What Makes a Prenuptial Agreement Valid in Pennsylvania?

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Gone are the days when prenuptial agreements are viewed as contracts on a marriage or a guarantee on divorce. While some religions and cultures still do frown upon them, they can be a great way to talk about finances and strengthen your marriage with clear expectations. If you have children from a previous relationship and significant assets to protect, a prenup can also make everyone feel more comfortable.

What is a prenup? A prenuptial agreement, also known as an antenuptial agreement here in PA is a formal agreement entered into before marriage in which the future spouses agree to provisions for equitable distribution of assets, debts and spousal support in case they divorce in the future or if they wish to provide for what happens to assets in the event of death by waiving a spousal election which is provided for in each state under the state law. In this document you can discuss current financial positions and how finances are going to be handled during the marriage, and whether you wish your will to control in the event of death.

The general purpose is for future spouses to think about and decide, prior to a marriage, their rights and duties concerning financial issues. These agreements can be especially helpful because putting one together forces the parties to discuss financial issues, a topic many of us avoid and is a common reason for divorces. If one or both parties have a substantial income, assets or debts these agreements may be a good option.

If one of you has significant assets or had to pay handsomely in a previous divorce, a prenuptial agreement can put one’s mind at ease that the less well-off party is not marrying for money.

In case a divorce does happen and if the agreement is valid, the issues agreed to in the contract are settled. Whatever issues not included in the agreement need to be worked out or failing that, litigated.

What makes a prenuptial agreement valid?
It is important to note that a prenuptial agreement’s validity is only determined when it comes into question in either a divorce or estate proceeding. This is why the writing of a prenuptial agreement must be done by an attorney who has significant experience in this area. There are a few general requirements to which make a prenuptial agreement valid:

· The agreement is in writing,

· Signed by both spouses, and notarized.

· Accompanied by a statement of assets for both parties and includes an estimated net worth as well as previous tax and salary information.

· The agreement cannot be the result of fraud or duress. It is a good idea to complete the prenuptial agreement and signing far before the wedding to rule out the appearance that it was forced on one party by the other.

· The parties understood and accepted the terms and conditions of the agreement, agreed to it voluntarily and had enough time to think about it prior to signing it. This includes the opportunity for both parties to consult with their own attorneys and make changes to or discuss points in the document.

· The agreement is fair and not “unconscionable,” which it may be even if what one spouse receives is small or disproportionate compared to what the other spouse receives, as long as one spouse is not left destitute.

Prenuptial agreements, like any contract, can be changed with the agreement by both parties.

A valid prenuptial agreement should shorten if not prevent disputes over financial issues if a marriage ends or a spouse dies, but issues they don’t cover are child custody and child support which can be especially contentious depending on the parties. If they can’t reach an agreement these issues would be decided in court, which can be a long, expensive and emotionally painful process.

Whether or not you signed a prenuptial agreement and your marriage is heading for a divorce, contact our office so we can talk about how mediation could bring an end to the disputes between you and your spouse, allowing you to start a new chapter in your life without the emotional and financial trauma that a divorce can inflict.

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Back to School – Who Pays for What?

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This is an expensive time of year for parents with school-aged children. Back-to-school shopping bills can run high from clothes to backpacks, pencils, and notebooks. When you are divorced and have children who pays these expenses should have been negotiated during your divorce. Your child support payment may have been calculated with these expenses in mind or your agreements should have clearly stated who is going to pay for which items. Sometimes parents simply agree to share all reasonable expenses with one doing the shopping and keeping track of receipts.

Here is a little more information on child support payments here in Bucks and Montgomery County, PA.

Child support in Pennsylvania is based on guidelines established by the state Supreme Court. They are intended to make sure that similarly situated parties are treated similarly. The amount of support is meant to provide for expenditures for food, housing, transportation and other necessary miscellaneous items on behalf of the children.

The guideline amount will be based on the combined net monthly income of both parties. There are circumstances which may warrant a change in the amount including having a special needs child. Raising a special needs child may result in additional education costs due to specialized education. The Rules of Civil Procedure covering child support matters allow for deviations from the guideline amount so you could have a support order requiring these costs be covered by the parties depending on their income, the cost to raise a child, tuition, and extra-curricular activities of the child.

