Sunday, October 31, 2010

Deciding who gets the house in a divorce? Get a home inspection.

Today's New York Times featured an excellent article about the value of obtaining a home inspection in a divorce.  When resolving equitable distribution in a divorce in both Pennsylvania and New Jersey, the value of a house can be a significant issue.

Usually, when one spouse wants to keep the home in a divorce, if we cannot otherwise agree on a value, we engage the services of an appraiser who provides a professional opinion as to the fair market value based on comparable sales in the neighborhood.  However, an appraiser does not always take into account specific details of the condition of the house that could greatly affect price.  For example, your house might be similar to your neighbor's but be worth far less due to work needed on the electrical, plumbing or structure -- all things that a home inspector will usually view and provide an opinion in a report.

Additionally, a spouse who keeps a house in a divorce might want to show funds that will be needed for necessary repairs as part of a reasonable needs analysis in an alimony calculation or as an equitable distribution factor.

Home inspections usually cost approximately $500 or more so before deciding on using this tool, discuss the situation with your attorney.  Obviously, if a home inspection provides evidence of a significant work that is needed that will affect the value of the home, and therefore the overall resolution of the divorce, it could be money well spent.

You can read the article from the New York Times by clicking here.

Thursday, October 28, 2010

Stick with old-fashioned networking during divorce and custody litigation.

            Practically everyone uses social networking websites.  Some people keep it simple, with minimal information.  Others put great amounts of detail into cyberspace and their pages read like a minute by minute diary of their lives.  Too much sharing by people who are going through a divorce or difficult custody disagreement often creates significant and irreparable damages.

            Information that you (and your friends) share on websites like Facebook can and will be used against you.  For example, recently we became aware of a case where the husband continually tried to play down the fact that he had an extra-marital affair.  He wisely restricted his Facebook privacy settings so that you could not view information about him unless you were his “friend.”  However, his girlfriend prominently displayed the fact that she was “in a relationship” with the husband, and proudly posted pictures of their beach vacation.  This only goes to show that it is all too easy to forget the many ways that people can gain information about you online. 

In this case, the girlfriend, presumably a proud and welcomed “friend” of the divorcing party, caused problems for the husband by posting pictures online.  Not only should you monitor your close friends’ actions, but you should also beware of people that are “friends.”  By “friends,” I mean those people who may not have your best interests in mind, or may have stronger allegiances to your adversary in litigation.  These “friends” are particularly dangerous online, because the information that you share with them may be used against you.

            The above example also demonstrates the danger of sharing pictures online.  Although the beach vacation pictures were not necessarily scandalous and merely depicted a happy couple on vacation, they did provide a poignant visual image of the alleged extra-marital affair.  Additionally, the evidence of this affair was accessible by the parties’ children and their friends.  In other cases though, the pictures could provide images that not only provided an illustration of a claim in the case, but also could lead to the opposing party having a strong financial claim against the pictured party.

            The advice we give our clients bears repeating often – be aware and cautious when using social networking sites!  The safest course of action is to delete all of your social networking sites, at the very least while the litigation is on-going.  If you choose to continue to maintain an online presence during litigation then make sure that you understand the privacy settings that are offered by the social networking sites that you frequent, and then properly utilize the settings.  Make sure that only true friends have access to the information that you share.  Also, actively monitor the information that online friends share so that you can prevent damaging pictures and information from spreading like wildfire.  Lastly, make sure that you have a secure password.  The opposing party in your divorce or custody litigation likely knows you very well.  This means that they are going to be able to predict likely passwords that you would use.  Additionally, these people are likely going to know the answers to any security questions that you set-up in case you forget your password. 

Limiting your online presence during on-going litigation will simply make your life a bit easier.  Old-fashioned social networking – like meeting a friend for coffee – allows you to utilize and rely on your social network without exposing yourself to the real liabilities that exist in the online world.

Written by Elizabeth A. Bokermann, Esquire, an associate with the Law Offices of Linda A. Kerns.

Tuesday, October 26, 2010

New Jersey - calculating self-employment income for purposes of support

Litigants who are self-employed and control their own income present special challenges in support litigation.  

If someone’s business takes in $150,000 in a year yet spends $125,000 on expenses, does that mean that the person only earned $25,000?  Not necessarily.  In New Jersey, for example, the court rules are very clear as to how a court will calculate income available for support.  

