibles added through acquisition or purchase may exist and the skills of the valuation specialist need to be considered in whether or not to utilize a third party to value the intangibles.

The simplest way of thinking about the asset approach is Assets - Liabilities = Asset Approach Value. This also equals "Equity" on the balance sheet. This is a very rough view but still a way in which someone could begin to gauge the value of a company through the asset approach before beginning a deeper look into each of the line items of the balance sheet.

Cash Flow Procedures/Statements

The income approach seeks to identify the future economic benefits to be generated by an entity and to compare them with a required rate of return. The first step in the valuation process, performed internally or externally, is to determine the future cash flows or "projections". This will be the responsibility of the company's management if using an external valuation specialist. The specialist should review the projections for reasonableness. The projections are typically performed for the upcoming five years. Although this is not a hard and fast rule, it is a rule of thumb that is commonly applied. Revenues and expenses should be projected forward from current results. The resulting amount should be appropriately tax affected to determine what the free cash flows of the entity will be. Other adjustments that should be considered are cash related items such as CAPEX, depreciation and amortization, to name a few.

After the free cash flows are determined, the entity's numerator of the calculation is largely in place. Next, the denominator is the focus. The rate of return, or discount rate, for more developed companies is often determined through the Build-Up Method. CAPM is used in some circumstances, but the inherent difficulty in identifying a "beta" for the CAPM calculation causes many valuation specialists to use the Build-up Method. While this type of approach works for a company with more history, a new company or one just beginning to generate income and free cash flows poses a different challenge.

Investors seeking to assess a younger company may choose not to apply the income approach as it may not be applicable due to a lack of results on which to base projections. However, if there is a basis to work from, using the Build-up Method may not be appropriate. The rate of return for companies that are younger can vary quite a bit. Amounts from 20%-80% are often used for companies that are early-stage. The less risky and more reliable the projections, the closer the rate of return is likely to be nearer to the 20% end of this spectrum. Riskier, younger ventures with less proven results upon which to base the projections may use a discount rate closer to the 80% end of this range.

Taking the free cash flows discussed as the numerator and applying a rate of return, or discount rate, will result in the present value of future cash flows. The sum of these for the five years, based on the reasonable adjusted projections, provides one half of the value to be calculated.

Not many companies will simply end at five years. The valuation needs to also take into account the additional years of cash flows to be obtained. These cash flows can often be even more significant than the five years already detailed out. The terminal value, as this next amount is known, is generated by applying a long-term growth rate to the company's free cash flows and discounting this total back to a present value as was done with the first five years' projections. When calculating the terminal value, the growth rate should consider the stage of the company and how it is likely to grow in the future. Many times, the United States GDP can be used as an estimate for this future growth. For well developed companies, exceeding this is unlikely. For earlier-stage companies, exceeding this is not uncommon. The sum of the present values of the five year projected free cash flows and the terminal value provides the total enterprise value from the Income Approach.

The advantages to the income approach are that it is widely recognized, it is flexible in addressing companies of many different stages and natures, and it simulates a market price even if there is no active market. The disadvantages include that it relies on hypothetical projections and it utilizes a discount rate with many variables in determining the appropriate figure.

Cash Transactions and Unrecorded Accounts Receivable

Cash intensive businesses can generate a significant amount of cash that isn't reported. Overstating expenses is yet another trick to make it look as though an entrepreneur's earnings are less than they actually are.

Why doesn't everybody do this? First, it's easy to get caught. Family law attorneys have plenty of experience pouring through documents obtained through discovery and know to look for certain inconsistencies. A simple lifestyle analysis can lead to deeper investigation into your financial paperwork. If you claim you generate a modest income from the business but your mortgage or rent payment is $3,000 a month, that's an obvious red flag. Or, if your bank statements reflect that you are spending an unreasonable amount of money on dining or leisure, it will cause an attorney to take a deeper look. Outside of a lifestyle analysis, there are many other ways that an attorney can unearth inconsistencies. If the attorney fails to pick up on these discrepancies, a forensic accountant can most certainly find hidden income.

The consequences of hiding income to lower support obligations can be more than just a slap on the wrist. Tax fraud is a federal crime with serious consequences. Anyone can report potential fraud to the IRS simply by filling out IRS form 3949-A. If the IRS investigates and discovers fraud you could face massive fines or even jail time. So, while it may seem smart to under report your income to lower your support obligation, it most likely is not worth the penalties you would incur should you be reported to the IRS and found guilty of tax fraud.

Not only is divorce common amongst entrepreneurs, there are unique considerations that entrepreneurs must face that other divorcing couples do not have to contemplate. Custody issues are complex because many entrepreneurs don't have a significant amount of time to spend with their children. Property division is complicated because it is difficult to place a value on the business. True to form, support issues are also difficult to settle because it is hard to verify an entrepreneur's income.

In order for a spouse to be entitled to alimony, he or she must prove that they are the dependent spouse, that the other spouse is the supporting spouse, and that an award of alimony would be equitable considering all relevant factors. Alimony is very discretionary and varies widely from case to case. Unlike child support, there are no clear guidelines or worksheets to use. The duration of the marriage, the parties' standard of living, the relative earnings and earning capacities of the spouses and the contribution of one spouse as a homemaker are just a few of the factors.

Hire an Expert. Couple the fact that it is difficult to calculate income for an entrepreneur with the gravity of making a mistake in calculating income and you will see why it is a good idea to involve an expert. Your attorney should hire a forensic accountant with experience in both calculating net cash flow and predicting cash flow. This expert should be good at explaining his methods and findings as he will need to not only be able to explain his calculations to you and your attorney, but also potentially the judge.

One of the most important things for an entrepreneur to keep in mind, is that under certain circumstances, alimony can be modified. So, if something happens and your business venture is suddenly not as profitable as it was previously, there is a chance that your alimony obligation could be lessened. There are some requirements that must be met to have the ability to modify the alimony award.

Examining Estate, Gift, and Inheritance Tax Returns for Gifts or Bequests

A will is a legal document that details what an individual would like done with his or her property and assets after death. If you have property you wish your cohabitant to receive after your death, you need to describe the property in your will and indicate your wish. Otherwise, if you don't have a will to detail your wishes, your property will pass according to what are called intestate succession laws.

In most states, intestate succession statutes automatically distribute your property to your closest family members, i.e. your spouse, children, parents, etc. Without a will, your cohabitant won't receive any of your estate unless he or she is successful in arguing that you had a financial or property-sharing arrangement. Such claims are often difficult to prove, particularly with the lack of any formal documents. Drafting a will is generally the best way to ensure your property is passed to whom you wish.

However, if you and your cohabitant are joint owners of the property, you may wish to consider a joint tenancy with a right of survivorship instead of a will. Joint tenancies give the cohabitants the ability to share the rights and responsibilities associated with the property during their lifetimes. Then, upon the death of one joint tenant, title to the property automatically passes to the other, without the need to go through the formal probate process a will requires. There are other benefits to a joint tenancy, such as tax savings, documentation of commitment, and the sharing of debt.

When you create a "power of attorney," you have authorized another person to make decisions on your behalf, particularly decisions that may have a legal effect. A power of attorney is "durable" when it only becomes effective after you have become legally incompetent, i.e. unable to manage you own affairs. Durable powers of attorney are also called "living wills."

There are generally two types of durable power of attorney, but this can vary depending upon the state you reside in. The first type, called the durable financial power of attorney, applies only to financial decisions. If you grant someone the durable financial power of attorney over your affairs, he or she will be able to manage your finances when you become unable, and must always act in your best interests. Second, there is a durable power of attorney for health care. While state regulations vary, the durable power of attorney for health care, otherwise known as a "medical directive," allows you to name someone to direct your medical care if you become incapacitated.

