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Here are the leading legal headlines from Wise Law on Twitter for Thursday, March 22, 2012:

  • Graham James sentence may be appealed 
  • Ontario court to rule Monday on prostitution laws
  • Lawyers Practicing Primarily in New York Must Work for Attorney-Owned Firms, Ethics Opinion Says
  • Charges laid against Chevron and Transocean over Brazil oil spill
  • Asbestos brake pad ban to be tabled by Ontario MPP | Wheels.ca
  • Unions Condemn Ryan ‘Path to Poverty’ Budget
  • Mitel sues Facebook over two patents – ZDNet (blog)
  • Men jailed for ‘accidental’ umbilical cord theft – The Local
  • KONY 2012 filmmaker diagnosed with psychosis 
  • Utah approves 72 hour waiting period for abortions
  • Seriously? College Grads Misled By NY Law School Job Stats? Judge Doesn’t Buy It, Nixes $225M Suit 
  • Defendants who get bad advice on plea bargains deserve relief
  • Fake Filesharing Lawsuits? Dang, That’s Devious 
  • House approves placing photo ID on November ballot (Jim Ragsdale/Minneapolis Star Tribune) 
  • Postal workers find 11 pounds of pot headed to N.Y. publishing house
  • Doorey: Ontario Employer cannot ask job applicant for Facebook password – request prohibited by OHRC
  • Some Threats OK, Others Not So Much in Personal Injury Settlement Negotiations |Erik Magraken
  • Jurors punished for using social media?
  • Employer can be vicariously liable for assault by junior employee on more senior one
  • SCOTUS Justices Question Mandatory Life-Without-Parole Sentences for Juveniles
  • Matt Gurney: Ontario’s ‘Judge Tantrum’ should resign or be fired 
  • Can Job Applicants Be Asked For Facebook Passwords?
  • US Supreme Court Lays Out New Plea Bargain Standards

– Rachel Spence, Law Clerk

Visit our Toronto Law Firm website: www.wiselaw.net
TORONTO EMPLOYMENT LAW • TORONTO CIVIL LITIGATION & ESTATE LITIGATION • TORONTO FAMILY LAW & DIVORCE
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Instead of making a custody determination based on an assessment of the statutory factors, the trial court abdicated its responsibility by allowing the child to decide with whom she lives. The decision is reversed. Johnson v. Mack, New Jersey App….

NJ DIVORCE CHILD CUSTODY


Instead of making a custody determination based on an assessment of the statutory factors, the trial court abdicated its responsibility by allowing the child to decide with whom she lives. The decision is reversed.    
Johnson v. Mack, New Jersey App. Div., March 14, 2012

As reported in the current [April 2012] edition of New Jersey Monthly Magazine, Charles C. Abut, Esq. has again been peer-selected for inclusion in New Jersey’s Top 100 Lawyers. Chosen from among the more than 80,000 attorneys in New Jersey,…

NJ DIVORCE BEST LAWYERS
As reported in the current [April 2012] edition of New Jersey Monthly Magazine, Charles C. Abut, Esq. has again been peer-selected for inclusion in New Jersey’s Top 100 Lawyers. Chosen from among the more than 80,000 attorneys in New Jersey, Mr. Abut has also been included in Best Lawyers in America in each year since 2000 and in Top 100 New Jersey Superlawyers. A graduate of Columbia [BA] and Cornell [JD], Mr. Abut is certified by the New Jersey Supreme Court as a matrimonial law attorney.    
March 13, 2012

According to a recent article appearing on Yahoo.com, people emerging from a divorce may not find much like in the dating department immediately thereafter. Though for some who had to go years without any new romance this is not only normal, it’s also healthier than a rebound relationship. New York psychologist Leah Klungness, Ph.D. and co-author… Continue Reading

According to a recent article appearing on Yahoo.com, people emerging from a divorce may not find much like in the dating department immediately thereafter. Though for some who had to go years without any new romance this is not only normal, it’s also healthier than a rebound relationship.

New York psychologist Leah Klungness, Ph.D. and co-author of The Complete Single Mother, says that while a divorcee may be experiencing pain and confusion following a divorce, it’s better to go through that then to numb yourself with an instant attempt to date. The distraction actually makes the healing process take longer.

As the single time drags on you may want to figure out why you’re dateless. Usually there are two main reasons for a post-divorce dating drought.

1.     You’re not ready to date yet

You may feel lonely, your friends and family may try to set you up with someone but that does not mean you’re actually ready to date again. “Emotional preparedness for dating doesn’t happen magically because the final papers have been signed,” says Dr. Klungness. “Anger, bitterness, thoughts about betrayal and infidelity can linger. If these feelings aren’t worked through, they quickly surface, even in casual dating situations, and can sabotage any chance of romance.”

The best rule of thumb according to Dr. Klungness is that, “When the thought of dating starts with an ‘I should’ instead of an ‘I want,’ it’s a red flag.” Rather than rush into something you’re not really ready for, regrouping and giving yourself time to heal is the best plan. Use the time to do the things you love, concentrate on yourself and put yourself first for once.

One sign that you may be ready to date is when people start to genuinely look attractive to you. “Repeated instances of being attracted to different people suggests the authenticity of your feelings,” explains Jerald Jellison, Ph.D., author of Managing the Dynamics of Change. According to Dr. Jellison, when you’re attracted enough to consider spending time with five different people you should be ready to begin dating again.

2.     Your approach to dating is outdated

If you’ve given yourself time to heal and still aren’t meeting the right kinds of people then maybe your problem is logistical. You’re likely meeting people at the wrong places or with the wrong group of friends. The same strategies you employed while you were young likely won’t work today, you’ve matured and so should your approach to meeting new people. Trying online dating, organized functions, engaging in activities you enjoy and meeting others involved are all possibilities.

