Alimony and Tax Implications

Alimony is support paid after a divorce has finalized. Alimony is deductible from the party paying alimony and taxed as income to the party receiving it if it meets certain requirements established by the Internal Revenue Service. For starters, you need to make sure the specific terms of your alimony award are spelled out in a settlement agreement or court order. Second, alimony is intended to be a cash payment. There is some flexibility here however in that payments of bills on behalf of the recipient are still treated as “cash” payments to the recipient. For example, alimony can consist of payments to upkeep a property such as mortgage payments, taxes and insurance though only half of the payments would be deductible.

Alimony can include payments to a third party if designated that it is in lieu of alimony. Additionally, alimony can consist of payment of life insurance premiums for the other party. It is important to note that the parties cannot file a joint return when alimony is being paid and should not be residing in the same household. Finally, alimony must terminate upon the death of the receiving party so any payments required after death would not count as alimony. Child support, noncash property settlement, and payments on the property of the partying paying alimony or use of that party’s property do not count as alimony. Alimony can be direct pay to the recipient or via wage garnishment through Domestic Relations. The method of payment has no bearing on the tax implications for the parties.

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Asking for Custody if you are not a Parent

Parties other than parents and grandparents may be able to file for custody. Section 5324 of the Pennsylvania Domestic Relations laws discusses who has standing to file for legal and physical custody. First, a person who stands in loco parentis may file for custody. In loco parentis status means you are acting as a parent even though there isn’t the biological connection. It has been defined as an assumption of parental status as well as an actual discharge of parental duties giving rise to a relationship which is the same as between a natural parent and child. This requires more than just a frequent care-taker role.

A grandparent may be able to file for legal and physical custody if their relationship with the child began with the consent of the parents and they are willing to assume responsibility for the child. In addition, one of three conditions must be met. First, the child has been adjudicated dependent. This happens through a legal proceeding. Second, it is established that the child is at risk due to parental abuse, neglect, drug or alcohol use. Finally, if the child had resided with the grandparent for at least a year and is subsequently removed from the home then the grandparent can file for custody within six (6) months from the removal date. Grandparents can also see partial physical custody of their grandchildren under Section 5325 if they are unable to meet the requirements for standing under Section 5324.

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Changes to Military Retirement Benefits

Retirement benefits can be a substantial asset up for division in the context of a divorce action. The same is true in the case of military retirement benefits. There is a certain time requirement for service in order to be eligible for military retirement. Once this threshold is reached, a spouse is then entitled to their share of the military retirement benefits no matter how insignificant. Under the ten year rule, where the parties have been married for 10 years and the service member has accumulated 10 years of service, DFAS (Defense Finance and Accounting Services) can pay the spouse directly. When the ten year rule has not been met, the spouse can still receive a portion of the military retirement benefits however the service member will be responsible to pay the spouse themselves. A court can only award a division of a military pension if it has jurisdiction over the service member via residence, domicile or consent.

As of January 2018, the framework for military retirement benefits is changing. All new service members will automatically be enrolled into the blended retirement system which is a combination of the traditional military pension as well as a Thrift Savings Plan. Members with up to twelve years of service can elect to switch to the new blended retirement system. There is a new continuation pay option between years eight and twelve of service contingent on an additional three years of service and a new lump sum payment option. The new rules will also freeze members pay grade as of the time of divorce for use in calculating the marital portion of the pension. This will have the effect of reducing the share to the spouse.

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National Adoption Month

November is National Adoption Month. This is the 22nd year for recognition of National Adoption Month. It started as National Adoption Week in 1984 on the motion of then President Ronald Reagan. In 1995, President Clinton extended the recognition from a week to the entire month of November. This year’s initiative is finding homes for teenagers. Teenagers are often less likely to find a forever home due to their age however it is still vital for teens to establish stable connections as it reflects on their overall wellbeing and increases their likelihood for success as adults.

Pennsylvania participates in presentation of a proclamation every year regarding National Adoption Month pledging its commitment to make sure every child has a place to call home. Pennsylvania specifically recognizes the Statewide Adoption & Permanency Network and PA Adoption Exchange as organizations that work towards the overall goal of permanency for all children. In addition to a month-long awareness, a National Adoption Day is also recognized. This year Bucks County will celebrate National Adoption Day on November 17, 2017. PA estimates that currently there are approx. 2,500 children in foster care awaiting adoption. You can visit www.adoptpakids.org for more information on the adoption process as well as many of the children in need of a home.