Ensuring Custodial Accounts or Trusts Aren't Being Used to Veil Assets

A trust is an agreement that is held by one person (trustee-person who manages the trust) at the request of another (settlor -a person who creates and usually provides the funding for the trust) for the benefit of a third party (beneficiary - the person that receives the income or principal from the trust).1 Estate planning is accomplished in two ways: a (1) revocable trust; or (2) Irrevocable trust. A person can establish value of trust assets either way.

When a settlor creates a revocable trust, this person has an option to modify this trust at some time in the future. Furthermore, this person can exercise his/her option to remove property and terminate the trust. On the other hand, when a settlor creates an irrevocable trust, the settlor cannot retrieve the property. The rationale being that the property belongs to the trust and not the settlor.
In order to determine whether the beneficiary's interest in the trust in a divorce is marital property depends on the jurisdiction and the terms of the trust. When a trust is litigated or questioned, as a marital property, the following questions are generally considered:

1. Is the trust revocable or irrevocable?

2. Who (if anyone) is vested the power of appointment?

3. Who are the beneficiaries of the trust?

4. How and to whom does the trust provide for distributions?

5. Is the trust a discretionary trust?

6. Is the trust a support trust?

7. Is the trust a non-discretionary trust?

8. Does the trust provide for both non-discretionary and discretionary distributions?

In terms of jurisdictional differences, some states, including Oregon, have a broad view on whether a beneficiary's interests constitutes property no matter whether such an interest is possessory, vested or contingent. Other states require that a spouse have a present right to receive the trust assets for a spouse's interests to be considered acquired property. Meanwhile, other states have adopted a more flexible approach based upon an examination of the type of interest held by the beneficiary spouse in the trust.
An income interest in a trust is a provision which grants the beneficiary the right to receive periodic payments during the lifetime of the trust. Income earned from trusts are generally not considered property because these income earned via trusts cannot be assigned (one to whom property rights are transferred by another) or conveyed to another person.
In Missouri, an equitable division state, non-marital property could be considered marital. RSMo § 452.330.1 defines marital property in divorce as all property acquired by either spouse during marriage except:

(1) Property acquired by gift, bequest, devise, or descent;

(2) Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent;

(3) Property acquired by a spouse after a decree of legal separation;

(4) Property excluded by valid written agreement of the parties; and

(5) The increase in value of property acquired prior to the marriage or pursuant to subdivisions (1) to (4) of this subdivision, unless marital assets including labor, have contributed to such increases and then only to the extent of such contributions. (Emphasis added).

In this vein, a spouse could argue in many states (if a state statute allows it) the other spouse's income earned on separate property as marital property.

For example:
[C]onsider client whose revocable trust provides that upon client's death all assets will be distributed outright to client's children in equal shares. If each child receives $100,000, then that $100,000 is non-marital property as property acquired by bequest. If child invests the $100,000 in stock that pays a $1,000 dividend, the $1,000 is marital property. If child purchases a home with $100,000 and child's spouse spends weekends fixing it up to be resold, then the appreciation in the value of the home may be marital property as marital labor contributed to the increase.

In regards to a revocable trust, if a child takes $10,000, which was received from client's revocable trust and puts it in a brokerage account containing money earned during marriage, then the inheritance has "commingled with marital property. In order to avoid such problems, a lawyer should be cautious when drafting mandatory or discretionary interests in a trust.

In Solomon v. Solomon, the Pennsylvania Supreme Court held that only an increase in value in property actually acquired can be deemed marital property. In these instances, appreciation is to be calculated only to the degree to which the property exceeded its value the time of acquisition. However, if a beneficiary's interest does not rise to the level of a property interest in the first place, there can be no argument that the asset is subject to division in a divorce or that the appreciation is martial property.

Other states also seem to focus on whether a beneficiary spouse has a present and absolute right to receive the trust assets. For example, in Mey v. Mey, the New Jersey Supreme Court held that a beneficiary spouse's interest in a trust does not constitute property that is legally and beneficially acquired, unless the beneficiary has acquired "unimpaired control and totally free use and enjoyment" of the trust assets.

In Friebel v. Friebel, the Wisconsin Court of Appeals on a similar note held that a beneficiary spouse does not acquire an interest in a trust during the marriage, unless she has a right to receive the corpus of the trust. Similarly, in Lipsey v. Lipsey, the Texas Court of Appeals held that a beneficiary spouse does not acquire an asset unless she has a right to compel distributions.
In Missouri, the law distinguishes between mandatory and discretionary trust. According to this statute:

A beneficiary's interest in a trust that is subject to the trustee's discretion does not constitute an interest in property even if the discretion is expressed in the form of a standard of distribution or the beneficiary is then serving as a trustee or co-trustee. A creditor or other claimant may not attach present or future distributions from such an interest or right, obtain an order from a court forcing the judicial sale of the interest or compelling the trustee to make distributions, or reach the interest or right by any other means even if the trustee has abused the trustee's discretion.

Furthermore, this statute provides that if the interest in a trust does not constitute a mandatory distribution, then "a beneficiary's interest in a trust is subject to the trustee's discretion." Given this definition, an income earned via beneficiary's discretionary interest is not a property because this earned income is "acquired by gift or bequest." In sum, "if all distributions are subject to the trustee's discretion, then neither accumulated nor distributed income will be marital property." However, any future income earned on the beneficiary's assets will be marital.
On the other hand, §456.5-506 defines mandatory distributions as:
[a] distribution of income or principal which the trustee is required to make to a beneficiary under the terms of the trust, including a distribution upon termination of the trust. The term does not include a distribution subject to the exercise of the trustee's discretion even if (1)the discretion is expressed in the form of a standard of distribution, or (2)the terms of the trust authorizing a distribution couple language of discretion with language of direction.

Unlike a trustee's discretionary distribution, in Missouri, mandatory distributions are not treated in a similar fashion. There are two cases that concern with the mandatory distribution trusts: (1) Charles Moore v. Melanie Moore; and (2) Linda Moore v. Jaclyn Moore. In Charles Moore, the issue presented to the Missouri Court of Appeals was whether the income not distributed by the trust categorized as a marital property The Court held that this undistributed income was martial property. The Court said, "[H]usband had the right to terminate his trust when he attained age 35. This court holds husband constructively received the trust assets at that time. The trial court erred in not classifying the income the trust generated from that date until the date of the dissolution of the parties' marriage as marital property."

Furthermore, the Court concluded that any income received from non-marital property, after marriage, is considered marital property in Missouri. This analysis was adopted by other jurisdictions (Pennsylvania and Texas) and persuaded Missouri Court of appeals to utilize similar rationale when deciding whether property is marital or non-marital.

In Linda Moore, the Western District Court of Appeals held that "trust income which wife received as a result of corporation paying excess distributions to trusts was marital property."43 The court treated this income as income earned on non-marital property. Furthermore, the court said, "Trust income which wife received as a result of corporation paying excess distributions to trusts was marital property; wife, as sole trustee and sole beneficiary of each trust, held both equitable and legal title, excess distributions paid to each trust were in turn paid by wife, as trustee, to herself as beneficiary, wife reported the income on her tax returns, wife's receipt of the excess distributions payable from the trust was actual rather than constructive, and trust agreements established that her right to the income from the distributions was vested, absolute, and irrevocable".

