Wednesday, March 25, 2009

Financial Issues to Consider When Going Through A Divorce

Besides the emotion involved with ending a marriage, divorcing spouses must be on guard to consider the best interests for their financial future, and the future of their children. Here are a few tips to consider:

1. Obtain complete information with regard to the marital estate. You cannot negotiate without a comprehensive review of all assets and debts.

2. Consider very carefully whether you want to keep the marital home. Sometimes, the equity in the home is such a huge percentage of the marital estate that in the divorce, you may receive the home, and little else. Prepare a budget and consider whether you will be able to afford the payments as well as the upkeep (maintenance, taxes, insurance, etc.). Additionally, carefully think about whether you should give up income producing assets in return for the marital home.

3. Consider the cost of health insurance once you are divorced if you are currently on your spouse’s plan. If you cannot obtain insurance through your employer, get several quotes so you can compare.

4. When considering any type of financial settlement, think where you will be in one year, five years, ten years and twenty years and think about various contingencies so, inasmuch as possible, you do not agree to something that you will be unable to afford later. Good planning now may mean a more comfortable future. If you are going to pay or receive alimony, carefully consider the tax consequences.

5. If you or your spouse is self-employed or is a partner in a closely held business, obtain an appropriate business valuation so you understand how that asset will come into play in the overall settlement. Speak to an attorney before obtaining any appraisals as different businesses are valued differently for purposes of divorce.

6. Consider the costs of any assets you will receive in divorce, such as the transaction costs for selling stock or a home, the tax issues and the tax basis of those assets.

7. If you are receiving support, you should also negotiate life insurance in case the spouse paying support dies.

8. When reviewing the assets, pay careful attention to 401(k), pension or other employee retirement plans so that you obtain your fair share in a settlement.

9. If you negotiate with your spouse, before signing anything, obtain legal advice so you do not bind yourself into a disadvantageous situation.

A thoughtful, comprehensive and enforceable financial agreement will prevent headaches later. Remember, you will be living with the financial consequences of your divorce for the rest of your life.

Thursday, March 19, 2009

When the Relationship Ends, What Happens to the Dog?

In both Pennsylvania and New Jersey, courts in the past expressed reluctance to address custody issues regarding family pets. In fact, in Pennsylvania, courts specifically decline to enforce a custody arrangement regarding a pet, even if it is a result of an agreement between the parties. Consequently, legislation has been introduced in Pennsylvania so that the enforcement of pet custody orders becomes part of the statutes. You can click here to read a previous blog on this subject.

This month, the Appellate Division of the New Jersey Superior Court faced a case where a girlfriend and boyfriend broke up yet disputed ownership of the dog. This case came from Gloucester County, New Jersey and, on the appeal, the Animal Legal Defense Fund as well as Lawyers in Defense of Animals wrote amicus curiae briefs (friend of the court briefs expressing opinions of a particular party or interest group). According to the court’s Opinion both of these groups asked the court to adopt some type of a rule that would require consideration of the best interests of the dog. In a review of the Opinion, the court apparently declined to take this route.

In this case, the girlfriend and boyfriend had a 13 year relationship in which they had purchased a house together as well as a dog. When boyfriend decided to end his relationship with girlfriend, they came to an agreement wherein boyfriend would keep the house and girlfriend would keep the dog and half the value of the house. The parties agreed that the dog was worth $1,500 as that is what they had paid in 2003 for this dog with a pedigree, registered with the American Kennel Club.

Subsequent to their breakup, girlfriend allowed boyfriend to occasionally take the dog for visits. Unfortunately, after one of these visits, he refused to return the dog.

Girlfriend sued for specific possession of the parties’ oral agreement and requested that the dog be immediately returned to her. However, the trial court found that a dog is personal property that lacks a unique value that is essential in order for a court to award specific performance. Accordingly, at the trial court level, boyfriend was ordered to pay girlfriend $1,500, the amount that they had agreed they had paid for the dog.

Girlfriend appealed and noted that the dog had a subjective value as well as an intrinsic monetary value and she had always attempted to enforce her right of possession of the dog. She also noted that boyfriend took an action specifically adverse to her ability to enjoy her right to the dog.

After reviewing the case law on the subject, as well as considering the unique qualities of the dog and his relationship to girlfriend, the Superior Court remanded the case, directing the trial court that their conclusion that specific performance was not an appropriate remedy was erroneous. The court noted that allowing boyfriend to keep the dog rewarded him for contemptuous behavior.

Accordingly, in this case, the court found that a family pet had specific and unique value that could not necessarily be assigned a price tag. However, fighting over a dog, to the point where it goes to the Appellate Court, could cost thousands of dollars. During a breakup, whether during a marriage or after a romantic relationship, think carefully about how family pets will be divided, realizing that a disagreement that is brought to court can be cost prohibitive.