Do things with a potential mate because you enjoy them and have common interests such as exercising, hobbies or professional activities. Dr. Jellison says that “After you identify people with whom you’re comfortable doing different things, then see if romantic feelings develop.”

Perhaps most importantly, avoid trying to recreate what you had with your former spouse. “The number-one cause of post-divorce dating disasters is the desire to regain what was lost from the social life of the marriage,” warns Dr. Klungness.

If you find yourself facing the emotional turmoil of family law problems, you need the help of an experienced South Carolina family law attorney to guide you through the messy process.

Source:Why you’re stuck in a dating drought after divorce,” by Nina Malkin, published at Yahoo.com.

See Our Related Blog Posts:

  • Family Courts in SC May Once Again Require Parents to Contribute Toward College Expenses
  • Important Considerations for Parents in Child Custody Relocation Cases

The father was not held responsible for the medical expenses incurred by his ex-wife for her child of another relationship. Pediatric Surgical Associates v. Brennan et al., New Jersey App. Div., March 12, 2012

NJ DIVORCE MEDICAL
The father was not held responsible for the medical expenses incurred by his ex-wife for her child of another relationship.
       Pediatric Surgical Associates v. Brennan et al., New Jersey App. Div., March 12, 2012

Divorced federal employees, retirees, servicemembers, and veterans need to check their beneficiary designations in the wake of a recently overturned Virginia law. The Virginia Supreme Court has overturned as unconstitutional a long-standing Virginia law that automatically changed beneficiary designations for…

Divorced federal employees, retirees, servicemembers, and veterans need to check their beneficiary designations in the wake of a recently overturned Virginia law.

The Virginia Supreme Court has overturned as unconstitutional a long-standing Virginia law that automatically changed beneficiary designations for life insurance policies after divorce (Va. Code Sec. 20-111.1). The Court’s decision applies to life insurance benefits for federal employees, veterans and military personnel.

The reason the law is unconstitutional is the doctrine of federal preemption of state laws under the United States Constitution’s Supremacy Clause. Also, the federal government has “sovereign immunity”, so that a state court can only make an order affecting federal benefits if Congress has specifically made a law allowing the states to do something with that benefit in a certain prescribed way. For federal and military pension Survivor Benefits, Congress has authorized states to do this in divorces, but when it comes to insurance, it has not. In fact, the federal statute creating and governing Federal Employees’ Group Life Insurance (FEGLI), in its section on designated beneficiaries, has a provision expressly preempting state legislation that conflicts with it.

The Virginia statute’s drafters anticipated the possibility of federal preemption of it, and so the statute specifically provides that if it is inoperable as to a particular kind of insurance because of federal preemption of the state statute, then the same net result between dueling insurance beneficiaries shall be achieved by using a “constructive trust” on the insurance proceeds, so that the person named as beneficiary must turn around and pay them to the person who otherwise would be the beneficiary. If you think that doesn’t exactly pass the smell test, and the state seems to be deliberately nullifying and undoing the actions of the federal government, the Virginia Supreme Court agrees with you. It points out, however, that it is joining a small minority position on this question: most states’ courts that have addressed the issue think such statutes are just fine.

The Virginia statute also applies to any kind of “death benefit”, such as designated beneficiaries of accumulated retirement contributions for employees and servicemembers who die before retirement. The court decision does not say anything about those other kinds of benefits. But federal employees and servicemembers would be wise to check and correct those beneficiary designations, too.

Two dissenting justices argued that the provisions of the FEGLI Act were designed to protect the federal government from getting entangled in disputes between rival beneficiaries, and NOT for the purpose of actually giving more benefits to divorced spouses instead of new spouses; and that therefore Virginia’s “preemption workaround” provision was perfectly constitutional, because it makes the divorced widows pay the benefits to the new spouses while keeping the federal government uninvolved.

On a practical level, unfortunately, neither way of deciding this issue is workable, fair or convenient for everybody. The Virginia statute is one of those laws that is designed to do for people by default what most people would choose to do if they attended to their affairs – to remove a divorced spouse from being the beneficiary except in cases where the separation agreement or divorce decree specifically says that they will stay the beneficiary. Many of our clients have rightly been told over the years that the law does this automatically, and have probably relied on it. On the other hand, many servicemembers, veterans, and federal employees have been told by the federal government over the years that they must change their beneficiary designation upon divorce if they want their insurance beneficiary to change. We have had people come to us whose deceased exes deliberately chose to do nothing about the beneficiary designation because they logically inferred, from all those federal warnings, that the beneficiary designation would change only if they changed it, and they wanted the ex-spouse to stay covered. So this is a case where either result would predictably lead to some injustice for quite a few people. But this is certainly the right result constitutionally.

And what we need to do about it is very clear: all federal employees, retirees, servicemembers or veterans who ever got divorced in Virginia or now live in Virginia should make sure that their beneficiary designations reflect their wishes, or their obligations under divorce decrees or agreements.

For more of the legal details see Richard Crouch’s case note about this case. 

Virginia’s General Assembly recently finished its work for the year, and tried to remedy the conflict between state and federal laws on what happens to an insurance beneficiary designation for a spouse when there is a divorce. The problem came…

Virginia’s General Assembly recently finished its work for the year, and tried to remedy the conflict between state and federal laws on what happens to an insurance beneficiary designation for a spouse when there is a divorce. The problem came to a head with a recent  Virginia Supreme Court decision saying that Virginia Code § 20-111.1, which automatically revokes beneficiary designations upon divorce unless the divorce decree or agreement said otherwise, could not be applied to federal employees. (Which implies that it couldn’t apply to veterans or servicemembers, either.) But there have been problems in individual cases for years.