Other states seem to focus as well on whether a trust is discretionary or non-discretionary in divorce. For example, in In Re Marriage of Balanson, the beneficiary of the remainder interest subject only to her survival. In other words, she would receive the trust assets provided she did not die before her father. In this case, the Colorado Supreme Court held that the beneficiary spouse's interest in a trust does not need to be subject to her present enjoyment to constitute marital property provided that the beneficiary had an enforceable contractual right to receive the trust assets in the future. The court concluded that remainder interests are distinguishable from discretionary trusts in that:
"[T]he value of such interests may be uncertain at the time of dissolution of marriage, they nonetheless constitute property because they are certain, fixed interests subject only to the condition of survivorship."

In the Massachusetts Supreme Court, a similar decision was reached in the case of Lauricella v. Lauricella. In Lauricella, the beneficiary spouse had an interest in a trust subject to divestment only if husband did not survive until the trust terminated according to its terms. Given husband's young age, the court concluded that the "likelihood is he will survive to receive his share..." Thus, the Massachusetts Supreme Court concluded that the fact that the valuation might be difficult, husband's interest was a divisible asset. However, in a later case, D.L. v. G.L., the Massachusetts Supreme Court engaged in further analysis on this topic indicating that trust documents should be examined closely in cases to determine "whether a party's interest is too remote or speculative to be so included."

In high asset divorce matters, the division of trust assets can be a significant issue. In complex cases, trust decanting can be an important issue in which parties should be aware of the concept.

The purpose of decanting includes the ability to address change in circumstances; protect tax treatment of a trust; modifying administrative provisions, such as restriction on investment powers; granting a beneficiary a special power of appointment; reducing administrative costs; altering trusteeship provisions or appointing fiduciaries; extending the termination date of as trust; converting a non-grantor trust to a grantor trust or the reverse; changing a trust governing law; dividing trust property to create separate trusts or shares; reducing potential liability; converting a trust into a supplemental needs trust; making a trust interest spendthrift or the reverse; and correcting a drafting error without the necessity of going to court.

A trust decanting works in the following manner:

Under a testamentary instrument or inter vivos trust, the Trustee is given the authority to decant for the benefit of one or more of the beneficiaries of the original trust. The trustee may decant or appoint all or part of the first trust assets in favor of a second trust under the original instrument or new instrument. The second trust may have as beneficiaries one or more of the beneficiaries of the first trust who are the proper objects of the exercise under the original instrument. The second trust may also have beneficiaries for whom a distribution of income or principal may have been made in the future from the first trust and may refer to the occurrence of a specific event under the first trust.

Divorcing parties try to keep the trust assets as non-marital to keep the benefits from the ex-spouse. It is easy to see that many divorcing parties try to hide or veil assets in trusts. To ensure that trusts are not being used to veil assets, the parties and lawyers need to be vigilant.

Are Found Assets Marital or Non-Marital? How to Differentiate.

As a general rule, all property acquired by either spouse during the marriage is marital property and is subject to equitable division upon dissolution of marriage. Who holds title does not matter. It is the nature of the property rather than the title that determines if it is marital or non-marital property.

When two people get married, they expect that they will spend the rest of their lives together, and they often begin to build that life by accruing assets. A new bed in which to sleep together, a new house to raise their family, a new car to take the children to soccer practice, these are all things that married couples might buy to accommodate their new life. But not all marriages last, and in the event of a divorce, the question of who gets what suddenly becomes significant.

In the event of a divorce, each party generally keeps the property that belonged to him or her before the pair were married. Courts will not divide these assets between the two parties, instead separating only the marital property based on certain circumstances. However, in Missouri, nearly all assets that are purchased during a marriage are considered marital property, even if one party purchased the item specifically for himself or herself. For example, if a man buys himself a Jacuzzi without his wife's knowledge, even if the wife never once used the Jacuzzi, it could still be given to her as part of the asset division.

There are some properties that are exempt from this precedent of marital property, including assets received through inheritance, exchanging personal property that was possessed before the marriage, property that is exempted by written agreement between the couple, and a few other specific examples. Still, when it comes to marital property, it can be difficult to tell exactly who is going to get what.

Also, when a couple decides to separate rather than divorce, all property they acquire is non-marital after getting a separation decree. Different from the date of separation for divorce filing.

Commingling of property makes non-marital property become marital. For example, if you inherit a car but bring it into your marriage and use for family/marital purposes, then that car had become marital property.

One of the most effective ways to help you take a stand on asset division in your divorce is to enlist the aid of an attorney. The courts consider many different factors when it comes to asset division, and proving that you deserve a particular asset or set of assets can increase your chances of walking away from the marriage with those properties.

Hypothetical: Husband likes to go on digs in Arkansas. One day he found a diamond and brought it home. He displayed it in his office. Is the diamond marital property?

VII. Resources and Experts in Divorce Cases

A. Appraisers, Forensic Accountants, Private Investigators, Therapists, etc.: What They Do and How to Find Them

It is also important to point out other resources which may be useful in a case with hidden assets, specifically forensic accountants and private investigators. While they may be costly, utilizing such resources may be extremely helpful, depending on the complexity of the case. Forensic accountants are especially helpful and often necessary when analyzing tax and financial documents for potential hidden assets.

Federal Rule of Evidence 702 allows for expert testimony: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise." Check state statutes for your local rules regarding the qualifications of an expert and the admissibility of their testimony. A Business Valuation Specialist will frequently be allowed to testify in terms of valuing a closely held business and consequently you should consider the use of Business Valuation Specialist in any case involving closely held business. This is particularly true if the business would appear to have some value and you are unfamiliar with business accounting. Remember, that in order to divide marital property and debt in a just or equitable manner, it is critical that all assets be valued, including businesses owned in whole or part by the parties.

It is also important to know at what point in time the evaluation is to take place. For instance, in Goodwin v. Goodwin, the husband's expert valued a business at the time the wife left the company's employ arriving at a figure of $385,000. The wife's evaluator valued the business at a point as close to trial as possible to a figure of $1.65 million. The trial court adopted the latter evaluation, and the appellate court concluded it was within the discretion of the trial court to do so.

Additionally, consider a cost benefit analysis regarding size of business or if spouse suspects hidden business incomes. All too frequently a spouse whose business has performed and provided beautifully for years will suddenly be cash strapped. (Recently Acquired Income Deficiency). To help identify such spouses consider the use of several types of financial experts. Accountants can help examine cash flow, value business perks, and discover hidden or unreported income. Business and Practice Appraisers can be used to determine the fair market value of a business or practice. Financial Planners can help identify the true value of investments going forward and Real Estate Appraisers as well as Vocational Experts may prove useful too. The key to the use of these experts is that you know both the expert and their report.

It is also vital to tell the expert at the onset what you might be looking for and the purpose in hiring them. Knowing what you're looking for will help you determine whether the expert is capable of identifying that information for you. In other words, you need to know the strengths and weaknesses of the expert. For this, you will want to see their curriculum vitae, discuss their potential biases, and ask about their general experience with testifying in court.

You will also need to be able to identify the strengths and weaknesses of the report. If you do not already understand, ask the expert for an explanation of the methodology used and alternatives which could have been employed. Prepare the expert for direct and cross examination of their findings and be prepared to impeach the opposing parties' expert in terms of the substance, their own biases, and on their experience. For instance, did they comply with methodologies in Rev. Rul. 59-60? Did they substitute book value for fair market value?

The following are a few basic concepts and terms in forensic accounting:

Market Approach: Valuator tries to locate guideline businesses that have been sold in order to make a comparison of value. Similar to appraising of residential real estate, but can be difficult to use for small closely held businesses.

Asset Based Approach: Each component of the business is valued separately. Valuator estimates value by estimating cost of duplicating or replacing individual elements of the business. This approach cannot be used alone if there are intangible assets with value.