In most cases both parties come to an agreement on which parent pays how much for child support. Educational expenses need to be considered when drawing up these agreements though as circumstances change changes in the agreement are often negotiated.

The person who doesn’t play a role in deciding who pays for what is your child. Like every other issue that may divide former spouses, using children as pawns in a power game will not help you. It will harm your child, your relationship with your child and a judge in a future matter may take your manipulation into account when making a decision.

If you have questions about child support or feel you may need legal representation in a child support matter contact our office so we can talk about your situation, how the law may apply and what can be done to protect your interests and those of your child.

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Child Support Awareness Month

August is National Child Support Awareness Month. President Clinton began the month of recognition in 1995 as part of his welfare reform agenda. The goal was to improve the collection of child support payments by widening the use of sanctions including wage garnishment and suspending driver’s licenses and passports for parents with child support arrears. As of today in Pennsylvania, wage garnishment is virtually always utilized to ensure child support payments can be collected. Child support in Pennsylvania is based on statewide guidelines established by the Pennsylvania Supreme Court. The guidelines are intended to ensure that similarly situated parties are treated similarly. Accordingly, all parties making $3000 per month with 3 kids would have the same basic support award based on the guideline amounts. The guidelines are based on an “Income Shares Model,” such that the amount is based on the combined net monthly income of both parties.

The amount of support reflected in the guidelines is based on the average expenditures of children for food, housing, transportation and other necessary miscellaneous items. Pennsylvania has established a self-support reserve based on the federal poverty guidelines, however, the support guidelines make financial support of children a top priority and the child’s needs in terms of support come first. The family court has the authority to issue a bench warrant to have a party who is not making support payments taken into custody. Additionally, the court can order additional incarceration at a subsequent support hearing as a means of reiterating the importance of regular support payments and demonstrating the severity of the punishment available for failure to comply. The court can also seize any lump sum payments due to the payor including, but not limited to, unemployment compensation, workers’ compensation, and Social Security retirement or disability benefits.

Click here to read more about child support.

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Enforcement of Support Orders

There are many options available to ensure support payments are being made. Income withholding is standard with most support orders. This will allow the support payments to be deducted directly from the payor’s income. Domestic Relations will send an income withholding order to the employer for implementation. If there is upwards of a fifteen (15) day delay in receiving payment, contempt proceedings can be initiated by Domestic Relations or the party receiving support. Overdue support, or arrears, will begin to accumulate with each late or missed payment. The court can unilaterally increase the monthly support award to account for the growing arrears in an attempt to help bring the account current again.

Several other remedies can be imposed to attempt collection of support. The court can seize any lump sum payments due to the payor including unemployment compensation, workers’ compensation, insurance settlements, Social Security retirement or disability benefits, and other public or private retirement funds. The court can put liens against real property to cloud title, suspend a driver’s, occupational, or recreational license, and report the amount owed such that it could affect your credit score. The court can even seize assets from a financial institution such as a bank. Some remedies do require advance notice to the payor regarding the action to be taken. Establishing a repayment schedule does not necessarily safeguard a payor from imposition of the remedies listed.

Click here to read more about support.

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Personal Perks

The issue of how personal perks are being paid often arises when dealing with a self-employed party. Examples of personal perks provided at the expense of the company may include cell phone payments, car payments or repairs, entertainment, meal expenses, travel expenses, country club dues, and other comparable expenses that primarily benefit the individual. These expenses may be still be permissible deductions for tax purposes but the court should consider the amount and nature of these expenses in a support case.

Personal perks are also relevant in the context of a business valuation for divorce. An income based approach is most popular for small businesses. This method of valuation focuses on the cash flow of the business. The reasonable compensation of the party owner should be deducted from the cash flow of the business in doing a valuation. Again, the personal perks paid by the business on the owners behalf would need to be accounted for and subsequently, necessary adjustments would need to be made.

Click here to read more about self-employed parties.