The legislature’s solution, for now, is HB 282 Divorce or annulment; revocation of death benefits; notice.  It amends the statute on beneficary designations being revoked by divorce, NOT by removing or changing the language that tries to overrule federal preemption of the state statute, but by adding: 

E. Every decree of annulment or divorce from the bond of matrimony entered on or after July 1, 2012, shall contain the following notice in conspicuous, bold print:

Beneficiary designations for any death benefit, as defined in subsection B of § 20-111.1 of the Code of Virginia, made payable to a former spouse may or may not be automatically revoked by operation of law upon the entry of a final decree of annulment or divorce. If a party intends to revoke any beneficiary designation made payable to a former spouse following the annulment or divorce, the party is responsible for following any and all instructions to change such beneficiary designation given by the provider of the death benefit. Otherwise, existing beneficiary designations may remain in full force and effect after the entry of a final decree of annulment or divorce.

 

To avoid thereby misleading people who have life insurance other than FEGLI or SGLI, it would be prudent and useful for that notice to add, “And then again, they may not. It depends on what kind of benefits they are, and on state and federal law.” The new legislation also does nothing about federal employees, retirees, servicemembers and veterans who are already divorced, who are also affected by the recent court decision. At least it provides another occasion to get the word out to them that they need to check their beneficiary designations.

Here are the leading legal headlines from Wise Law on Twitter for Wednesday, March 21, 2012:

  • ACLU files torture complaint against US on behalf of Afghan, Iraqi detainees
  • Air Canada pilots challenge back-to-work law 
  • Ontario and New York Bars to hold historic summit
  • Wal-Mart pleads guilty to workplace safety charges in N.B. teen’s death
  • Ex-coach Graham James sentenced to 2 years for sex assaults
  • Chemerinsky: SCOTUS Tackles Law and Politics of the Health Care Act
  • 9-year-old gets jury duty summons: What’s that?
  • Declining LSAT Test Takers Could Spell ‘Death Spiral’ for Bottom Law Schools
  • We stole a bike in Toronto – it was easy
  • US Supreme Court rules on ineffective assistance of counsel claim
  • Ontario court upholds $469000 award for sex assault – OHS Canada

– Rachel Spence, Law Clerk
Visit our Toronto Law Firm website: www.wiselaw.net
TORONTO EMPLOYMENT LAW • TORONTO CIVIL LITIGATION & ESTATE LITIGATION • TORONTO FAMILY LAW & DIVORCE
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This blog is part three of a three-part series discussing how a divorce could affect your taxes. You can read the first blog post in this series here, and the second here.

In 1962, the United States Supreme Court decided United States v. Davis, which created difficulties for divorcing parties and attorneys. Although, there was no sale and no money changing hands, the transfer of appreciated property in exchange for marital rights was considered to be a “sale” with the transferor liable for payment of capital gains taxes.  The gain was determined by the fair market value of the asset on the date of the transfer with the transferor deemed to have received the value equal to that portion of the fair market value transferred to the other spouse.  Conversely, the transferee was charged with neither gain nor loss because the marital rights relinquished were not “appreciated property,” even though these rights were considered to be equal in value to the value of the property received.  Thus, the transferee of appreciated property received it on a “stepped up” basis equal to the fair market value of the property received. 
 

Imposing a tax on the transferor of property incident to a divorce was largely viewed as a perverse tax consequence since the transferor, who was parting with an asset like the marital residence (and often reluctantly so), considered the imposition of a tax in addition to the taking of an asset to be punitive. 
 

The Domestic Relations Tax Reform Act of 1984 changed the Davis rule so that divorce related transfers after July 18, 1984 are treated as gifts which result in neither gain nor loss to either party and thus have no tax consequences.  The transferee receives the asset at the original basis rather than the stepped up basis and is taxed on the gain when the property is ultimately sold.  The transfer is not a taxable event since no tax is immediately imposed on the transferred property. 
 

With regard to transfers of appreciated property, such as real estate or stock between spouses incident to a divorce, prior to 1984 these were considered to be taxable events.  The transferor was subject to capital gains taxes on the gain from the original basis of the property to the fair market value on the date of transfer.  The theory justifying the tax was that even if the transferor received no money, the consideration for the transfer was “money’s worth” in exchange for the transfer.  Again, the transferee took the property at the new “stepped up basis”.  The Domestic Relations Tax Reform Act of 1984 likewise changed the law by providing that the property would pass to the transferee at the original basis with no tax imposed.  Of course, the transferee was required to eventually pay the capital gains taxes or qualify for an exemption when the property was ultimately sold. 
 

The shift of the tax burden from the transferor to the transferee was temporarily rendered more onerous with the passage of the Tax Reform Act of 1986 that eliminated preferential capital gains tax treatment and imposed tax on capital gains at ordinary income tax rates.  The Taxpayer Relief Act of 1997 eliminated taxes on capital gains of up to $250,000 realized from the sale or exchange of the taxpayer’s principal residence. 
 

Deferred compensation payments from non-qualified plans and stock options transferred incident to divorce do not trigger an immediate tax consequence to the transferor.  The tax liability is imposed on the transferee upon exercise of the options or receipt of the deferred compensation.  However, cashing out a retirement account and transferring the proceeds results in an imposition of tax to the transferor.  To avoid an immediate tax consequence, the transfer must be made of the transferor’s interest in the account by way of a rollover directly into the transferee’s account or by changing the name on the account. 
 