The text of the relevant rule reads as follows:

a. For income from self-employment, rent, royalties, proprietorship of a business, or joint ownership of a partnership or closely held corporation, gross income is gross receipts minus ordinary and necessary expenses required for self-employment or business operation. Personal income from the operation of a business includes all income sources listed above and potential cash flow resulting from loans taken from the business.

b. In general, income and expenses from self-employment or the operation of a business should be carefully reviewed to determine an appropriate level of gross income that is available to the parent to pay a child support obligation. In most cases, this amount will differ from the determination of business income for tax purposes.

c. Specifically excluded from ordinary and necessary expenses, for the purposes of these guidelines, are expenses allowed by the IRS for:

1. The accelerated component of depreciation expenses;

2. first-year bonus depreciation;

3. depreciation on appreciating real estate;

4. investment tax credits;

5. home offices;

6. entertainment;

7. travel in excess of the government rate;

8. non-automobile travel that exceeds standard rates;

9. automobile expenses;

10. voluntary contributions to pension plans in excess of 7% of gross income; and

11. any other business expenses that the court finds to be inappropriate for determining gross income for child support purposes.

So, if you are self-employed, or the other party is self-employed, gather as much information as you can so that you can present the relevant facts regarding income to the court.

Sunday, October 24, 2010

Earning capacity

In Pennsylvania, when determining income for purposes of support, courts rely on actual income as well as earning capacity.  This practice attempts to prevent individuals from deliberately suppressing their income in order to depress a support obligation.

Recently, the Superior Court of Pennsylvania addressed a case wherein a father voluntarily retired in good health at age fifty two (52) after accumulating fully vested pension benefits.  The child covered by the support order is seven years old. Father's pension benefit is approximately half of his previous income.  While the Court found that Father did not choose to retire for the purpose of reducing his support obligation, this still constituted a voluntary reduction of income, as Father was still healthy and able to work full time.  Accordingly, Father was imputed an earning capacity higher than his pension benefit.  You can read the full opinion here.

Saturday, October 23, 2010

If you have access to a trust, it may be considered in your alimony and child support award

In a complicated and length opinion, the New Jersey Superior Court, Appellate Division, recently opined regarding a husband and wife's dispute over income and assets that were available to wife via a trust set up by her family.  You can read the full opinion here.

Friday, October 22, 2010

Costs of sale - do we consider them when valuing assets in divorce in Pennsylvania?

The Pennsylvania Divorce Code specifically permits a court to consider costs of sale when valuing and dividing an asset in a divorce.  In 2005, our Divorce Code was amended so that a court could consider:

"The Federal, State and local tax ramifications associated with each asset to be divided, distributed or assigned, which ramifications need not be immediate or certain."
"The expense of sale, transfer or liquidation associated with a particular asset, which expense need not be immediate or certain."

An example of the practical effect of these two portions of the statutes plays out as follows:

A couple owns an investment property worth $200,000.  If one of the spouses decides to keep this property in the divorce, how do we value it?  The Divorce Code, as outline above, would allow us to subtract the "costs of sale," which in Philadelphia would be 6% for a realtor and 2% for transfer tax, bringing the "value" down to $184,000.  Then, if it is an investment property, we would deduct the capital gains tax that would be owed at the time of sale.  If the capital gains rate is 15%, the tax bite would be $27,900.  That amount would also be subtracted so that the value for purposes of equitable distribution would now be $156,100.  Note the significant reduction from the actual fair market value of $200,000.

Prior to July 2010, the "costs of sale" deduction was only applied on a case by case basis -- and could vary from county to county and even within counties.

However, in July 2010, in the case of Balicki v. Balicki, the Superior Court of Pennsylvania quoted and affirmed the Trial Court's reasoning:

"It is crystal clear that the Legislature intended to stop the practice of the lower courts analyzing the prospect of sale of an asset, and [the lower court Master] was mistaken to do so.  We believe the Legislature intendeds the assets simply be given the value they would have at distribution after deducting every expenses necessary to achieve liquidation.  Since the language in the Divorce Code concerning the immediacy and certainty of the expense of sale is identical, it is also relevant. Balicki v. Balicki, 2010 PA. Super 134.

Accordingly, unless the Balicki case is overruled on appeal to the Pennsylvania Supreme Court, or the Legislature changes the statute, in Pennsylvania we must consider costs of sale of an asset.  

