Business Perks

It is not uncommon for self-employed parties or parties with ownership interests in a business to have some expenses paid for by the business. Examples may include paying their cell phone bill, car payments or repairs, travel expenses, entertainment costs, membership dues, etc. Many of these expenses can subsequently be deducted as legitimate business expenses in terms of preparing a business tax return however, they are treated differently in the context of family law. The issue of how personal perks are being paid often arises when trying to identify income available for child or spousal support. The value of some of these “business expenses” can be added back to a party’s income for purposes of a support calculation.

Business perks are also relevant in the context of a business valuation. 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 however, the personal perks paid by the business on the owner’s behalf would need to be accounted for and subsequently, necessary adjustments would need to be made. Removing all expenses representing personal perks paid to the owner will increase the total income of the business and in turn, increase the value. If there is more than one owner a similar review of what business expenses are actually personal perks should be done for the other owners as well.

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Guardianship

Guardianship is an option for any individual who has trouble or is incapable of making their own decisions. A court may appoint a guardian and grant the guardian authority to make decisions on behalf of the individual who has been deemed incapacitated by the court. The standard for incapacity involves an analysis of whether the individual can manage their financial resources and/or meet essential requirements for their own health and safety. A petition should be filed with the court to initiate a guardianship proceeding. Shortly after filing a petition you will be assigned a hearing date. The petitioning party has the burden of proof to demonstrate guardianship is absolutely necessary. This generally involves securing expert testimony from a treating physician regarding the extent of the incapacity and necessity for a guardian.

Notice of the hearing and a copy of the petition must be served on the individual for whom guardianship is sought (Respondent) explaining in plain language the possible ramifications of the forthcoming legal proceedings. Notice must also be given to additional interested parties such as other family members. The court’s decision will address the nature and duration of any guardianship to be instituted. For example, the court will state whether it is limited guardianship or plenary guardianship. Limited guardianship is appropriate where the Respondent is not totally incapacitated and only needs assistance with certain areas and so the court would dictate what specific powers the guardian will have. The appointed guardian must act for the best interests of the Respondent and file a report each year with the court regarding the ongoing care of the Respondent. The Respondent or any other interested party can petition the court to modify or terminate the guardianship if circumstances change or if the appointed guardian is not acting appropriately.

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90 day Mutual Consent Divorce

A no-fault divorce means that neither party is asserting that the other party did something wrong. Instead, the assertion is that the marriage is simply irretrievably broken. In Pennsylvania, a no-fault divorce may be granted after a waiting period of 90 days provided both parties consent to the divorce at the conclusion of the waiting period. This waiting period is often referred to as a cooling-off period. It is utilized to give the parties an opportunity to reflect on the severity of the decision to get a divorce and/or seek marital counseling to see if the relationship can be saved. The 90-day waiting period begins to run from date of service of the Complaint in Divorce.

At this point, almost half of the states have some waiting period between when you file and when you can be divorced however, there does not appear to be any correlation between the length of the cooling off period versus the rate of divorce. New Jersey and Arkansas have longer waiting periods for a no-fault divorce. New Jersey has one of the lowest divorce rates in the country while Arkansas has one of the highest divorce rates. Pennsylvania does specifically indicate its policy behind the mandatory waiting period is to “encourage and effect reconciliation and settlement of differences between spouses” as the “protection and preservation of the family is of paramount concern.” 23 Pa. C.S. 3102.

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Appraisals for Divorce

An appraisal may be needed to ascertain an accurate value of an asset in a divorce or estate matter. Assets that may require an appraisal include real property, jewelry, vehicles, antiques, and even retirement plans. Parties may elect to use one appraiser or have their own independent appraisers. When choosing an appraiser, it is important to make sure the appraiser is licensed or certified. A licensed appraiser has met the minimum requirements for practice. A certified appraiser must complete additional classroom hours and practice in the field. A list of all licensed and certified appraisers is available online. You should also make sure the appraiser you select has prior experience with the exact type of appraisal sought. This would include experience in the geographic market, the type of property, and intended use of the property.