With regard to dependency exemptions, prior to 1984 a parent could claim a child if he or she paid more than 50% of the child’s support for the year in question.  Application of this test generated disputes between parents and significant administrative problems for the IRS.  In cases where both parties claimed the dependency exemption, they were required at an audit (usually years later) to produce proof of their expenditures for food, clothing, medical care, shelter and so on.
 

These provisions were changed in 1984 to entitle the primary custodial parent to claim the child absent a written waiver to the other parent.  This was an important feature because as  personal exemptions were phased out for high income taxpayers, it cost little or nothing for a payor in a high income tax bracket to grant the exemption to the other party for whom the exemption actually confers a benefit. 
 

Congress created an additional benefit to parents in 1997 in the form of a child tax credit which acts to offset actual tax liability.  The child tax credit is an addition to the dependency exemption and is available only to the parent entitled to claim the exemption. 
 

An additional credit, the Child and Dependent Care Credit, is available to a custodial parent even if he or she waives the dependency exemption in favor of the other parent.
 

From a simple concept one hundred years ago to provide a source of revenue for the Federal Government by taxing income, federal tax law has steadily evolved and expanded.  Despite periodic expressions of intentions to simplify the tax Code, it has grown ever more complex.  Changes in tax law over the past fifty years have generally been modifications that are responsive to the needs of divorcing couples and their children.  When considered as a whole, such changes have, almost without exception, been improvements. 
 

Divorce lawyers have used their experience in applying the tax consequences of transactions incident to divorce into catalysts for change.  The current state of the tax law as it applies to divorce remains a work in progress; however, it improves with each change.          
 

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory.

This blog is part two of a three-part series discussing how a divorce could affect your taxes. You can read the first blog post in this series here.

 

Alimony comes in many forms, including permanent, rehabilitative, limited duration, reimbursement and temporary (pendente lite) support. It is important to recognize that whether payments qualify as alimony under federal tax law is determined by the characteristics of the payment and not by how they are labeled under state law.

 

In 1954, the Internal Revenue Code added two key provisions, Section 71, which provided that alimony payments were includeable in the taxable income of the recipient and Section 215, which provided that such payments were deductible to the payor.  These provisions remain part of current tax law although they have been subject to revisions over the years.

 

Initially, to qualify as alimony, the payments have to be “periodic”.  Thus, installment payments of a principle sum did not qualify for periodic payment treatment unless the installments were payable for a period of more than ten years.  This ten year requirement was rigidly enforced.  Payments over a shorter period of time could qualify as periodic provided that the total sum was rendered uncertain by a contingency, such as the death of either party or the remarriage of the recipient.  Additionally, the payments must be in discharge of a support obligation, as opposed to payment for transfer of property or a property settlement.

 

Additionally, the payments must have made pursuant to a decree, court order or written agreement.  In the case of an agreement, the requirement was that it be signed by both parties. 

 

Thus, agreements for payment of support that were confirmed by an exchange of letters between lawyers did not qualify, nor did oral agreements between the parties.  Importantly, the requirement of a writing has remained unchanged despite subsequent amendments to the Internal Revenue Code.

 

The Domestic Relations Tax Reform Act of 1984 and Tax Reform Act of 1986 amended the Internal Revenue Code and dramatically changed tax law with respect to alimony. Most of the changes are beneficial to divorcing parties and have provided lawyers with previously non-existent planning possibilities.

 

For example, since1984, parties have been able to designate alimony payments as non-taxable to the payee and non-deductible to the payor and this designation is accepted without question by the IRS.  The concept of alimony “recapture” was also introduced to prevent “frontloading” or disguising property settlements as alimony to gain tax advantages.  To eliminate such problems, the new law placed limits on accelerated alimony by “recpaturing” excess payments in earlier years and adding that excess back to the payor’s income.  The recapture rules do not apply to temporary support or to fluctuating payments not in the control of the payor, such as an  obligation to pay a percentage of income.  Importantly, the rule is applicable only to qualifying payments in the first three post-separation years. 

 

Unlike alimony, child support payments are neither deductible to the payor nor taxable to the payee; however, payments that are “unallocated” between spousal support and child support are entitled to alimony treatment under the Internal Revenue Code.  Unallocated payments became a popular device which resulted in making additional funds available to the family assuming that the payor is in a higher tax bracket than the payee, he or she could afford to pay a larger amount, a portion of which would be retained by the payee rather than paid out in taxes.  This principle proved to be so popular that many states have adopted the unallocated payment structure. 

 

The next and final article in this series will deal with the tax considerations of property distributions, dependency exemptions and childcare credits.

 

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory.

In a previous post, I posed the question ”are you a good candidate for a collaborative divorce?” Once we have determined that the collaborative divorce process is right for you and your spouse, and you have each retained a collaboratively trained attorney to help you through the process, it may be necessary to add other professionals to the team.

In addition to each party’s attorney, other trained professionals may be called upon to help you navigate through the issues in your divorce case.  Not all of these professionals are used in every case, but one or more may be helpful, depending on the issues in your case.

Divorce Coach: This is a licensed mental health professional who guides a party through the emotional issues that many times hinder the settlement process.  A divorce coach can help prioritize issues, aid with communication between the parties, and support that party through the emotional ups and downs of divorce.  Each party should have their own divorce coach to deal with their particular issues.
 

Child Specialists: These are trained professionals who work with children, parents and families in transition.  They advocate for the children in this process by communicating the children’s concerns to the parties.  The child specialist can make recommendations to the parents based on their education and experience as well as the children’s needs and desires.  The goal is to establish a workable parenting plan taking all family members’ needs into consideration.
 