Income (Income-Based Approach): General way of determining a value indication of a business, business ownership interest, security or intangible asset using one or more methods that convert anticipated economic benefits into present single account.

Capitalization of Earnings: A method within the income approach whereby economic benefits for a representative single period are converted to value through division by a capitalization rate.

Capitalization Rate: Any divisor (usually expressed as a percentage) used to convert anticipated economic benefits of a single period of value.

Minority Discount: A discount for lack of control applicable to a minority interest.

Key Man Discount: Discount for loss of efficiency until someone is sufficiently trained to replace a key man.

Marketability Discount: Discounts for lack of marketability deal with the lack of liquidity of an ownership interest and how quickly and easily it can be converted into cash.

B. Interviewing & Vetting (w/ Sample Questions)

First, it is important to ask about the methodology, assumptions, procedures and how the opinion of value was determined. The following are some examples of potential other questions to ask.

· Have you personally sold a business or assisted a client in buying or selling a business in the same industry? How many have you sold?

Asking the expert if he or she has sold businesses in the past is directly aimed at the expert's experience and knowledge on real-world issues. An expert who has sold businesses has firsthand knowledge of the selling process and is likely to have a better understanding of the marketplace. An attorney should be on the lookout for a business valuation expert who is purely theoretical and has little knowledge about buyers and sellers in the real world.

· Do you know for certain if the amount you concluded to be the value of the business can be financed?

A good business valuation expert will consider more than one method as a check for reasonableness. And a great business valuation expert will take one step further by determining if the purchase price can be financed. If the opposing side's expert determines a value for a business that cannot be paid off in five or seven years while also returning a reasonable amount to the owner, it is probably not a realistic price to pay for that business.

· Does your valuation comply with generally accepted accounting principles?

Some valuation experts are stumped by this question. Generally accepted accounting principles do not govern the valuation field. However, there are well-accepted valuation principles such as Uniform Standards of Professional Appraisal Practice and Statement on Standards for Valuation Services.

· Did you conduct a site visit? If so, when?

Generally, site visits are important to a business valuation but this question is often overlooked by attorneys. If the expert did not conduct a site valuation, how do they know what they were valuing didn't just vanish into thin air? A site visit must be performed to physically observe the valuation subject and corroborate those observations with the information obtained from the management interview and financial records. Trust but verify.

· From your previous valuations, has any value you determined ever been substantially changed in a court decision? Has the value stood up in court?

This question further discredits the expert by showing the judge or jury that the expert's been wrong in the past.

· Have you ever been excluded as an expert? Has your testimony ever been excluded?

This is a direct hit at the expert's credibility if he or she answers yes to this question.

· Who hired you and how many times have you worked for them?

It's all about perception. If the expert admits he or she has been hired by a client over and over again, the perception is that the expert will conclude a value to the client's satisfaction whether or not it represents fair market value.

· You advertise yourself as an expert for hire, is that correct?

The intent of this question is to show the judge or jury that the expert is a "hired gun" and is likely an advocate on behalf of his or her client. The value may be skewed to favor their side and may not represent fair market value.

· How much of your professional time is devoted to expert testimony?

Score one for your side if you cross-examine a business valuation expert who spends more time on the "expert" part than the "business valuation" part. This kind of "expert" likely will be seen as an expert opinion for hire.

C. Information & Documents They Need (w/ Checklists)

The expert often will start with the couple's tax return to understand the trail that needs to be established regarding income and expenditures. In addition, he or she will access bank account and other investment account activities. Because often it is uncertain when a party to a matrimonial dispute initially considered terminating the marriage, a forensic accountant may need to go back several years before the date of separation to understand the financial implications of the marriage and the assets that may be subject to equitable distribution.

A review of several years' tax returns will reveal whether the initial listing of assets and liabilities has been manipulated. One tool is a "source and application of funds," also known as comparative balance sheets. In this exercise, the accountant will gain an understanding of the couple's assets and liabilities at a particular point in time, usually several years before the divorce action was initiated, to gain an understanding of the various sources of income and expenditures reflected on the tax return. The forensic accountant also will talk with the party to find out about other lifestyle and related income and expenditures that may not be reflected on the tax return.

By starting with the balance sheet (assets and liabilities) and adding all income shown on the tax return (as well as nontaxable income and return of capital) and then deducting expenditures, whether tax deductible or not, the forensic account will ascertain whether the balance sheet at the beginning of the year and at the end of the year are supported by transactions known to have occurred. In addition to documentation, an interview with the client often is helpful in understanding whether other transactions may not be reflected on the tax return, including those that may constitute tax fraud.

This comparison of balance sheet to cash flow is the first step in understanding whether hidden assets are likely. A review of bank statements and all other types of financial assets (brokerage accounts, mutual funds, pension plans, and partnerships of any sort) will be used to understand actual transactions that have occurred during the year.

A review of cancelled checks and bank statements will show whether income is being "siphoned off" from marital/household accounts for other purposes. For example, in reviewing bank statements for two years before a marital separation, one forensic accountant noted checks being written to cash. In denominations of $7,500 each, these were being negotiated at a bank on Grand Cayman Island. A review of the other spouse's passport indicated that he was taking scuba-diving vacations to the Cayman Islands simultaneous with these transactions. Over the course of two years, $75,000 had been withdrawn from marital bank accounts and deposited in Cayman Island accounts.

In many cases, the expert will review tax returns and related financial information from an underlying business. Businesses that borrow money are routinely required to complete financial disclosure information in connection with those loans, whether with a bank or other institution. Ascertaining what information a business has provided to such institutions is frequently part of the discovery process.

The forensic accountant compares information provided to such banks with financial statements presented in discovery and tax returns filed with the government. This analysis may give rise to additional assets or expenditures beyond normal business requirements or provide grist for cross-examination to impugn the credibility of one of the spouses. The forensic accountant will attempt to gain access to all financial statements prepared for the couple as well as those for business entities to which either spouse has a ?nancial interest, especially a controlling interest. Although control normally requires more than 50-percent ownership in an entity, in many circumstances an individual can have effective control or significantly influence control with less than 50-percent ownership. Sometimes owners with as little as 10 to 20 percent of an equity interest in the business may, in fact, control business operations.

All of the couple's financial statements for the period must be made available to the accountant. By reviewing bills paid to an accounting firm, the expert will find out what work has been undertaken on behalf of the couple or the business, which may lead to further analysis and discovery of additional assets (as well as income).

D. Preparing Experts for Depositions & Testimony

Once you have selected an expert, the expert has reviewed the case, has given you the report, and has been deposed, preparation of the expert has just begun. Preparing the expert for trial involves working with the expert, deciding what the expert will cover on direct examination and what exhibits she will work with, practicing the direct examination and what exhibits she will work with, practicing the direct examination in a realistic setting, and preparing for cross-examination. Insist that the expert give you adequate time to accomplish these effectively.

First, you need to decide what the expert will testify about and, just as important, what he will not talk about. Remember that the expert often wants to tell the jury everything he knows about the subject. This is usually fatal to a case. The jury should be told only what it needs to know to understand the subject and accept this expert's opinion. What the jury needs to know is a small fraction of what the expert actually knows. The expert needs to focus on the process, not the details. Hence, your first task is to pare down, with the expert's help and understanding, the information the expert will testify about on direct examination.

Part of this process will involve agreeing on a "trial vocabulary." Juries dislike witnesses who use stilted, technical language, and prefer those who can communicate in plain English. You and the expert need to agree how to translate technical terms into understandable language, without insulting the jury's intelligence. The better approach is to avoid technical terms entirely. If the expert does not use them, make sure the expert immediately explains what the term means in clear and plain English.