Generally, this rule can be a benefit to the spouse who elects to keep an asset in a divorce and has no immediate plans to sell, as the costs of sale and tax consequences can provide a significant reduction in value for purposes of divorce.

Thursday, October 21, 2010

Thought of the Day

"There are no failures - just experiences and your reactions to them."

- Tom Krause, is a Finnish operatic baritone, psychiatrist and author.

Sunday, October 17, 2010

Thought of the day

“It is better to sleep on things beforehand than lie awake about them afterward.”

― Baltasar Gracian

Wednesday, October 13, 2010

What is income for purposes of support in New Jersey?

When in doubt, read the rules.  In establishing a child support order in New Jersey our child support guidelines define gross income as income from the following sources:

1. Compensation for services, including wages, fees, tips, and commissions.

2. The operation of a business minus ordinary and necessary operating expenses (see IRS Schedule C).

3. Gains derived from dealings in property.

4. Interest and dividends (see IRS Schedule B)

5. Rents (minus ordinary and necessary expenses - see IRS Schedule E).

6. Bonuses and royalties.

7. Alimony and separate maintenance payments received from the current or past relationships.

8. Annuities or an interest in a trust.

9. Life insurance and endowment contracts.

10. Distributions from government and private retirement plans including Social Security, Veteran’s Administration, Railroad Retirement, deferred compensation, Keoghs and IRA’s.

11. Personal injury awards or other civil lawsuits.

12. Interest in a decedent’s estate or a trust.

13. Disability grants or payments (including Social Security disability).

14. Profit sharing plans.

15. Workers’ compensation.

16. Unemployment compensation benefits.

17. Overtime, part-time and severance pay.

18. Net gambling winnings.

19. The sale of investments (net capital gain) or earnings from investments.

20. Income tax credits or rebates (excluding the federal and state Earned Income Credit and the N.J. homestead rebate).

21. Unreported cash payments (if identifiable).

22. The value of in-kind benefits.

23. Imputed income.

If you are preparing for a New Jersey child support matter, you should review this list to determine if you or the other party has income from any of the sources listed.  For more information, read the Child Support Guidelines in the New Jersey Rules of Court.

Tuesday, October 12, 2010

Go Phillies

Looking forward to a parade down Broad Street!

Stormer - all decked out in his Phillies outfit.

Sunday, October 10, 2010

Can this marriage be saved?

Often, when individuals come to my office to consult with me, they indicate that they are not sure if they want to go through with the divorce and that they really want to “work on” their marriage. However, I find that many of these individuals do not have a strategy or a plan to accomplish what is necessary to get their marriage back on track. 

Here are a few tips I have collected during my years as a divorce lawyer to help you develop and execute a strategy to “work” on your marriage:
  • Parties should commit to marriage counseling/therapy. I find that sometimes, a couple may try one counseling session and then refuse to go back. It may be useful for couples to commit from the outset to attending a certain number of sessions, even if they are unsure after the first session. This way, both of the spouses will know that the other is truly making an honest effort and will be engaged in the therapy process for a set number of appointments. 

  • Unfortunately, sometimes a therapist will note to one or both spouses that he or she has underlying issues, such as depression, alcohol or drug dependency or some type of mental health or behavioral issue, that need to be addressed. When one or both spouses are faced with this type of self-awareness, the first reaction often is to stop counseling, either assuming that the counselor is wrong or in an attempt to avoid discussing uncomfortable issues.  However, truly engaging in counseling means that you will at least listen and attempt to follow the expert’s advice. The majority of marriage therapists have a great deal of experience and training. If you trust that individual’s expertise, you should trust their recommendation when they spot an issue. 

  • Shower your spouse with genuine kindness. Sometimes, a marriage gets to the point where all you think about is the other spouse’s faults and the things that are keeping you apart, rather than what brought you together. Go back and try to remember the foundations of your relationship so that you can see the positive attributes of your spouse and the benefits of your relationship.  This helps you see why your marriage is worth saving.

  • Determine your own personal short and long term life goals and make sure, at least on major issues, you and your spouse are on the same page. For example, if finances are a problem issue and the source of stress because one spouse refuses to work or equitably contribute to the marriage, then all of the counseling in the world may not fix the marital problem because the underlying issues still exist.  Similarly, significant differences in opinion on in financial habits, lifestyle expectations or life-altering decisions, like the decision to have children, may not be reconcilable.  Although the question of whether this person is right for you for the rest of your life should have been answered prior to entering into the marriage, you may want to revisit the issue now.  Prolonging a decision to break-up often simply results in more pain and expense at a later date. 