Financial Specialists: This team member can aid the parties by analyzing assets, debts, incomes and budgets with the goal of having everyone understand the financial situation.  In addition, he/she can identify options in dealing with that situation.  Issues of cash flow, tax consequences, and net worth, fall within their purview, as well as determining true income for support purposes in the event there is a closely held business in the mix.
 

Appraisers: If the value of real estate, a business or personal property is at issue, various experts in these fields should be hired as neutral experts to value said property.
 

The above professionals are hired on an as needed basis and can greatly aid the parties in first understanding the issue and them coming to a workable settlement.

 

Maria Imbalzano is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Ms. Imbalzano.

The impact of federal tax law has evolved into an important aspect of my matrimonial practice. This is the first of three blogs which will discuss how the divorce process can affect your taxes, as well as the difference between the need for joint and individual tax return filings during a divorce.

Most married persons file joint returns because it saves them money. The quid pro quo for lower taxes is joint and several liability on the return. Since joint tax returns are favored, the parties are permitted to amend filed tax returns to joint tax returns within three years from the due date of the original returns.

The marital status of the parties at the end of the tax year determines their federal filing options.  If a couple is divorced at any time during the year, including December 31, they are considered single.

Although same sex couples are legally entitled to marry in a growing number of states, these marriage are not recognized under federal law pursuant to the Defense of Marriage Act. Thus, federal benefits, including application of the tax laws, are available only to spouses in heterosexual marriages.  As a result, legally married same sex couples are not entitled to file joint tax returns.  Other federal tax benefits, including alimony treatment of post-dissolution payments are also unavailable to same sex couples. 

Whether a joint tax return is accepted by the Internal Revenue Services is determined by the intent of the parties in the context of the circumstances.  When a couple has historically filed joint tax returns and one party withholds his or her signature, a joint tax return filed by the spouse may be accepted.  For example, in Federbush v. Commissioner, (1960), it was determined that the tax return was a joint filing even though Mrs. Federbush refused to sign it, since her refusal had nothing to do with the contents of the return, but was related to other marital problems. 

In Anderson v. Commissioner, (1984), it was determined that Mrs. Anderson did not intend to file a joint tax return but signed it only when ordered to do so by the divorce court. 
Mrs. Anderson had no income and was not even required to file a tax return.  She resisted signing the joint return because she had concerns about the propriety of her husband’s deductions. Such concerns proved to be justified when a deficiency resulted from the IRS disallowing the losses. The determination that Mrs. Anderson did not intend to file jointly return relieves her of any liability for the deficiency. 

When the issue of intent is driven by threats of abuse or duress, such facts operate as a defense to joint liability, provided that the conduct is directly related to the signing or the refusal to sign the tax return.

An exception to the rule of joint and several liability is known as the “Innocent Spouse Doctrine”, which was introduced in 1971.  Initially, to qualify as an innocent spouse, a taxpayer was required to prove not only that he or she did not know the item on the return was incorrectly reported but also that he or she did not benefit from the underpayment of taxes. 

In response to criticism, the Tax Code was revised to afford broader protection for innocent spouses.  Under the new law, a party could seek relief from joint liability by establishing a lack of knowledge of the understatement of the taxes and that it would inequitable under the circumstances to hold him or her liable for the deficiency.

Joint tax refunds can also involve substantial funds.  Federal tax law often dictates a different result from State divorce laws.  Although a federal tax refund check is drawn to the order of both parties, they do not necessarily have equal joint ownership rights to it.  Instead, it is the source of the overpayment which determines ownership of the refund. Overpayment by a married couple filing a joint tax return is owned by each spouse separately to the extent that he or she contributed to the overpayment.

One of the potential hazards of filing jointly that one of the joint filers may appropriate a tax refund to which the other is entitled.  In United States v. MacPhail, a 1997 Separation Agreement contained a provision requiring the parties to file joint tax returns for the previous year but made no mention as to the payment of any taxes due or entitlement to any refund.  As a factual matter, the taxes due were almost entirely attributable to Mrs. MacPhail’s income from the family business.  When the parties requested a filing extension, it was accompanied by a substantial payment from Mrs. MacPhail’s funds.  When the return was eventually prepared, it showed an overpayment of approximately $300,000 which was designated as a credit against the parties’ tax liability for the following year.  Now divorced, the parties filed separate returns.  Mr. MacPhail filed first, showing a tax liability of approximately $1,000 and claiming the credit.  As a result, the IRS applied the overpayment to his tax liability and issued him a refund check of $299,000.  When Ms. MacPhail later filed her tax return, and claimed the $300,000 credit she thought she thought she had coming, the IRS refused her claim, stating that Mr. MacPhail had already received the refund.  Eventually the IRS acknowledged that the funds had been paid to Mr. MacPhail in error and granted Ms. MacPhail a credit on her separate tax return.  The IRS then demanded payment from Mr. MacPhail but he had already spent  the money and was essentially judgment-proof.  When the issue was further litigated, it was determined that the credit was correctly given to Ms. MacPhail because she was the source of the overpayment and that the IRS was required to look to Mr. MacPhail for repayment, although by this time, a futile act.

In summary, the ownership of a joint federal tax refund belongs to the person who made the overpayment and not necessarily the person who earned the income. 

The upcoming blogs in this series will deal with the tax considerations of alimony, child support and division of property in a divorce.

In “The Collaborative Way to Divorce” by Stuart G. Webb and Ronald D. Ousky, the authors put together a short quiz to help you determine whether the collaborative process is right for you.

Take the following quiz and add up your score: (PDF)

If your total score is higher than 40, you are a good candidate for the collaborative process.  If the total is between 30 and 40, you may still be a good candidate, but you should work on the areas producing 1′s and 2′s. If your total score is between 20 and 30, you may not be quite ready for this process.  If your score is below 20, the collaborative process may not be right for you.

