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Arnold Schwarzenegger And Maria Shriver: Legal And Financial Implications Of Split

Arnold Schwarzenegger Maria Shriver

The Huffington Post   First Posted: 05/23/2011 2:09 pm Updated: 07/23/2011 6:12 am

Since Schwarzenegger went public with his stunning revelations on May 17, the public has been inundated with information about everything from who the mother of his "love child" is to where she lives to her relationship with Schwarzenegger and his family to how the couple’s kids are faring through this difficult time. But not much has been said about the stuff that will probably matter most when the fracas dies down--the legal and financial ramifications of the situation. For that, we asked two Huffington Post Divorce expert bloggers to weigh in.

Answering questions about the legal implications of the situation is Robert S. Cohen, whom the New York Times referred to as one of the most powerful divorce attorneys in the United States. He is the founding partner of the New York-based law firm Cohen Clair Lans Greifer & Thorpe LLP and is currently a senior partner of the family law firm Cohen Lans, LLP. He has represented Christie Brinkley, James Gandolfini, Uma Thurman, and Tommy Mattola in their splits, among others.

Answering questions about the financial implications of the situation is Michelle Smith, the Founder and President of the New York-based divorce financial analysis firm Smith Divorce Strategies, LLC. Smith has handled the financial aspects of some of the nation’s most notorious and high profile divorces.

Please note that neither Cohen nor Smith are working with these clients or have advised on this case.

THE LEGALITIES

Huffington Post: It seems that Arnold Schwarzenegger and Mildred Baena may have had some sort of agreement in place. If so, what kinds of things would be in it?

Robert S. Cohen: It likely had a clause concerning child support. It would probably have included confidentiality provisions. And anything else that may have transpired between them, such as access to the child, decision-making—all the kinds of things that would normally come up in a custody agreement. The fact that it’s a child born out of wedlock doesn’t change that.

If there was an agreement in place, would that be altered in light of the publicity of the recent revelations?

RC: If the agreement has provisions that say it can be modified under certain circumstances, and one of those circumstances is publicity about the fact that this child exists, then the agreement gets altered, otherwise it doesn’t get altered. So generally these revelations would not affect any sort of agreement, unless the agreement provides for that.

So something like child support payments to Baena would probably not change?

RC: No, but generally child support is a modifiable concept. And in some jurisdictions the passage of time is sometimes reason enough to allow a parent to go back and seek more child support.

We’ve seen reports that Maria Shriver’s net worth is 100 mil and Schwarzenegger’s is 400 mil. Would Shriver be eligible for spousal support?

RC: California is a community property state, which means that assets created by Shriver and Schwarzenegger during the marriage get divided 50-50. The fact that he had a child out of wedlock is irrelevant to the financial split.

Would she be eligible though? She gave up her career at NBC to support him.

RC: If she needed spousal support because she didn’t have enough income, she would be entitled to it. Her giving up her career may or may not be relevant. Generally, one looks at whether or not she needs it.

If the couple fights over custody, would his recent misdeeds be considered, or are those irrelevant?

RC: As far as custody is concerned, the court would only consider what happened here insofar as it might impact his ability to parent the 13-year-old [the older 3 kids wouldn’t be affected by custody rulings]. The courts look to whether the behavior directly affects the relationship with the child. If, for example, instead of being with his kids, he was running around with women, that would be relevant. Here, I could see Maria Shriver’s lawyers arguing that it could affect his relationship with the 13-year old because of the fact that there’s another child of precisely the same age in their home, and he may see that child and have a relationship with that child, and [that may detract from his relationship with his son with Shriver]. But basically, [as far as] what one does outside the marriage, if it doesn’t affect the kids, it’s not really relevant.

Would Shriver be eligible for a bigger settlement because of the recent scandal, or are the circumstances irrelevant?

RC: I would assume that Schwarzenegger is not interested in a public spectacle here. While I assume Maria Shriver is not interested in that either, she’s on the good side of all of this publicity. She’s the aggrieved person—she hasn’t done anything wrong. In New York court papers filed are private, the media can’t get at them. In California, they’re wide open.

So you think they’ll settle out of court.

RC: Yes.

Partly because all the details of their life together would be made public if they went to court?

RC: Yes. Schwarzenegger is going to want this to go away as best he can. And does that give Maria Shriver some leverage in the negotiations? Maybe.

THE FINANCIALS

Huffington Post: What kinds of things is Maria likely talking about and thinking about with her lawyers now, finance-wise?

Michelle Smith: They are probably now in what I call “Ice T mode”--quantifying her lifestyle, the kids’ lifestyle, and figuring out how much money is needed for all of it. ‘I’ is for identifying assets. ‘C’ is for classifying them—are they real estate or private investments, are they liquid, are they illiquid, are they real estate, what’s the family home? Did they come into the marriage with anything? Classification is critical. What’s coming in the future—payoffs? Royalties? The ‘E’ is evaluating--brokerage accounts, hedge funds. And the ‘T’ is, what are tax implications? It’s intense information-gathering time. And you’re doing not only the 30,000 feet above view, but also looking from the ground up to make sure it’s all captured and listed. Then you start to discuss.

Is there a financial ramification to an affair?

MS: Sometimes, and it depends on the state. In some states there is leverage, in others there is not. If it’s a factor in your state, and the judge is sympathetic to you, it could matter. There’s all kinds of things that get ruled on in a split. If there’s an egregious package of behavior, it may be a factor. Here, we are also dealing with what I call a “guilt window,” when a settlement deal could be more generous to her.

What does that mean?

MS: Well, I’ve got to believe that this will settle out of court. There is a period of time—this intense period of public scrutiny—where he will most likely feel guilt and give more [money] than if the two go through protracted litigation. It usually lasts a couple of months; I’ve seen it last a year. And man, when that window closes, it’s over. So often I tell my clients, ‘You’re never going to get a richer deal than you will in this moment.’ It may be hard, but that deal is never on the table again. If you throw it into court, you’re going to lose that leverage.

Is it smartest in this case for them to sell the house?

MS: There’s likely enough money here between the two of them where there’s not going to be a forced house sale. It’s going to come down to what’s best for the kids. Not every divorce has the luxury of not disrupting the kids. This is really about doing what disrupts them the least.

Shriver has moved out of the house, at least for the time being. Could that negatively affect her?

MS: Probably not. People say, ‘don’t abandon the house!’ But in this case, this isn’t your garden variety mom ran out of the house, left the kids behind kind of thing. It’s an extenuating circumstance.

In a perfect world, what would Shriver have done to protect herself against financial disaster when she went into this marriage?

MS: She would have made sure that she had access to all marital money. That she had advisors who knew where everything was. She would have made sure both their names were on the accounts, and on any LLCs or private partnerships they may have used to buy houses or luxury goods. Hopefully she had her own team of advisors who gave her regular status updates. She could have done all of this. We don’t know.

But a lot of women don’t deal with the money. And when you’re famous and rich, you often have people handling it for you. But when there are large sums of money, you’re not going to notice [even thousands] disappearing [to a mistress].

Would she be eligible for some portion of the money he paid Baena—there are reports that he paid $65,000 towards her house in Bakersfield, for example.

MS: What matters is [determining] how much money was spent on [Baena]. If it’s a big number relative to the couple’s total assets, then Shriver’s team could argue that it was marital money, and she is entitled to some of it. In general, though, just follow the money—that’s where the whole story emerges.


Please note that this information does not constitute legal or financial advice, and is not a substitute for consulting your own attorney or financial advisor.



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