  • Do not make your relationship issues the only focus of your life and conversation. A friend, who is a divorce lawyer, recently told me a story where he got on a flight to Europe and sat next to an individual who learned what he did for a living.  The seat-mate then proceeded to spend the entire flight telling him about her marital problems. Unfortunately, this type of occurrence is more common than not. Relationship and marital problems can overwhelm someone wherein it is all that he or she can think about or discuss. Understand that your friends and family will most likely have sympathy for you and try to help, but there is often a limit to their ability to patiently and sincerely listen to your problems. Do not become the person that people avoid because all you do is talk about your marriage and relationship problems.  Relying on your support network is important, but do not take advantage of them or overwhelm them.  Even in the middle of all the stress, remember there are positive and happy things in your life to discuss, and remember to inquire into your friends’ lives.

  • Avoid sharing too many of your feelings or stories on blogs, Twitter, Facebook or in gossiping with friends and family. If you truly want to work on your marriage, the intimate details of the relationship should be between you and your spouse, not between you and the internet community. 

  • Sometimes, couples need to address underlying problems that strain the relationship.  Your marriage will not improve if you are always arguing about finances.  See a financial advisor to get your money issues in order.  Incessantly arguing about the kids?  Come together on a parenting plan and stick with it.  If you cannot decide on housekeeping standards, then, perhaps, you should consider hiring a cleaning service.  Once the underlying issue is solved, you may find energy to work on your relationship.

  • Do not avoid sexual and intimacy problems.  A sexual relationship is part of a healthy marital relationship.  If your sex life is lacking or non-existent, you should address it with your spouse, your therapist, your doctor or any other professional who can help.  If you want a platonic roommate, then you do not need to be married.  Both you and your spouse should be happy and satisfied with your sexual relationship.

Getting back on track takes work and commitment.  Marriage is not simply the promise of “I do.”  It is saying “I do” every day.  Real marriage requires weathering on-going storms and continued negotiations.

           Written by Linda A. Kerns, Esquire, and edited by Elizabeth A. Bokermann, Esquire.

Friday, October 08, 2010

Who gets Fido?

            During a divorce in Pennsylvania, pets are considered marital property that is to be divided during equitable distribution.  Obviously, a pet is not the same as a bank account and it cannot be divided in half.  Despite the fact that pets often feel very much like members of the family, pets also are not subject to custody orders.  In short, a Pennsylvania judge will not issue an order determining who gets the beloved pet.  It is up to the divorcing couple to determine who will be entitled to the furry best friend.  If the pet has a particularly high monetary value because, for example, it is a prize-winning show-dog, then the party not receiving the pet likely should receive an asset to off-set the value of the pet during the division of assets.

Buddy, the author's happy and
often mischievous Chocolate Lab.
             Sometimes, under amicable circumstances, where the divorcing couple is able to cooperate, the parties choose to share the pet or have visitation time; however, this only works in circumstances where both people are agreeable.  This arrangement will not work if there will be a fight each time that the pet is supposed to change hands.  Additionally, courts will not enforce these types of custody agreements, even if the parties include terms as part of their agreement.  Therefore, your ex-spouse could refuse to return your pet, and you will have no recourse.

            If you have a pet, and anticipate that it will be the subject of contention, you should discuss with your attorney the best way to resolve the situation.  Ideally, you will be able to negotiate an agreement so that everyone’s needs, including your pet’s, are addressed.

           Written by Elizabeth A. Bokermann, Esquire, associate with the Law Offices of Linda A. Kerns.

Wednesday, October 06, 2010

I am paying child support - doesn't that mean I have a right to see my child?

            In Pennsylvania, child support and child custody are totally separate legal cases.  As a parent you have a legal obligation to financially support your child.  This duty exists whether you see your child every day, once a week, once a month or once a year.  Sometimes the amount a parent owes does not seem fair or seems like too high of a percentage of the parent’s income.  However, the amount owed is calculated strictly on a formula basis, except in very high income cases or where there are unusual circumstances that warrant a deviation from the guidelines.  Under the state guidelines, support is calculated using a formula that factor’s in both parents’ incomes, the amount of custody time that the parent has, any special needs that the child has, along with other factors depending on the individual case. 