In 1995, the New Jersey Supreme Court rejected a long-standing custom favoring a child assuming the father’s last name automatically. In Gubernat v. Deremer, the Court held that, when parents do not agree what last name their child should have, the Court must determine which name is in the best interests of the child. 140 N.J.120 (1995). This determination begins with a “strong presumption” that the name selected by the custodial parent is in the child’s best interest.

 

That decision was further affirmed by the New Jersey Supreme Court in 2004 in the case of Ronan v. Adely, 182 N.J. 103 (2004).  The Supreme Court affirmed the presumption in favor of the custodial parent’s choice of last name and clarified that the non-custodial parent has the burden of rebutting the presumption–i.e. showing that the name set forth by the custodial parent is not in the best interests of the child. The Court further emphasized that, in rebutting the presumption, the non-custodial parent should address the following factors in showing that the last name set forth by the custodial parent is not in the best interest of the child:

  1. the length of time the child has used one surname;
  2. the identification of the child as a member of a family;
  3. the potential and anxiety, embarrassment and discomfort the child might experience if the child has a different surname than the custodial parent; and
  4. any preference the child might express assuming the child is of sufficient age

It is important to note that both of the children in both Gubernat and Ronan were born out of wedlock, i.e. the parents of the child were never married. In an unpublished (non-precedential) decision rendered in January of this year, the Appellate Division decided the issue of whether the presumption set forth in Gubernat and Ronan applied where the parties were previously married, and the children were born during the marriage. In Emma v. Evans, after the parties’ divorce, the mother sought to change the child’s last name from the father’s last name to her last name. The Appellate Division, in that case, affirmed the best interest of the child test regardless as the child’s birth status, but rejected the presumption in favor of the parent of primary residence when children are born in wedlock. In that case, even though the mother was the custodial parent, the Appellate Division held that she was not entitled to the presumption because the child was born when the parents were still married. 
 

A different Appellate Division Panel issued a published (precedential) decision on March 6, 2012, addressing the same issue addressed in Emma v. Evans, but rejected the conclusion reached in Emma v. Evans that held that the presumption established by Gubernat does not apply to children that were born when the parents were married.

 

In Holst-Knudfen v. Mikish, the Appellate Division clarified that the Supreme Court’s Decision in Gubernat did not differentiate between children born out of wedlock and those born to married parents.  Accordingly, the Panel held that the presumption set forth in Gubernat in favor of the last name proposed by the custodial parent applies to all cases– whether or not the child is born out of wedlock or to married parents.  That Panel also clarified that, the current law states that it is the non-custodial parent’s burden to rebut that presumption by addressing the relevant factors and showing that the last name is not in the best interest of the child. 
 

However, the Appellate Decision in Holst-Knudfen v. Mikish found some merit in the issues that the Panel in Emma v. Evans found with the presumptions set forth in Gubernat, and essentially,  invited the Supreme Court of New Jersey to make new law.  The Panel asked the Supreme Court to differentiate between cases where the parents  have entered into a detailed settlement agreement and cases where the parents did not have a settlement agreement– despite their marital status at the time the child was born.  The Panel noted that,  even in cases where the parents were never married, they may enter  into settlement agreements outlining the parenting time, responsibilities, child support obligations, etc. – and perhaps those settlement agreements may even address which parent’s last name the child shall assume. 

 

The Appellate Division in Holst-Knudfen v. Mikish further suggested that if the parties have expressed a position in their settlement agreement regarding the child’s last name, then the Court should enforce that agreement.  On the other hand, if the agreement is silent with respect to the child’s surname, the Appellate Division in Holst-Knudfen v. Mikish suggested that perhaps the parties should be on neutral ground rather than proceeding with the presumption in favor of the parent of primary residence (who in many cases are women)– so as to not unfairly advantage either parent.  In the event that the Supreme Court adopts this reasoning, then cases where the  parents  have settlement agreements that are silent on the issue of the child’s last name would be determined by a straight best-interests-of the child determination. 
 

In lieu of these conflicting decisions issued only two short months apart, it seems that the issue of the presumption set forth in Gubernat as it applies to persons that have a negotiated settlement agreements–despite their marital status at the time of the child’s birth–may be an issue that comes before the Supreme Court of New Jersey before long. 
 

As always, it is important to consult with an experienced matrimonial attorney if you have any questions regarding any of these cases, or wish to enter into a settlement agreement outlining your rights and responsibilities as a parent.

 

Corrine Cooke is a member of Stark & Stark’s Divorce Group in our Lawrenceville, New Jersey office. For questions, or additional information, please contact Ms. Cooke.

In the case of Holst-Knudsen v. Mikisch, decided on March 6, 2012, the Appellate Division of the New Jersey Superior Court addressed the thorny issue of a custodial parent’s right to legally change the surname of a child from that of the other parent.
 

In this case, the parties were married in 2000 and had a daughter in 2005. They divorced in 2008. The Final Judgment of Divorce incorporated a Marital Settlement Agreement negotiated with the assistance of counsel which contained detailed arrangements and financial support obligations for the child between the individual parent and the non-custodial parent. Two years later, Ms. Holst-Knudsen filed a motion to compel Mr. Mikisch to remit child support through the Probation Department by wage garnishment, to modify the parenting schedule and to legally change the surname of the child to “Mikisch Holst Knudsen”. Mr. Mikisch filed opposed the relief sought.
 

The Marital Settlement Agreement provided that the parties would have joint legal custody with Ms. Holst-Knudsen as the primary custodial parent.
 