Second, you need to decide what exhibits the expert will work with during their testimony. Remember that visual aids such as large diagrams, three-dimensional models, and more sophisticated exhibits such as computer animations have an immense impact on the jury, both as persuasive devices and as aids to memory. With the expert's help, you need to decide what exhibits will most effectively illustrate the points the expert will make during their testimony.

Third, you need to practice the direct examination with the expert. Review the considerations that apply to any witness. Emphasize not just the content of the testimony but also the communication concerns, the paralinguistic and kinesic overtones that control how the jury perceives the expert. Practice getting the expert out of the witness chair and standing before the jury. Assuming the teacher mode, and working with visual aids. Practice in a realistic setting using the actual questions and answers you plan on using in court. Use videotape to show the expert where his testimony is effective and where it can be improved.

Fourth, prepare the expert witness for cross-examination. Review the considerations that apply to any witness. Independently verify the expert's academic and other credentials. Make sure the expert has reviewed his own publications and speeches. Make sure he knows the basic treatises on the subject and what they say. Make sure he has reviewed his deposition transcript in this case, as well as his deposition transcripts in other similar cases. These will be potential impeachment sources on cross. Review the opposing expert's report, since it will probably suggest the points the cross-examiner will raise. Have someone practice both a gentle and ahrd cross-examination with the expert.

Getting experts to spend the amount of time necessary to become well prepared to testify is difficult. Some experts are "too busy" and are rarely available for pretrial preparation. Some believe that the preparation for their deposition is adequate to prepare them for trial. Some experts believe that they already know all there is to know about testifying. Whatever the reason, be careful about experts who will not give you the time you need to prepare yourself, and them, for trial. Like any witness, practice is important. If an expert will not commit themselves to spend adequate time to prepare for trial at the beginning of the engagement, you may need to find another expert.

VIII. Ethics and Discovery

A. HIPAA and Privacy Issues

Although the HIPAA rule does not require consent for release of protected health information, it does require the covered entity to provide the individual with a notice of its privacy practices concerning the uses and disclosures that may be made of such information.

The notice should be written in plain language and contain the following elements:

(1) A header stating that the notice describes how medical information about the patient may be used and disclosed and how the patient can get access to the information;

(2) A description of the types of uses and disclosures the covered entity may make for the purposes of treatment, payment, and health care operation, with at least one example for each purpose;

(3) A description of each of the purposes for which the covered entity may use or disclose protected health care information without the individual's authorization;

(4) If state law is more stringent than the rule for any purpose not requiring authorization, the more stringent restrictions must be stated;

(5) There must be sufficient detail of the purposes to put the individual on notice of the permitted or required uses and disclosures;

(6) A statement that other uses or disclosures will only be made with the individual's authorization and that the individual may revoke such authorization;

(7) If the entity intends to contact the individual about appointment reminders or other treatment alternatives or to raise funds, or if a group health plan, health insurer issuer or HMO intends to disclose protected health information to the sponsor of the plan, it must include a statement of that purpose;

(8) A statement of the individual's rights concerning protected health information, specifically the right to receive confidential communications of protected health information, the right to inspect and copy protected health information, the right to amend protected health information, the right to receive an accounting of disclosures of protected health information, and the right to obtain a paper copy of protected health information that has been transmitted electronically;

(9) A statement that the covered entity has a duty to maintain protected health information confidentially and to give notice to individuals of its duties and practices concerning that information, that the entity is required to abide by the terms of the notice, and that if it changes the practices, it will issue a revised notice; and

(10) A statement that individuals may complain to the Secretary of HHS if they believe their rights have been violated, a description of the complaint procedure and a statement that the individual will not be retaliated against for filing a complaint.

All covered entities must provide the notice to individuals upon request and as required, depending on the type of entity. Health plans must provide notice no later than the compliance date for the plan, to all new enrollees, and to all individuals within 60 days after a material revision. At least once every three years, the plan must notify covered individuals that the notice is available and how they may obtain it. A health care provider that treats individuals must provide the notice not later than the date of the first service delivery or in an emergency situation as soon as reasonably practicable after the emergency treatment. The provider must make a good faith effort to obtain a written acknowledgment of the receipt of the notice, except in an emergency situation. If the provider has a physical delivery site, it must have the notice available to individuals upon request and post the notice in a prominent place. Whenever the notice is revised, the provider must make it available on request and post the revised notice, if appropriate. If a provider maintains a website, it must post its notice on the site. The entity may be sent as a notice via e-mail, if the individual agrees to that method. Covered entities that participate in joint arrangements may issue a joint notice, if it contains the required parts, describes the entities and service delivery sites to which the joint notice applies, and states, if applicable, that the entities will share protected health information as necessary to carry out treatment, payment and health care operations.

In addition to setting out requirements a covered entity must abide by in using and disclosing protected health information, the privacy rule also sets out procedures by which an individual may request restriction of, access to, or amendment of his or her protected health information.

An individual may request that a covered entity restrict uses and disclosures of his or her protected health information for treatment, payment or health care operations, or disclosure to a family member or friend. The entity is not required to agree to any such restrictions. If it agrees to a restriction for treatment, payment or health care operations, it may not use or disclose information for those purposes, except if the individual needs emergency treatment. Any restrictions may be terminated by the individual or the covered entity.

A covered health care provider must accommodate a reasonable request from an individual to receive communications concerning protected health care by alternative means (for example, via mail but not the telephone) or at alternative locations (at someone's house or another address). A covered health plan must honor a request for delivery of such information by alternative means or at alternative locations if the individual states that disclosure of all or part of that information could endanger him or her. The covered entity may require that the request be made in writing and condition the provision of a reasonable accommodation on information of how payment is to be handled and the specification of an alternative address or other method of contact. A covered entity may not require an explanation from the individual as to why he or she is requesting such an accommodation.

An individual has a right to access his or her protected health information, with a number of exceptions. The privacy rule excludes certain types of information from the set of information to which the individual has access. These include psychotherapy notes, information compiled in anticipation of, or for, litigation, and protected health information that is subject to the Clinical Laboratory Improvements Amendments of 1988, to the extent the law prohibited access to the information by individuals or exempt from the Clinical Laboratory Improvements Amendments of 1988 as set out in federal regulation.

Under certain circumstances set out in the rule, the covered entity may deny an individual access to records without an opportunity for a review of the decision. These include:

(1) Requests for material exempted from access;

(2) A correctional institution may deny an inmate's request for protected health information if obtaining such information would endanger the individual, other inmates, or anyone who works at the facility;

(3) An individual's access to protected health information created or obtained in the course of research may be temporarily suspended for as long as the research is in progress, if the individual agrees to the suspension;

(4) An individual's right to records subject to the Privacy Act can be denied if the information is protected from release under that law;

(5) An individual can be denied access to protected health information if it was obtained from someone other than a health care provider under a promise of confidentiality and the access would reveal the source of the information.

Denials of access to records under some circumstances may be reviewed by a licensed health care professional. The professional is one designated by the covered entity to review such decisions and did not take part in the initial decision to deny access. Reviewable circumstances include: (1) a licensed health care professional has determined that the access requested is reasonably likely to endanger the life or safety of the individual or another person; (2) the information requested makes reference to another person and a licensed health care professional has determined that the access requested is reasonably likely to endanger the life or safety of the other person; (3) the request for access is made by the individual's personal representative and a licensed health care professional has determined that the access requested is reasonably likely to endanger the life or safety of the individual or another person.