Even though this child support money is paid from one parent to the other, it is perhaps better viewed as the child’s money because the receiving parent is supposed to use the money to pay for the child’s needs, and the amount owed is based on how much money is needed to support the child considering various factors.  Therefore, the money paid is the parent's legal obligation to financially care for the child.

On the other hand, spending time with the child is not necessarily a legal duty or obligation.  That said, a parent’s desire to be involved in the child’s life, as long as it is driven by good intentions, is always admirable and respectable.  Parents must understand that when a judge decides custody time with a child, the judge is not ultimately concerned with what either parent wants.  Instead, judges use a “best interests” standard.  This means that the judge tries to look at all of the facts and circumstances of the case to determine what custody arrangement is best for the child.  In other words, what custody arrangement is most likely to allow the child to thrive, succeed and live a healthy and happy life.  In cases where it is possible, Pennsylvania courts like to try to award shared custody.  However, shared custody is sometimes not the best option because of the parent’s busy work schedules, the proximity of the parents’ homes to each other and/or the child’s school, the child's hectic school and extra-curricular schedule or many other issues.

At the end of the day, child support and custody are decided based on very different factors.  Child support is a legal obligation and child custody is not.  If you believe that too much or little is being paid in support, then you should consider speaking with an attorney to see whether, due to a change in circumstances, the support obligation should be different.  You also should consult with an attorney if you believe that your child would benefit from a change in custody time.  These issues are independent from each other, but it is often best to address them at the same time for the sake of efficiency and clarity.

Written by Elizabeth A. Bokermann, Esq., associate with the Law Offices of Linda A. Kerns.

Tuesday, October 05, 2010

“Irreconcilable Differences,” “Best Interests,” and other confusing divorce and custody terms

It would be impossible to try to define in this forum the many confusing legal terms that you will confront during your divorce or custody litigation; however, it is important for you to know that many of the terms do not have exactly the same meaning in the courtroom that you would expect them to mean if you heard someone speak the phrase on the street.

For example, during a divorce, you will often hear the phrase “irreconcilable differences.”  This phrase designates that the marriage has essentially failed or is finished and that the parties will not be able to resolve their differences within the marriage.  Using the term does not pass judgment on either of the parties, and it does not suggest failure of any individual.  In other words, if the husband files for divorce on the grounds of irreconcilable differences, it does not mean that it was the wife’s fault that the marriage has ended.  Instead, it only means that the marriage no longer exists in a way that can be sustained.  Because no one is alleging that a specific action of a party caused the breakdown of the marriage, we call this a “no-fault” divorce. 

Another example of a sometimes confusing legal term that arises during child custody litigation is “best interests.”  During child custody proceedings, judges use a “best interests” standard when making decisions, and look to decide what is best for the child.  Often a parent who is seeking increased custody time with his or her child asks, “How can it not best for my child to be with me more often?”  However, in the legal world, best interests means more than simply one question.  “Best interests” is a complex and thorough analysis of all the many facts and circumstances that combine to determine what is best for the child at the end of day, which means that if the judge does not award increased custody time, he or she is not necessarily passing judgment on the parent.  Instead, the judge could be making the decision based on logistics, such as the location of the parent’s home in comparison to the location of the child’s school, the need for a child to be with the other parent or the child’s ability to handle the transitions, among many other reasons.

Like “irreconcilable differences” and “best interests,” there are many confusing terms that you may encounter as you wind your way through a separation or divorce.  If you ever read a document during the course of your divorce or custody proceedings that you do not fully understand, talk to your attorney.  Many documents filed with the court must contain terms and phrases, required by law.  Sometimes, a document can look harsh and foreboding when, in reality, you should not be significantly concerned about the wording.  He or she will be able to explain to you what the words mean in the specific context.  

Your lawyer should not only advocate for you, but also should educate you and guide you through the process.  As always, there is no such thing as a stupid question, and often asking for an explanation can prevent misunderstandings and hurt feelings.

This blog post written by Elizabeth A. Bokermann, Esquire and edited by Linda A. Kerns, Esquire.

Friday, October 01, 2010

Autumn is finally here

“Every leaf speaks bliss to me, fluttering from the autumn tree.”

― Emily Brontë