You should discuss with the appraiser if any information you supply to them is confidential and should not be included in their report. You should also make it clear who the appraiser is permitted to discuss the appraisal with and/or share the report with. For example, you may not want to share certain information with the opposing party. You should be clear about the valuation date for the appraisal. This may be the date of purchase, date of separation, date of death, or current value. Per the Uniform Standards of Professional Appraisal Practice, appraisers are not permitted to revise an appraisal to account for a different valuation date after completion. Instead, the standards require a completely new appraisal which is not cost-efficient. Finally, you should ascertain whether your appraiser would be available as witness if their testimony in a court hearing becomes necessary. This is generally an additional cost above the cost of the appraisal itself.

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How to Approach the Subject of a Prenup

As a wedding day approaches, most couples are consumed with thoughts of dresses, flowers, music, food, fun, and love. The last thing anyone wants to think about, much less talk about, is how assets will be divided in the event of divorce! However, this is a conversation that many couples need to have. Marriage is full of tricky discussions – it’s ok to start practicing that skill now.

There are many benefits to talking about a prenup. One of those is that the discussion will force you to look at your financial situation and examine both of your attitudes about money. Frankly, a deep discussion about finances should be a prerequisite to marriage, as money is a huge source of friction and discord in many relationships.

Beyond the benefits of discussing financial matters, there are several situations in which having a prenup in place is a good idea, such as:


  • If there is a large financial disparity between the two parties
  • If you own all or part of a business
  • If one of you has a large amount of debt
  • If you are remarrying, especially if there are children involved.

Regardless of your reasons, discussing a prenup can be difficult. Sometimes both parties heartily agree to a prenup. In other cases, one person has to convince the other. Here are a few tips for approaching the subject of a prenup:

Pick the Right Time

Don’t bring up a prenup in the heat of the moment or in the middle of an argument. Likewise, don’t introduce the topic in the middle of a romantic dinner to commemorate the anniversary of the day you met. Pick a quiet, neutral time to bring up the topic – when you are both well-rested and calm.

Consider a Mediator

You could suggest a meeting with a mediator who can help you discuss the advantages of a prenup impartially and without emotion. If you decide to move forward and draft a prenup, the mediator can also help you by asking all of the important questions, gathering information, and offering sound, logical advice. Again, a mediator can remove the emotion from a tender subject.

 

Be Honest

Be truthful and straightforward about why a prenup is important to you. Be very open about your financial situation – the good, the bad, and the uncertainties.

Listen

If your partner is opposed to the idea of a prenup, listen to their concerns. Don’t jump right in with arguments.

While you certainly do not expect your marriage to end in divorce, a prenup can allow you to open important lines of communication, have an honest dialogue about financial matters, and ultimately allow you to retain more control of your financial situation, rather than giving that control over to the court system. Approaching the topic is not easy. Remember that a trained attorney can help.

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APL

Alimony Pendente Lite, or APL, is spousal support while the divorce is pending. A party may petition for APL at the same time as the divorce complaint or any time thereafter prior to the entry of a final decree. The purpose of APL is to ensure each party has the ability to sustain themselves during the divorce. A party seeking APL should be ready to prove they lack sufficient property to provide for their reasonable means and are financially unable of self-support during the pendency of the divorce litigation. It is the income-dependent spouse who would have the opportunity to receive APL. The court may consider the duration of the marriage in making any award. This is to ensure one party does not benefit from a significant support award in the context of a very short marriage.

In a case with children, the APL award will be 30% of the difference of the parties’ net incomes after the child support obligations of the case have been applied. In a case without children, the APL award will be 40% of the difference of the parties’ net incomes. An award of APL is not appealable until after the divorce is final. The reason for that being that APL is not considered a “final order” as is required before an appeal can be taken. APL and spousal support are calculated the same way however, APL can be seen as preferable to spousal support in that there are no defenses to APL whereas for spousal support any conduct that would constitute fault for a divorce matter can result in an inability to receive spousal support. Spousal support can be filed as soon as parties are separated and is not contingent on a divorce action pending.