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Additional Expenses in Child Support

Child support in Pennsylvania is based on statewide guidelines established by the Pennsylvania Supreme Court. The guidelines are intended to ensure that similarly situated parties are treated similarly. Accordingly, all parties making $3000 per month with 3 kids would pay the same amount of support based on the guideline amounts. The guidelines are based on an “Income Shares Model.” Accordingly, the guideline amount will be based on the combined net monthly income of both parties. However, there are circumstances which warrant a deviation from the guideline amount such as having a special needs child.

There are often additional financial, education, and medical costs associated with raising a special needs child. The child may be involved in counseling and/or specialized education. There may be frequent medical attention required. Sometimes, special supplies are needed to encourage good behavior and/or supplement their educational program. The Rules of Civil Procedure governing support matters do allow for deviations from the guideline amount. Rule 1910.16-5 lists the factors to be considered in deciding whether a deviation is appropriate. Reasons for any deviation must be clearly articulated. Rule 1910.16-6 discusses allocation for additional expenses independent of the basic support award. Additional expenses can be added in such as health insurance costs, child care costs, summer camp, private school tuition, unreimbursed medical expenses, and other needs. You can create a support order which would dictate these expenses be split between the parties in proportion to their income. Parties can agree to pay the provider directly for their share or for one party to pay the full sum and then seek reimbursement from the other party. It is always a good idea to keep detailed records of expenses for the children and provide proof of the costs.

Click here to read more about child support.

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Earning Capacity

In a support matter, the incomes of the parties will be used to calculate an appropriate award based on the support guidelines applicable throughout the Commonwealth. At the initial appearance for a support matter, both parties are asked to bring in proof of their income in the form of W-2s, tax returns, pay stubs, or other documentation of income received. If a party is unemployed or underemployed, the courts may consider their earning capacity. Pennsylvania Rule of Civil Procedure 1910.16-2(d)(4) discusses earning capacity. First, the rule indicates there should be a determination that a party willfully failed to obtain or maintain appropriate employment. Involuntary reductions income (e.g. lay-offs or unemployment due to illness or disability) generally do not trigger an earning capacity analysis.

If the reduction income is seen as voluntary (e.g. willingly took a lower paying job or cut hours) then the court may impute an income consistent with that party’s earning capacity. A number of factors should be considered when trying to identify an appropriate earning capacity. For example, age, education, training, skill set, work experience and prior earnings history are relevant to consider. A Judge must explain the rationale behind any earning capacity that is assessed against a party. The earning capacity provision exists so that parties who have a support obligation can’t escape their obligation by leaving their jobs or otherwise lowering their income. Under- or un-employed parties seeking to avoid imputation of an earning capacity should be prepared to show they have taken good faith efforts to secure comparable employment and that any reduction income was for a valid purpose, not to lower or avoid a support obligation.

Click here to read more about calculating support.

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Treatment of Veterans Benefits

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Former military members may be eligible to receive a number of different veterans benefits from the Department of Veterans Affairs (VA). Possible benefits include disability compensation, pension benefits, life insurance, educational benefits and more. Title 38 of the U.S. Code addressing veterans benefits dictates that the benefits are off limits to creditor claims. However, Title 38 has special provisions regarding the support of family dependents. Accordingly, receipt of veterans benefits can be counted as income for support purposes.

Veterans benefits cannot be divided as an asset in a divorce case. This is due to the Uniformed Services Former Spouses’ Protection Act (USFSPA). The Pennsylvania Divorce Code confirms this rule. Under 23 Pa. Section 3501(a), discussing the definitions for marital benefits, veterans benefits exempt from attachment, levy or seizure are defined as non-marital. The definition goes on to draw a distinction between any benefits received in lieu of military retired pay. A similar distinction arises in support cases as far as whether the benefits can be garnished for payment of an award. Garnishment of veterans benefits is only permissible where the service member has waived military retired pay to receive the veteran benefit.

Click here to read about military divorce.

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Paternity by Estoppel

A presumption of paternity arises where a child is born into an intact marriage. In that circumstance, absent clear and convincing evidence to the contrary, the husband will be deemed to be the father. However, even in the absence of a biological connection, paternity may be established. Paternity by estoppel acts to impose an obligation on the party who holds themselves out as a father to the child and supports the child to continue to support the child. The Pennsylvania Supreme Court has held that the purpose of paternity by estoppel is to keep families intact and protect the best interest of the child by shielding them from claims of illegitimacy and, potentially, a broken family.