The covered entity must act on an individual's request for information within 30 days of receipt of the request, unless it cannot take any action within that time. If it cannot deny or grant access to the information within 30 days, it may take a 30-day extension and must inform the individual of the reasons for the delay and the date action will be taken. If it grants access to the information, access can be in the form of inspection, copying or both and must be in the form or format requested by the individual (for example, on paper, on diskette or on CD), if it is readily producible. The entity may provide the individual with a summary or explanation of the information if the individual agrees to be given a summary or explanation and agrees to the fees the entity charges. A covered entity may charge a fee for reproducing or summarizing protected health information; the fee should only include the costs of copying, postage and preparing an explanation or summary. If the entity denies access it must provide a written denial setting out the basis for denial, review procedures (if applicable) and procedures to complain to the covered entity or to the HHS Secretary.

An individual may request that the covered entity amend protected health information about himself or herself. The entity must act on the request within 60 days of the receipt of the request. If it grants the request to amend, it must make the amendments, inform the individual and make a reasonable effort to inform others who may have received the information about the amendment. The entity may deny the request for amendment if it determines that the information was not created by it, is not part of the designated record set, would not be accessible to the individual or is accurate and complete. If the entity denies the request it must provide a written denial setting out the basis for denial, the individual's right to submit a written statement disagreeing with the denial, the individual's right (in lieu of a statement of disagreement) to request that the entity provide the request for amendment and denial with any future disclosures and procedures to complain to the covered entity or to the HHS Secretary. If the individual provides a statement of disagreement, the entity may prepare a written rebuttal and give a copy to the individual. Any subsequent disclosure of the information must include the statement of disagreement and rebuttal, if any, or the individual's request and denial, if the individual requested those be included.

An individual has a right to receive an accounting of the disclosures of his or her protected health information that the entity has made in the prior six years, other than disclosures for treatment, payment or health care operations, to the individual, made pursuant to an authorization, for the facility's directory or to persons involved in the individual's treatment, for national security purposes, to correctional institutions or law enforcement officials, as part of a limited data set or that occurred prior to the date the entity complied with the HIPAA rule. The entity has 60 days to act on a request for accounting, but it can extend the response period for another 30 days. It must provide the date of disclosure, the entity or individual to receive the information, a description of the information and the purpose of the disclosure. If the entity made multiple disclosures to the same person or entity for certain purposes, it may provide information of the dates, entity, description of the information and purpose and may also provide the frequency of disclosures and date of last disclosure. If the information was disclosed for research purposes, the entity may provide the name and description of the protocol or other research activity, a description of the information that was disclosed, the date or period the disclosures were made, the name, address and phone number of the entity that sponsored the research and of the researcher; and a statement that the information may or may not have been disclosed for a particular protocol or other research activity.

The HIPAA rule does not grant the individual a right to restrict release of information as he or she pleases, it does not allow the individual unrestricted access to his or her protected health information, it does not grant an absolute right to amend the record, and the covered entity is not required to account for all disclosures. Nevertheless, the rule does provide individuals with various ways to control access to his or her health information and provides a complaint procedure for the individual to contest the entity's decision concerning that access.

B. Protecting Confidential and Privileged Information

A lawyers' duty of confidentiality is one of the profession's "core values." The ethics duty of confidentiality extends far beyond the evidentiary attorney-client privilege. The duty generally covers any information learned during the attorney-client relationship (not just communications to or from a client). Even information in the public record can be subject to this ethical duty of confidentiality. Lawyers must assure that paralegals under their supervision comply with this ethics duty of confidentiality.

ABA Model Rule 5.3(a)(b) - "With respect to a non-lawyer employed or retained by or associated with a lawyer: a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm shall make reasonable effort to ensure that the firm has in effect measures giving reasonable assurance that the person's conduct is compatible with the professional obligations of the lawyer; a lawyer having direct supervisory authority over the non-lawyer shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer."

Most paralegals' ethics guidelines contain a parallel duty of confidentiality.

In addition to the ethics rules, lawyers and paralegals might be subject to confidentiality duties from other sources:

· Explicit or implicit retainer agreements with clients

· Common-law fiduciary duty -- this is the highest duty known in the law

· Tort principles

· Employment agreements between lawyers (or paralegals) and their law firms, law departments, the government, etc.

· Court orders -- the confidentiality duty in court orders often outlasts the litigation

· Confidentiality agreements entered into by parties in litigation, companies involved in business transactions, etc.

· Miscellaneous laws (such as the securities laws)

Unfortunately, the opportunity for disclosing confidential information exists at all times and in many places. Lawyers and paralegals must avoid inadvertently revealing confidential information at work. Inadvertent disclosure can come from sending a fax to the wrong number, accidentally including privileged documents in a production, etc. Confidential information can sometimes be revealed through sloppy document handling (leaving confidential information in conference rooms, etc.) or careless talk in elevators, rest rooms, etc. To avoid the risk of others deliberately or inadvertently revealing confidential information, lawyers and paralegals should share information within their law firms or law departments only with those who have a "need to know." Outside work, the risks are even higher because there is no justification for ever sharing confidential information. Lawyers and paralegals should avoid sharing work-related information with anyone (even their spouses).

Revealing confidential information at work can cause termination. Paralegals who violate their supervising lawyer's duty of confidentiality can subject the supervisors to ethics charges (up to disbarment), malpractice actions, etc. Lawyers and paralegals might even be subjected to criminal penalties for revealing confidential information.

C. Duty of Candor in Discovery

It is crucial that lawyers honor their duties of candor during the discovery process if our legal system is to function effectively. The ethics rules require certain standards of candor to tribunals, to opponents, and to others involved in the process.

A lawyer's duty of candor to the court is one of the bedrock foundations of our legal system. As one court has said, "a lawyer's duty of candor to the court must always prevail in any conflict with the duty of zealous advocacy." This duty is expressed in Rule 3.3:

(a) A lawyer shall not knowingly:

(1) make a false statement of fact or law to a tribunal;

(2) fail to disclose a fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client, subject to Rule 1.6;

(3) fail to disclose to the tribunal controlling legal authority in the subject jurisdiction known to the lawyer to be adverse to the position of the client and not disclosed by opposing counsel; or

(4) offer evidence that the lawyer knows to be false. If a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall take reasonable remedial measures.

(b) A lawyer may refuse to offer evidence that the lawyer reasonably believes is false.

(c) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer, which will enable the tribunal to make an informed decision, whether or not the facts are adverse.

(d) A lawyer who receives information clearly establishing that a person other than a client has perpetrated a fraud upon a tribunal shall promptly reveal the fraud to the tribunal.

A lawyer also has important obligations of truthfulness in dealing with others, as evidenced by Rule 4.1 and Rule 4.3.

Rule 4.1 provides:

In the course of representing a client a lawyer shall not knowingly:

(a) make a false statement of fact or law; or

(b) fail to disclose a fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client.

Rule 4.3 provides in pertinent part:

(a) In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer's role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.

The ethical obligations of a lawyer participating in the discovery process are further addressed in Rule 3.4:

A lawyer shall not:

(a) Obstruct another party's access to evidence or alter, destroy or conceal a document or other material having potential evidentiary value for the purpose of obstructing a party's access to evidence. A lawyer shall not counsel or assist another person to do any such act.

(b) Advise or cause a person to secrete himself or herself or to leave the jurisdiction of a tribunal for the purpose of making that person unavailable as a witness therein.

(c) Falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law. But a lawyer may advance, guarantee, or pay:

(1) reasonable expenses incurred by a witness in attending or testifying;

(2) reasonable compensation to a witness for lost earnings as a result of attending or testifying;

(3) a reasonable fee for the professional services of an expert witness.