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Custody and Domestic Violence

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Emotions run high in any child custody discussion.  When you are fighting with your soon-to-be-ex, in person or through your attorneys, that arguing adds extra pressure to the process.  When violence and abuse are already present in the relationship, there is added urgency along with a fear of you or your children being victimized.  

 

Whether you are negotiating parenting time and a custody schedule for the first time or you think an existing schedule should be reviewed, it is very important for you to tell your attorney about any abuse.  As divorce and family attorneys, we have helped many families through these situations.

First and foremost, if your spouse is abusing you and/or your children, it is critical that you get yourself to safety and follow the protocols of the Bucks and Montgomery County Protection from Abuse (PFA) procedures.

Next, an experienced attorney can help you unravel the tangle of domestic violence as it relates to your custody case.  To be clear, just because you say you are being abused does not mean the judge is going to grant you full custody or take away the other parent’s rights.  While protection and safety are of primary concern, there needs to be documented proof of abuse.  This is where an experienced attorney can help you.  

Documentation is a very important part of any abuse case and should include as much detail as you can by date.  Remember to not only include details about any physical abuse, but also emotional abuse as well.  You will need to find a safe place to store your documentation and sometimes the best place is out of your home and away from where your spouse may find it.  Sometimes your computer or phone can be safe.  We can help you put the right system in place.  Record incidents of physical abuse with a doctor (including pictures) and even with a therapist or social worker.  As you document, also make sure to tell at least one trusted confidant what is happening; this can be a friend or family member.  This level of documentation is critical so that you have a trail of proof should it ever be needed.  

As mentioned above, your safety is of utmost importance and stopping the abuse is the goal.  When your emotions run high, working through the legal process can seem tedious and a waste of time.  However, all custody issues in Montgomery and Bucks County, PA need to be resolved following a legal procedure and we can help you work through it quickly to obtain the best possible resolution.  

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How to Change Your Custody Agreement/Parenting Time

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If you have children and are getting divorced, you will negotiate a parenting time schedule, typically called a custody agreement. This dictates the amount of time that each child will spend with each parent. It can include overnights, holidays, and special arrangements like pick-ups and birthdays. If you are divorcing with younger children, your schedule will more than likely need to be adjusted in the future to accommodate different schedules.  If you have already been divorced for a few years, you may be concerned that your custody agreement is no longer working. After all, your schedule, as well as the activity schedules of your children, have probably changed over time.  


First, as you move through your year, you may find that certain dates in the schedule need to be adjusted.  For instance, you may need to attend a work event or a wedding on a weekend when you are scheduled to have your children.  If your ex is agreeable, a simple email, phone call or text can handle these one-time changes. Sometimes, in contentious post-divorce relationships, parents feel they need to get an attorney involved in every single change.  This can ensure that there is a formal agreement to the change, but is usually not necessary.  


For more substantial changes to your custody agreement, you will want to make sure that the new plan is fair and, most importantly, includes a consultation and/or review with an attorney.  For instance, if you are taking on more nights with your children, you may be entitled to additional child support.  With more permanent changes, you should file with the court.  A handshake (or email) agreement is not enforceable all the time.  


If you have a more serious circumstance to consider, it is essential that you have legal guidance through the process.  If your ex does not show up for scheduled time and your children are continually disappointed, homework is not completed when the children are in your ex’s care, your ex suffers from alcoholism or drug abuse or is incarcerated, then the circumstances may be extreme and legal guidance is imperative.


Lastly, you may want to change your custody agreement but your ex may be opposed to doing so.  You may be changing jobs or moving or you may realize that your child’s new schedule needs to be accommodated in a different way.  If you and your ex do not get along, then you might need lawyers, or even the court, to handle the change.  If both parties do not agree…this will need to be negotiated.  You must be able to demonstrate that it is in the best interest of the child to amend the parenting time agreement.  