The Agreement also laid out a complex parenting time schedule base on Mr. Mikisch’s residence in South Carolina. After issuing its rulings on child support and parenting time, the trial court denied Ms. Holst-Knudsen’s request to change the child’s surname.  Ms. Holst-Knudsen appealed.
 

The Appellate Division reversed and remanded the issue back to the court for further proceedings. In so doing, the Appellate Division cited the seminal case of Gubernat v. Deremer, 140 N.J 120, decided by the New Jersey Supreme Court in 1995. In Gubernat, the Supreme Court held that when parents who are  not raising a child together do not agree about the child’s name, the court must resolve the issue under the “best interests of the child” standard but with a “strong presumption” that the name selected by the custodial parent is in the child’s best interests. Thus, the non-custodial parent bears the burden of proving by a preponderance of the evidence that the custodial parent’s choice is not in the child’s best interests. As stated in Gubernat, the trial court should”examine scrupulously all factors relevant to the best interests of the child” including the length of time the child has used one surname, the identification of the child as a member of a family unit, the potential anxiety or embarrassment the child might experience if he or she bears a surname different from that of the custodial parent, and any preference the child may express if sufficiently mature.
 

The Appellate Division went on to address its disagreement with the recent decision of another appellate panel in the similar case of Emma v. Evans which drew a distinction between children born out of wedlock and those born of married parents. The Court held that the Gubernat standard applies equally in both circumstances. If, however, the parties entered into “a detailed settlement agreement that addressed parenting issues, perhaps the parents should be on equal footing” (emphasis supplied by author). Factors to be considered are whether the parties addressed the issue in their agreement, purposely omitted it or inadvertently omitted it. The Appellate Division concluded that the trial court did not rule under current legal standards and remanded the case for further proceedings consistent with Gubernat, as discussed above.
 

The case is important because changing a child’s surname has consequences for the child’s self perception and relationship with his/her parents, peers, teachers and the community at large. This author personally believes that the presumption in Gubernat should be set aside and that such cases be determined on a straightforward “best interests of the child” basis.  Readers are invited to agree or disagree. 
 

John Eory is the Co-Chair of Stark & Stark’s Divorce Group in the Lawrenceville, New Jersey office. For questions, please contact Mr. Eory.

A study conducted by the University of Chicago and Georgetown University revealed that children whose parents divorce when they are between three and five years old are more likely to have to behavior problems than older children, such as middle school or adolescent children.

That divorce has an adverse impact on child development should come as a surprise to no one; considering the emotional and daily routine disruption of moving from a two parent household to a single parent household, there undoubtedly be a lasting impression left on a young child.

I assume that for the 3,492 children followed in the study, there were 3,492 families that would otherwise prefer not to be in their situation. The unfortunate aspect of the divorce is that there is never a “good time” to do it; by virtue of the divorce process both in the house and the courts, there will likely either be some negative repercussions on the parties and their children. However, for many of those families, the emotional and psychological damage may have occurred before anyone filed for divorce. 

 

Whenever it comes to pass though, the best outcomes in divorces tend to be those in which the individuals involved can effectively co-parent their children and move past any personal animosity in favor of a consistent, unified front with the children. Succeeding in doing so will likely help to blunt some of the developmental impact divorce has on children.

In a case decided late last year the Pennsylvania Supreme Court visited an old and persistently nagging question.  Are personal injury settlements marital property where the injury occurred before separation but the trial or settlement of the claim occurred afterward?

In Focht v. Focht, the husband was injured at a raceway in Leesport, PA in April, 1999.  He and his wife retained counsel shortly after the injury with the wife raising a claim for loss of the consortium of her husband (i.e, his services as a spouse).  A divorce action was initiated in early 2004.  The personal injury cases ultimately settled later that year for a gross value just over $400,000.

 

In the divorce proceeding Husband asserted that his “right” to the $400,000 did not exist until the case was settled with the defendant.  Since that came long after the separation he relied upon the statute stating that court has jurisdiction over property acquired during the marriage.  Wife asserted that the property right accrued the moment he was injured and that all he did later was to exchange his right to sue for a sum of money representing the loss he sustained in April, 1999 when he was injured.

 

This seems to be a relatively simple question but there had been case authority suggesting that Husband was correct and that view was sustained by the Pennsylvania Superior Court. 990 A.2d 59 (2009).  The case that created the confusion was a 2002 case Pudlish v. Pudlish,  where the Superior Court held that a worker’s compensation claim settled after separation was not marital because the employer had denied worker’s compensation up until a time after husband and wife had separated.  796 A.2d 346. The Supreme Court, in Focht decided that Pudlish had been wrongly decided.  In so doing it followed the sound reasoning referenced above; the occurrence of an injury is when a right accrues, not when the case is resolved.  To do otherwise would actually encourage separation and divorce as the injured spouse might not wish to share any resulting settlement with a spouse who may or may not have been part of the trauma itself or the process of recovery.  This also made matters exceedingly complex for the lawyer who represented husband and wife at the outset.  In most instances, a case is settled in one piece and defendants care little about how the settlement is allocated between injured party and spouse.  Where the two are contentedly married there is really very little to fight over, but in this case, because the separation was well underway the personal injury lawyer had to grapple with a husband and wife wrangling over the value of the actual injury versus the derivative consortium claim.