(d) Knowingly disobey or advise a client to disregard a standing rule or a ruling of a tribunal made in the course of a proceeding, but the lawyer may take steps, in good faith, to test the validity of such rule or ruling.

(e) Make a frivolous discovery request or fail to make reasonably diligent effort to comply with a legally proper discovery request by an opposing party.

(g) Intentionally or habitually violate any established rule of procedure or of evidence, where such conduct is disruptive of the proceedings.

The duty of truthfulness to a tribunal is implicated in the discovery process, such as during a deposition or in connection with interrogatories.

In some situations a lawyer is obligated to reveal otherwise confidential client information to rectify false statements made by the client or the client's witness. This can create a difficult ethical dilemma for a lawyer. As one court has noted, "[f]ew [ethical] questions are graver or more serious in the practice of law than determining what evidence of crime or fraud justifies a lawyer's disclosure of his client's confidential information."

At the most basic level, it clearly is unethical for a lawyer who has executed answers to interrogatories and represented to opposing counsel that those answers may be treated as if they were signed under oath by the lawyer's client to include in those interrogatories answers that are false. Reaching this conclusion requires only a very straightforward application of the rules. But what is counsel's obligation when a client believes that the client has answered interrogatories truthfully but later learns that the answers were incorrect?

The Virginia State Bar ethics committee was asked about such a situation. The client apparently acknowledged that the interrogatory answers would have to be amended, but wanted the lawyer to attempt to reach a settlement before amending the answers or otherwise disclosing the correct facts. The committee opined that it would be improper for the lawyer to attempt a settlement without first amending the incorrect answers. It also would be improper for the lawyer to remain silent as to the interrogatory answers while conducting settlement negotiations.

Moreover, contradictory statements given by a client or a witness may create ethical problems for a lawyer. A witness for a lawyer's client gave one statement immediately following an accident, a second statement in writing and signed, and a third statement at a deposition. The lawyer then learned that only the first statement was correct. The lawyer was engaged in settlement negotiations with opposing counsel, who had all three statements but was unaware that the second and third statements were fabrications. Under these circumstances, it would be improper for the lawyer to negotiate using, by implication or otherwise, either of the false statements or the theories of recovery suggested by those statements. It would likewise be improper to base further discovery requests on the fabricated testimony.

False testimony by a client or witness for a client at a deposition is treated as a fraud upon a tribunal for purposes of a lawyer's ethical obligations. After a deposition, a client informed her lawyer that she had lied about some matters. The lawyer thought that those matters were irrelevant to the merits of the case, but might bear upon the client's credibility. The lawyer believed that the client would correct the matters if called to testify at trial. The lawyer, however, thought that the case might settle shortly after the deposition. In response to the lawyer's inquiry, the Virginia State Bar ethics committee concluded that the false testimony was related to the subject matter of the lawyer's representation, that deposition testimony came within the definition of "tribunal" under the rules, and that the lawyer was obligated to disclose the client's false statement to court if the client was unwilling to do so.

A similar result may obtain where a client's expert witness has lied at a deposition about his credentials. Not every misrepresentation made by a witness at a deposition rises to the level of fraud on a tribunal. Consequently, the lawyer must determine whether the expert's qualifications, about which the expert testified falsely, are material to the opinion rendered by the expert. If they are, it is improper for the lawyer to allow the false deposition testimony to stand, regardless of whether the case proceeds to trial or is settled.

Other situations can call into play a lawyer's ethical obligation of truthfulness during the discovery process, and even before discovery begins. For example, a lawyer may not ethically ask a doctor who has treated the lawyer's client to alter medical records, even though no pleadings have yet been filed. A lawyer is ethically prohibited from serving a Virginia subpoena duces tecum on a person in another state where the lawyer knows that the subpoena is unenforceable, unless the individual has agreed to accept service.

It also is improper for a lawyer to miscertify a service certificate on a pleading or other material by showing one date as the response date but not actually depositing the material in the mail for delivery to other counsel until a later date. This is unethical not only if it is done repeatedly, but even if it occurs as a single instance of intentional misstatement.

Problems relating to a client's identity-or even existence- can implicate the duty of truthfulness. A lawyer who undertakes representation of a client in a criminal case and subsequently learns that the client was arrested and charged under a false name may not, by omission or commission, permit the court to believe that the client's true identity is something that it is not. If the lawyer is permitted to promptly withdraw from such a case, the lawyer would not be obligated to reveal the client's true identity to the court. If, however, the lawyer continues in the case, the lawyer should ask the client to inform the court of the client's true identity and, if the client is unwilling to do so, the lawyer has "an affirmative obligation to reveal the fraud to the court."

In contrast, where a lawyer is representing a client in a criminal matter in which the client has been charged under the client's true name, and then learns that the client was arrested for a separate offense under a false name, the lawyer-who does not represent the client in the second case-is not obligated to make any corrective disclosure in the second case.

A client's death during settlement negotiations also may create a disclosure obligation. A client died after authorizing the lawyer to settle his personal injury case within a specific range, and with an offer pending. The Virginia State Bar ethics committee advised that the lawyer was not obligated to disclose the client's death to the opponent insurance company "absent a direct inquiry from the insurance company regarding the client's health." The lawyer, however, would be required to disclose the client's death at the time the lawyer accepts the settlement offer and to inform the opposing side that both the client and the administrator of the client's estate authorized the settlement. The ABA ethics committee has taken a stronger stand in favor of disclosure, concluding that "the lawyer must inform her adversary of the death of her client in her first communication with the adversary after she has learned of that fact."

Finally, a lawyer who learns of the attempted bribery of a witness by the opposing party may have a duty to report that incident to the authorities.

D. Ethics and Electronic Discovery

Seeing that Facebook is now one of Family Attorneys' most valuable tool in discovering information in cases, it's important to remember where to draw the ethical line when utilizing such a powerful tool. Many have probably considered "friend-ing" someone to avoid having to seek consent or to avoid the cost of subpoenaing social media outlets and their users. This, however, is a dangerous proposition because the vast majority of states have adopted the Model Rule of Professional Conduct 8.4. Rule 8.4 makes it professional misconduct for any lawyer to engage in dishonesty or misrepresentation. The rule also makes it misconduct for a lawyer to supervise anyone in activity that would be misconduct if partaken by the lawyer. Thus, it would seem that "friend-ing" an opposing witness or even worse an opposing party would likely violate this rule (communicating with the opposing party would also violate Rule 4.2).

Specifically, two bar opinions have addressed this issue. The Philadelphia Bar Professional Guidance Committee found an investigator, working for a lawyer, could not send a friend request to a hostile third party witness. The opinion concluded that this was deceptive, even though the investigator's profile contained accurate information. The act was deceptive because the investigator was omitting a highly material fact; that the purpose was to provide access to the attorney. Contrary to this, the Bar of the City of New York Committee on Professional Ethics found it was ethical for an attorney or agent of the attorney to "use her real name and profile to send a friend request to obtain information from an unrepresented person's profile." The opinion did find an ethical violation where the lawyer uses a fake profile to send the friend request (coincidentally this would violate most terms of use agreements with social network providers).

Additionally, somewhat related, the San Diego County Bar Association's Legal Ethics Committee dealt with a similar issue. There the lawyer sought to friend two employees of the defendant's company in hopes that they would let their guard down over social media. The committee rejected both arguments put forward. It determined that "friend-ing" a represented party is different than accessing an opposing party's public website, and it found that "friend-ing" is within "the subject of representation."