Regardless of the changes you need to make, your parenting time schedule can usually be adjusted.  It is critical to find a lawyer who is experienced in Bucks and/or Montgomery County who can walk you through child custody issues and any other changes that should be considered.  

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Accounting for an Estate

An accounting is one of the final steps in administering an estate. It is the final reconciliation of all assets in the estate, all expenses of the estate, and any interim distributions. A formal accounting is filed with the court. An informal accounting may be done as well and is presented to the beneficiaries as a summary of the administration of the estate. Pennsylvania and New Jersey accept the national standard form for filing of accounting. The accounting should list all the items that were received into the estate. This may be separated into categories such as real estate, cash accounts, personal property, bonds, mutual funds, etc.

The accounting will indicate if there have been any gains, losses or other disposition of property received into the estate since the estate was opened through the time of the accounting. Any distributions of the estate would be listed such as personal debts of the decedent paid from the estate, funeral expenses, administration expenses and legal fees, where applicable. Finally, the accounting will state the balance of the estate after disbursements. This is the amount available for distribution to the beneficiaries presuming the accounting is accepted. It is important for the executor or administrator to keep detailed records while handling the estate to make sure the final accounting can be accurately prepared.

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Inventory for an Estate

An inventory of probate assets will need to be filed with the court in the process of probating the will. The first step for the executor or administrator is to gather information on what assets exist. For real estate, ownership should be confirmed first via review of deed or a title search. If the home is not promptly sold, it should be appraised to obtain an accurate value. Be sure to inventory the contents of the home as well. This is particularly important if the will provides for specific bequests of personal property such as jewelry, collections or automobiles. For bank accounts and securities, statements should be obtained from the financial institution or broker.

For retirement-type accounts, a good place to start is with the prior employer if documentation cannot be found otherwise. Same rule applies for life insurance policies as they may have been offered as a benefit of employment as well. You will need documentation to support the date of death values for all probate assets. The inventory should be filed within nine (9) months of the death of the decedent. An inventory provides useful in preparing the inheritance tax return which is also due within nine (9) months. Finally, the inventory comes in handy in closing out the estate and preparing an accounting if necessary.

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Putative Father Registry

A putative father is a man whose legal relationship to a child has not yet been established. This may occur in a situation where the Mother of a child is not married and she alleges someone as the father or the man believes he is the father. Pennsylvania maintains a registry of putative fathers for the purpose of giving a man in such a position notice prior to any termination proceedings. Unmarried parties can agree to execute an acknowledgement of paternity to confirm the legal relationship. This acknowledgment is then submitted to the Department of Vital Records to update the birth records. If the parties are not agreeable to execute the acknowledgement, the alternative course of action is to file a petition for genetic testing.

Both parents will be ordered to participate in genetic testing. Failure to appear by the father can result in a court order declaring him as the father by default. Failure to appear by the mother can result in the court dismissing an action for support. Tests results alone are not sufficient to establish paternity. Instead, the parties must stipulate in writing that the test results prove paternity or the court must make an order on paternity after reviewing the test results. Once there is an order on paternity, at that point Vital Records can be contacted regarding updating their records. Additionally, any actions for support or custody of the child can proceed.

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Pension Valuations

Pensions are often one of the assets up for division in a divorce. The marital portion of a pension plan may be divided amongst the parties. The marital portion of a plan would be the portion that accrued from the date of marriage through the date of separation. In some cases, the entire pension will be marital depending on the timing of the marriage alongside the start date of the pension plan. The marital portion will also include investment experience on the marital portion that accrues post-separation. It will not include contributions by the employee made post-separation. Parties can divide the marital portion of the plan by way of percentage or fixed dollar amount.

It is useful to get a pension valuation completed to identify the lump sum marital value of a pension. This can be particularly useful if the intent of the parties is to offset the value of the pension with other assets. For example, if Husband has a pension worth $200,000 and Wife wants to keep the house with equity of $200,000, the parties may agree Husband keeps the entire pension and Wife keeps the house as an equitable distribution. To arrive at the lump sum value of the marital portion of a pension, a coverture fraction calculation needs to be completed to account for the total years of marriage in the context of the total years of contribution to the plan applied to the total benefit available. The valuation also accounts for interest and mortality factors to arrive at the present value. An expert can be retained to complete this valuation.

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