 

We are commonly asked how cases like this are managed where the settlement or award is a large portion of the marital estate and yet one party has had the traumatic injury and the other party has suffered for however long cohabiting with the consequences.  It is not uncommon for people who have suffered traumatic injury to become depressed or require intense care for weeks, months or years at a time.  Thus, the answer to the question is quite fact specific.  In equitable distribution all of these facts must be weighed.  But the single greatest factor remains to what degree the “injured” spouse continues to have either pain or economic loss after the injury occurs.  In cases where a person loses the use of a part of the body or is afflicted with chronic health issues by the injury, the award or settlement will go in large percentages toward that person.  But that may not be the case where a traumatic injury yields to an otherwise full recovery.  These are tough cases to value in equitable distribution but at least it is now clear that the case itself is marital property if the injury occurs before the parties separate.

 

Focht v. Focht  32 A.3d 668 (Pa. Supreme, 11/23/2011)

In December, 2011 a panel of the Superior Court decided Love v. Love. 33 A.3d 1268 (2011). This was a Philadelphia County support action wherein Wife came to the United States with husband’s child.  The child was born in 2003.  The husband and wife married in 2005 and the application for immigration appears to have been processed in 2008.  Shortly after Wife was admitted to the United States the couple separated and Wife began an action for support.

The trial court heard the case and decided that upon consideration of the earnings and earning capacity of all parties, Wife was entitled to support of $622 for the child and $323 for the child.  Wife appealed asserting that, among other things, upon her admission to the United States husband had executed an affidavit under the Immigration and Nationality Act (8 U.S.C. 1183a) by which he committed to support Wife at a level equal to $125% of the Federal Poverty Guideline rate.  That statute references Form I-864 wherein a person seeking to bring an alien into the U.S. or to seek a change in status for the alien creates a contract with the United States government by which the alien can sue for support equivalent to the 125% rate. In 2011, the rate for a household of one was $13,613 and for two it was $18,388. The support order in this case was significantly less than this amount; thus the appeal by wife.

 

The trial court found this obligation was contractual and therefore outside the scope of Pennsylvania support laws.  This was not to state that Wife could not enforce this contract; just that it was not cognizable under Pennsylvania support laws which permit very draconian remedies (e.g., imprisonment, loss of licenses, seizure of bank accounts etc) for non-compliance with a support order.

 

The Superior Court heard this appeal and reversed with instructions to amend the order to the amount required under the “contract” with the Immigration and Naturalization Service.  The ruling contains some fascinating observations not all of which tie firmly with existing law.

In this case the Superior Court relied upon a statute from the Divorce Code. 23 Pa. C.S. 3105.  It provides that where the parties reach an agreement “within the jurisdiction of the court under this part” the Agreement has the effect of being a court order in its own right.  Curiously, however, as the dissent notes, this action was not initiated under “this part” of the Domestic Relations law-specifically the divorce law (called Part IV) in the statute) but under a different part- the support law (called Part V).

 

Another curiosity is the treatment of earning capacity.  It is well established that in deciding support rights under Pennsylvania support law, courts look not only to the actual earnings of the parties but their earning capacities. In this case, the appellate court implies that the affidavit trumps the support law in cases involving immigrants only.  The opinion states: “We conclude that an immigrant spouse’s earning capacity should not be reapplied to offset the sponsor’s financial obligation.”  The court finds that mitigation is an “affirmative defense” that must be pled and proved even though the support rules do not mandate an answer or refer to affirmative defenses being pled.  The conclusion is that in support court only non-citizens may have an advantage because only their actual income will be considered.  

 

The dissent notes that much of this ruling contravenes well established Pennsylvania law and precedent. It suggests that a separate action in contract be initiated although the contract in this case is between the United States and the husband and third party beneficiary rights in a domestic relations setting have been somewhat difficult to enforce.  Chen v. Chen 893. A.2d 87 (Pa. Supreme 2006).[1] Suffice to say that this is a new branch of domestic relations proceedings and one which may trigger more appellate law refining it.  For example, if the sponsor was not the spouse but a parent or employer, is this action cognizable as support?  Can an immigrant plaintiff sue a sponsor and a spouse at the same time for support; one under the INS law and the other under Pennsylvania law?




[1] Chen decided that a child must be specifically designated as an intended beneficiary to maintain third party status to sue. It would appear from the language of Form I-864 that wife in this case would have that status. (“that person may sue you for this support”)

 

The 2011 numbers are in an homes in America lost another 4% of their value last year. Add the rate of inflation for 2011 to that and the number comes to 7.16%. If you are settling your divorce premised upon a recovery of housing prices it would appear that despite a horrid second and third quarter, equities was the place to be last year.

The Case Schiller data do not look specifically at Pennsylvania housing prices. But if you want to feel good try looking at the data reflecting how far markets have fallen from their peak. From worst to best:

 

Vegas                                   60+ percent decline in value

Phoenix                                55+

Miami                                    50

Detroit & Tampa                    46%

San Diego & San Francisco       40%

Atlanta, Chicago, Minneapolis, Seattle     34-35%

New York & Washington DC      25%

Charlotte                                        20%

Boston & Denver                      12-14%

Dallas                                             10

 

Lawyers are not economists.  But the concern about future home prices has a demographic dimension.  Young people graduating from school and entering the employment market are doing so with an unprecedented level of debt.  That debt is going to impact their ability to afford housing for many years to come. Our history since 1950 has been for a new generation of affluent young people to “buy” their parents generation out of larger and larger homes.  Those days may be behind us.

Insurance
From feeds.lexblog

I recently met with a financial planner who commented to me that something divorcing parties neglect to handle is their insurance – whether it’s car, life, homeowners, or health insurance.  I then read this article that summarizes some of the key issues surrounding insurance in the event of a divorce/separation, so I thought I would share it to make sure we don’t neglect the insurance issues:

http://money.msn.com/saving-money-tips/post.aspx?post=130c1f52-5797-451a-9f77-b5dfe1fd6e72

Los Angeles Accident Attorney
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