In the case of K.E.M. v. P.C.S., 38 A.3d 798 (Pa 2012), Appellant, mother of G.L.M., brought an action for support against Appellee, the alleged father of G.L.M. Appellant was married to H.M.M. at the time G.L.M. was born. Further, H.M.M. had supported the child and acted as a father figure to G.L.M. for most of the child’s life. Appellee filed a motion to dismiss the support action on the basis of a presumption of paternity on the part of H.M.M. and paternity by estoppel. Appellee’s argument that H.M.M. had acted as G.L.M.’s father prompted the lower court and Superior Court to grant his motion to dismiss the support action against him and continue to hold H.M.M. responsible for G.L.M.’s support. In this case, H.M.M. submitted to a paternity test which ruled him out as the father, however, on appeal the court found it was in the child’s best interests to still recognize Apellant’s husband, H.M.M., as the father.

Click here to read more about child support.

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Step-Parent’s Duty to Pay Child Support for Step-Children

On December 29, 2015, the Pennsylvania Supreme Court decided that a step-parent can be responsible for child support if that step-parent has taken aggressive legal steps to obtain the same custodial rights as a biological parent. A.S. v. I.S., No. 8 MAP 2015 (Pa. Dec. 9, 2015). The mere existence of a relationship between the step-parent and child and other reasonable acts to maintain a post-separation relationship with stepchildren remainsufficient to establish a duty to pay child support. Id. citing Commonwealth ex rel. McNutt v. McNutt, 344 Pa. Super. 321 (1985).

In A.S. v. I.S., Mother had twin sons in Serbia in 1998. In 2005, Mother married Stepfather and moved with the two children to Pennsylvania. Stepfather filed for divorce in 2010, and filed for custody of the children in 2012, seeking to prevent Mother’s relocation to California with the children. The trial court granted Stepfather’s emergency petition and prohibited Mother from relocating. The trial court found that Stepfather had put himself in a situation of a lawful parent by assuming the obligations of a parental relationship without going through the formality of legal adoption. The trial court entered a final custody order granting the parties shared legal and physical custody of the children.

A support master dismissed Mother’s support complaint because the Stepfather was not the biological father and, therefore, did not owe a duty to support the children. Mother filed exceptions to the master’s recommendation arguing that Stepfather should be treated as a biological parent for support purposes because he had sought and obtained legal and physical custodial rights as if he were a biological parent. The trial court affirmed the master’s dismissal of the support complaint and the Superior Court of Pennsylvania affirmed the trial court’s decision. Mother appealed to the Supreme Court of Pennsylvania on the issue of whether a step-parent who obtained equal custodial rights should be liable for child support and, if so, whether the support amount should be calculated based on the child support guidelines.

The Pennsylvania Supreme Court noted that the child support statute providing “parents are liable for the support of their children…” does not define “parent” or “child.” 23 Pa.C.S. §4321. However, other Pennsylvania cases have held that a “parent” for support purposes is not limited to biological or adoptive parents. Additionally, the Court cited to cases holding that a party may be prevented from denying his status as a father where he has held himself out as such. Id. citing Fish v. Behers, 559 Pa. 523 (1999); Hamilton v. Hamilton, 2002 Pa. Super. 72 (2002). When a step-parent commences litigation to achieve all the rights of parenthood at the cost of interfering with the rights of a fit parent, the same public policy is implicated: it is in the best interests of children to have stability and continuity in their parent-child relationships. “By holding a person such as stepfather liable for child support, we increase the likelihood that only individuals who are truly dedicated and intend to be a stable fixture in a child’s life will take the steps to litigate and obtain rights equal to those of the child’s parent.” Id. at *19.

Ultimately, the Court found in this case that “when a step-parent takes affirmative legal steps to assume the same parental rights as a biological parent, the step-parent likewise assumes parental obligations, such as the payment of child support.” Id. at *1. The novelty of this decision could have far-reaching effects on child support obligations.

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