Model Rule 8.4 is by no means, the only ethical rule potentially implicated when an attorney seeks to friend a witness or opposing party. Model Rule 4.1 requires that in the course of representing a client that the lawyer not knowingly "make a false statement of material fact to a third person." The rule prohibits misrepresentations that "occur by partially true but misleading statements or omissions that are the equivalent of affirmative false statements." Since a material fact is one that could influence the listener, the act of omitting the purpose behind the friend request could prove to be a violation of Rule 4.1.

Further, Rule 4.2 provides an obstacle for this behavior. Rule 4.2 states that: "In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order." There is nothing to suggest that this rule does not apply to electronic communications. However, an argument can be made that "friend-ing" is merely accessing public information, which is not prohibited by the rule. For instance, if the opposing party runs a website, there is nothing prohibiting the opposing attorney from perusing that website.

Model Rule 4.3 seems to address the attorney "friend-ing" a third party witness. Model Rule 4.3 requires that a lawyer, in "dealing on behalf of a client [,]" ensure that an unrepresented party understands the lawyer's interests in communicating with that person and must proactively clarify misunderstandings that the party may hold. Here again, it is likely that an attorney or his agent would have a duty to inform that they are not merely a neutral third-party.

Many view the "friend-ing" of an opposing party or witness to be similar to an undercover investigation. In both instances, the attorney is placed in a situation where "misrepresentation" is certainly more likely and perhaps key to obtaining information. The difference though is that in a criminal investigation the ends are thought to justify the means. Several states including Alabama, Alaska, Florida, Iowa, Virginia, and Wisconsin all have modified Rule 8.4 to create a prosecutorial exception. In these instances, it is ethically acceptable for an attorney to supervise an undercover operation. Outside of criminal investigations however, misrepresentation only seems excusable to prove civil rights violations and to investigate intellectual property infringement where the agent was merely observing normal business operations of the target.

Ultimately, as of yet, there is no hard answer to whether a lawyer may make friend requests or have his agents do so. It lies on the fringe of many of the rules. Generally, the account from which the request is sent must be valid and truthful. Further, the greater the public access to the profile on which the information is contained the greater chances that the behavior will be deemed ethical. Greater public access makes the behavior of "friend-ing" more like observing someone in their ordinary course of business. For instance, Facebook may be joined by any member of the public and is thus more likely acceptable. If the networking website is typically reserved for certain groups, the requesting individual, attorney or agent, had better be properly includable in that group to avoid misrepresentation.

Finally, and perhaps your best option, is that there is little to prevent a client from accessing others accounts. In other words, clients can friend individuals in an effort to conduct an investigation and then pass that information onto their attorney. An attorney can even passively use their client's login credentials to access information that the client would ordinarily have access to. An attorney cannot direct their client to provide messages directly to opposing parties.

E. Ethically Handling Clients Who Lie; Hide Assets; Don't Respond

It is imperative that clients be forthcoming and honest with issues in their lives that may impact their case or the paralegal's ability to adequately assist the attorney in representation of the client. This is particularly true in family law issues where the client's entire life is being scrutinized to determine what assets they are entitled to during a divorce or whether it is in the best interest for a child to be an ongoing presence in the client's life. At the very beginning of representation of a client, you must thoroughly explain the importance of the client being 100% open and honest with you. You should always press the clients on difficult issues to discuss such as drug abuse, affairs, physical abuse, or other activities at the initial client meeting.

The client should be advised that your ability to assist in their representation to the best of your ability will be compromised if they are not open and honest with you at all times.

Clients often believe that they are in control of all the facts and circumstances of their lives. However, clients will inevitable make accidental disclosures by e-mail, texts, or other social networking forums about actions they have taken that they believe have been kept secret.

Disclosures about actions clients have taken inevitably occur by the opposing party's counsel in chambers in front of the judge during status conferences. If a client has been truthful from you from day one, you can anticipate these disclosures ahead of time and work with the attorney to develop a strategy for minimizing the effect of the information when it comes to light.

Dishonest clients can often be identified by adhering to a stringent file management guidelines in all cases. When a client brings allegations forward about the other party, you must immediately request documentation from the client to corroborate the allegation. You will need the information anyway in order to assist in fully preparing the case. A client that is consistently making allegations that the client cannot in any way corroborate with documentation should be immediately reminded and counseled on the critical importance of honesty, its effect on the attorney/client relationship moving forward, and its effect on the credibility of the client's case position overall.

In addition to urging your client to be open and honest, there are several things that during your first client meeting you can urge them to consider in order to avoid problems that can arise during the pendency of litigation. It is important to stress to the client that anything that they do or say while litigation is pending can be scrutinized and often times actions that they take can have negative effects on their case. For instance, some good tips to impart to your new client are:

(1) Not to speak ill of the other parent;

(2) Not to unnecessarily withhold contact between the other spouse and the children;

(3) Not to move or draw down any bank funds, securities or investment accounts of any kind;

(4) Not to harass, cuss at, or stalk the other party; and

(5) Not to dispose of, damage, or destroy the personal property of the other party.

A client's behavior during the pendency of any litigation can have a significant effect on the outcome of litigation. A client who fails to follow the advice of counsel on how to act during the pendency of a family law litigation matter should be immediately cautioned to do so in writing as to the client's decision not to follow your advice and the potential consequences the client may face as a result of the client's chosen course of action. A phone call to the client is fine, but it is not sufficient. Always follow up in writing to protect yourself.

An abusive client must be dealt with swiftly and firmly, and again, in writing. The client must be informed that the client's behavior is unacceptable and that continued representation by the attorney and the firm will immediately cease should the behavior be repeated.

If the client continues not to cooperate, the attorney should not be afraid to withdraw from the non-compliant or abusive client's case. Cases involving these types of clients pose malpractice risk to the attorney as these clients will likely look to blame the attorney when their behaviors lead to undesirable results in their cases.
Most especially in family law matters, it is critical to constantly maintain a strictly professional relationship with your client. In particular, divorce and child custody matters often bring out the worst in people, creating environments where a client's anger and frustration can cause a client to react in unpredictable ways. Specifically, clients should be warned to: Not to speak ill of the other parent in front of the parties' child(ren); Not to unnecessarily withhold contact between the other spouse and the child(ren); Not to move or draw down any bank funds, securities or investment accounts of any kind; Not to harass, cuss at or stalk the other party; and not to dispose of, damage or destroy the personal property of the other party. A client's behavior during the pendency of any litigation can have a significant effect on the outcome of the litigation.

During the first interview with a client, it is important to assess the client's expectations of the litigation. Often, many family law clients have unrealistic expectations about the role of their attorney and the legal process. During this initial interview, family law attorneys need to explain to the client what they expect in terms of communication, cooperation, and an agreement as to how they wish to proceed with the representation. Attorneys need to be careful to avoid providing an opinion of the possible outcome of the case at the beginning of the relationship. By managing clients' expectations, an attorney can avoid potential friction, as well as the risk of attorney discipline.

A client who fails to follow the advice of counsel on how to act during the pendency of a family law litigation matter should be immediately cautioned in writing as to the client's decision not to follow counsel's advice and the potential consequences the client may face as a result of the client's chosen course of action. A phone call to the client is fine, but is not sufficient. Always follow up in writing to protect yourself. An abusive client must be dealt with swiftly and firmly and again in writing. The client must be informed that the client's behavior is unacceptable and that continued representation will immediately cease should the behavior be repeated. Do not be afraid to withdraw from a non-compliant or abusive client's case. Cases involving these types of clients pose malpractice risk to you as these clients will likely look to blame you when their behaviors lead to undesirable results in their cases.


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