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Market Experience on Accounts

Certain accounts that may be considered marital property and up for division in the context of a divorce can have fluctuating value based on the market. For example, mutual funds, stock benefits, 401ks, and annuities will reflect gains and losses that can change daily. Similar to other assets, the cut-off date for value purposes is technically the date of separation however gains and losses on that date of separation value through the date of distribution are also considered marital. This can result in a significant sum for an account with a large balance or in the instance of a lengthy separation period.

It is good practice to work with an experienced family law attorney and/or retirement division attorney or actuary to ensure you are getting an equitable distribution of these types of assets. To the extent a Qualified Domestic Relations Order (QDRO) is necessary, your attorney can draft/review an Order with the appropriate language to effectuate the desired distribution. A QDRO is a document that identifies the plan to be divided and gives specific details as to how that division will take place and what rights the party receiving the funds, referred to as the alternate payee, will have going forward. Failure to address the market experience can result in an unfair distribution.

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Name Change Petition

The court has the ability to order a name change of an adult or a minor child. Name changes are permissible so long as it is not sought for illegitimate purposes and the person seeking a name change does not have certain criminal convictions. Specifically, a person cannot request a name change if they have a conviction for murder, voluntary manslaughter, rape, involuntary deviate sexual intercourse, statutory sexual assault, sexual assault, aggravated indecent assault or robbery. A petition for name change should be filed with the civil court in the county where you reside. A filing fee is due at the time of filing as well as copies of your fingerprints which can be obtained at your local police department. A hearing for the petition will be scheduled for one – three months later.

Prior to the hearing date, notice of the petition must be published in the county law reporter as well as a newspaper of general circulation. Additionally, adults must have checks through the Prothonotary’s office for civil matters, the Clerk of Courts for criminal matters, and the Recorder of Deeds for any property issues. If requesting a name change of a minor, in addition to the publication requirements for all name change petitions, you must also proof service on the non-petitioning parent. If the other parent does not agree with the name change, the court will decide after hearing from the parties. A name change of a minor may be granted if it is in the child’s best interests. The party requesting the name change has the burden of proof and must convince the court how the requested change would serve the child’s best interests.

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Same-Sex Adoption

Married same-sex couples can pursue a step-parent adoption. A step-parent adoption requires background checks be completed as it relates to the adopting parents. Presently, there are three background checks required: (1) Child Abuse History Clearance; (2) PA State Police Criminal Record Check; and (3) FBI Criminal Background Check through the Department of Welfare. The rights of the natural parent need to be terminated in conjunction with the adoption petition. This can be via consent of the natural parent or via involuntary termination if grounds for termination exist.

Couples who are not married but interested in adopting a child together can do so following the procedures for a second-parent adoption. Second parent adoptions require the same background checks as a step-parent adoption. They also require a home study whereas a step-parent adoption does not. The home study consists of several visits to the home over a span of time to observe the living arrangements and relationship with the proposed adopting parent. The parental rights of the first parent need not be terminated for the adoption by the second parent to take place. Following successful completion of all the pre-requisites and filing of the Petition for Adoption, the final step is the adoption hearing in either scenario.

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How to Divide Your Retirement Plan

Retirement plans are often one of the significant assets up for distribution in the course of a divorce. Careful attention should be given to the type of retirement plan at issue to avoid tax penalties and/or early withdrawal penalties to the extent possible. Additionally, the type of retirement plan will dictate what will be necessary in terms of documentation or court orders to effectuate the rollover. Non-qualified plans include individual retirement accounts or IRAs. These can usually be rolled over by completion of a form with the applicable institution. You should still do a direct rollover to a similar account to avoid taxes and/or withdrawal fees.

Qualified plans include defined contribution plans such as 401Ks as well as defined benefit plans such as pensions. A Qualified Domestic Relations Order (QDRO) will be necessary to distribute a qualified plan. A QDRO is a document that identifies the plan to be divided and gives specific details as to how that division will take place and what rights the party receiving the funds, referred to as the alternate payee, will have going forward. Rights of the alternate payee may include receiving cost of living adjustments similar to the plan participant and being able to elect their own survivor beneficiary for their interest in the plan. Both qualified and non-qualified plans will be taxable as distributed. The QDRO effectuates a tax-free rollover of funds to the spouse being awarded a share of the retirement plan in divorce but the spouse will be taxed on it when they withdraw it.

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