Wednesday, March 18, 2009

Are Your Private Psychiatric Records Subject to Review in a Custody Matter?

The Superior Court of Pennsylvania recently issued a well reasoned Opinion regarding whether a parent in a custody battle must release certain private psychiatric records. In the case of Gates v. Reed Gates, a Father had primary custody of the couple’s minor child, while Mother had partial custody. Approximately a year after the custody Order was entered, Father discovered that Mother had recently received inpatient mental health treatment. Father filed a petition with the court requesting that Mother release her records. Mother challenged the jurisdiction of that petition on the basis that there was no custody action pending. Father then filed a petition to modify the custody presumably so the court would have jurisdiction over Mother’s psychiatric records.

The trial court eventually entered an Order directing Mother to consent to release her mental health records to Father. Notably, Father never alleged that Mother did not provide the proper care to the parties’ minor son or posed a risk. The Opinion seems to suggest that Father simply wanted information regarding why Mother had inpatient treatment. The trial court allowed Father to cross examine Mother on the record and she explained that she had inpatient treatment in order to monitor the effect of her medication.

Because Mother had appealed the trial court’s Order to turn over the medical records, Father then filed a petition for contempt. The trial court found Mother in contempt and suspended her rights to see the minor child, as well as directed her to pay Father’s counsel fees. Mother also appealed that Order. Mother asked the Appellate Court for a stay of the trial court’s Order which was granted so that she was allowed to see her son pending the appeal.

The Appellate Court addressed the issues raised on appeal with regard to what privacy rights Mother had in her psychiatric records, whether she was really in contempt of court for failing to turn them over and whether her due process was violated.

The Superior Court quoted the relevant statutes and case law. Ultimately, the Superior Court found that the trial court was in error in directing Mother to release her mental health records with regard to her brief hospitalization.

Notably, this case wound its way through the court for almost two years, all the while Mother objecting to Father’s request for her inpatient psychiatric records. While a trial court has a right to order a mental examination of either the parents or a child to determine a custody arrangement in the child’s best interest, the Superior Court declined to expand the court’s power to obtain, without limitation, a person’s mental health records. The court noted and emphasized that people have an expectation that their mental health records will be confidential and that privacy is necessary and critical for effective mental health treatment. If a patient knew that private communications with a mental health professional would be subject to discovery in various legal proceedings, their willingness to fully cooperate and be open and honest in the treatment process would be severely restricted. This could deter from effective treatment. Of course, this does not mean that a parent’s mental condition may not be placed at issue as part of a custody proceeding. However, parties must look for less intrusive means to address these issues then automatically seeking a comprehensive release of privileged and confidential mental health records without laying a foundation.

Monday, March 16, 2009

Tuesday, March 03, 2009

It Is Not That Easy Being An Innocent Spouse.

As a divorce attorney with a Master’s Degree in Tax, I often get calls from people who have marital as well as IRS problems. Many individuals assume that if there are tax debts from the marriage, they can be somewhat easily addressed by filing an "innocent spouse" petition with the IRS. However, the rules for being granted innocent spouse protection are quite specific and not everyone qualifies. Additionally, sometimes there are less expensive and less burdensome options to attempt to relieve yourself of joint tax obligations.

There are basically four types of relief under the innocent spouse laws:

1. Innocent Spouse Relief: This basically applies when there is understated tax on a return due to your spouse and you had no reason to know of the erroneous items. By way of example, if you and your spouse file a tax return reporting $50,000 of joint income, and your spouse failed to tell you that he or she had an additional $25,000 of income, which would have raised your tax liability, you may qualify for innocent spouse relief.

2. Separation of Liability Relief: Generally, you may be permitted to separate your liability from your spouse if you are now divorced or separated and did not know about any understated tax.

3. Equitable Relief: There is an understated or underpaid tax and, considering all of the facts and circumstances, the IRS determines that you should not be held liable. (Please note that equitable relief is the only type of relief from liability available for underpaid tax).

4. Community Property Laws: This applies to community property states. Neither Pennsylvania nor New Jersey are community property states.

If you find that you owe a joint tax liability with your spouse, petitioning for innocent spouse relief is only one of several options available. Your first step should be to obtain a transcript of your tax account to determine if the IRS number are correct. Use Form 4506-T. Then, review Form 8857 Request for Innocent spouse Relief and the Instructions. You should also review other options such as an offer-in-compromise, an Installment Plan, Bankruptcy or obtaining payment from your spouse in divorce proceedings.

As you can see by the IRS forms, obtaining relief from liability through Innocent Spouse Relief can be an expensive, time consuming process. Evaluate all of your options with a qualified accountant or tax attorney.