Discovering Assets and Income in Divorce

It is not uncommon for parties contemplating divorce to try to hide assets in an attempt to keep them out of the marital estate that will be up for distribution. One of the biggest red flags as far as potential hidden assets is if the spending habits or lifestyle of a party is way more than would be expected based on their reported income. You should also be wary of a party who owns their own business. If they deal in cash they can easily hide money. Additionally, what they report for tax purposes is not always indicative of income available for spousal or child support. It complex cases it may become necessary to hire an expert to analyze income flow. Top level executives may receive different forms of income. Examples include stock options, bonuses, car allowances, and deferred compensation plans. Even military members often have a compensation package that goes beyond their base salary.

Discovery is a good start in seeking to track down assets, hidden or otherwise. Tax returns and bank statements are good to review in terms of sources of income as well as where the income is going. A tax return can show rental income, interest on bank accounts, dividends on stock, etc. Bank statements can show any transfers of money and identify where it went to. Parties can subpoena documents directly from the custodian of the documents if the spouse will not cooperate and turn them over. If these initial avenues of discovery do not yield the desired results, a party will have to make a decision as to whether to invest more money in the chase for hidden assets. Any party that anticipates hiding or dissipating assets may become a problem during the pendency of the divorce should obtain a court injunction right away preventing the dissipation or transfer of any marital assets.

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Void and Voidable Marriages

In order to file for an annulment, a party must establish the underlying marriage was either void or voidable. Under 23 Pa C.S. 3304, void marriages include those where (1) one of the spouses is still in a former marriage, (2) the parties are too closely related, (3) either of the parties was incapable of consenting to the marriage, usually due to mental disorder, or (4) either of the parties was under 18 if claiming a common law marriage. A void marriage is one that is invalid because it violates some public policy.

Under 23 Pa C.S. 3305 grounds for voidable marriage include: (1) where either party is under 16 without court approval, (2) where either party is 16 or 17 without court approval or parental consent, (3) where either party was under the influence of alcohol or drugs at the time of the ceremony impacting their ability to consent, (4) either of the parties is incurably impotent, or (5) there was fraud, duress, coercion or force to secure the marriage. A voidable marriage is presumptively valid unless a party challenges it. There is a sixty day time limit to pursue an annulment from the ceremony date for several of the voidable grounds. Additionally, regarding void and voidable marriages, the right to annulment is lost if there is subsequent confirmation of the marriage after becoming aware of the potential grounds for annulment. Where an annulment is to be granted, equitable distribution and potential support claims may proceed just as in a divorce action.

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Inherited Assets

The receipt of an inheritance may impact your divorce or support case. Section 3501 of the Divorce Code defines what will be considered marital property, and up for division, versus what will be considered non-marital property. Property received as a gift, bequest, devise or descent is non-marital per 23 Pa. C.S. 3501(a). Accordingly, an inheritance that is received during the marriage can be classified as non-marital property. A problem is created if the party who receives the inheritance places the funds into a joint account and/or commingles with other funds properly classified as marital. In that scenario, it can be difficult, if not impossible, to trace which funds were from the inheritance versus which funds were marital when trying to figure out equitable distribution at some later date. As a practical tip, parties should avoid commingling inheritance funds with other marital funds. Inheritance funds should still to be disclosed in a divorce action since the separate assets of the party are a factor for equitable distribution under 23 Pa. C.S. 3502.

As it relates to support matters, money received by way of an inheritance is not to be considered income. This was established in the case of Humphreys v. DeRoss, 790 A.2d 281 (Pa. 2002) wherein the court noted that the term “inheritance” was not expressly listed in the statutory definition of “income” under 23 Pa. C.S. 4302 and so was not intended to be included. However, Humphreys also established that receipt of an inheritance may still be a factor under Pennsylvania Rule of Civil Procedure 1910.16-5. Rule 1910.16-5 lists factors for the court to consider for possible deviation from a guideline support obligation. One of the factors the court may consider is the assets and liabilities of the parties, including inherited assets. In E.R.L. v. C.K.L., 2015 PA Super 220, the court upheld an upward deviation of a child support award where father had just received a $600,000 inheritance. The base support award was appropriately calculated in that case without the inclusion of the inheritance money as income.

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Steps in Equitable Distribution

Equitable distribution is the term used in Pennsylvania as it relates to division of marital property in a divorce. Marital property will consist of nearly everything acquired in either party’s name from the date of marriage through the date of separation. Equitable distribution does not mean an automatic 50/50 split of all marital property. Instead, the statute on equitable distribution sets out thirteen (13) factors to be considered when seeking to set percentages for distribution on a case-by-case basis. In any divorce involving equitable distribution, the parties should first identify all the property to be considered. Specifically, Pennsylvania Rule of Civil Procedure 1920.33 discusses the requirement of each party filing an Inventory. The Inventory should list all marital assets and debts at issue. An Inventory must be filed prior to requesting a hearing on equitable distribution.

The second part of Rule 1920.33 goes over the requirements for a pre-hearing statement. This statement is to be prepared when your case is ready to go to court on equitable distribution (i.e. after you have grounds for divorce). Again, you will need to list all marital assets and debts, however, you should also include more detailed information regarding the assets and debts such as their values or balances at date of separation and present. Corroborating documentation should be attached to the pre-hearing statement as exhibits. Appraisals may be needed to confirm the fair market value of real property or defined benefit retirement plans such as pensions. Pre-hearing statements should be filed at least sixty (60) days prior to a scheduled equitable distribution hearing. It is important to work with an experienced family law attorney when dealing with equitable distribution matters to ensure all marital property is identified and subsequently submitted to the court in a timely fashion.

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Counseling for Children

Counseling may be a useful resource for children dealing with changes in family status due to divorce or separation. It can serve as a safe place for children to discuss and process their feelings. It is not uncommon for children to be reluctant to discuss their feelings with their parents. Both parents will need to agree to counseling unless one parent has sole legal custody. A parent can petition the court for an Order regarding counseling if they believe it is necessary and they are unable to get the other parent’s consent.

Family counseling may serve to repair a relationship between a parent and child that has been damaged. It may also prove useful where a parent is looking to rebuild a relationship after a period of missed time with the child. Also known as reunification counseling, its goal is to reintroduce and/or reinforce the relationship between a parent and their child. Reunification counseling can be viewed as a more collaborative approach to re-establishing a relationship as opposed to just having the court force certain periods of visitation when the child may not be willing or emotionally ready. This is especially true when dealing with teenagers. It is the role of the reunification therapist to facilitate the process with the end goal of repairing the relationship going forward. If you are facing a high conflict divorce or separation or have been inactive in your child’s life for a certain period of time and feel you may need help rebuilding the relationship, consider counseling as an option.

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Health Insurance in Divorce

One frequent question in the context of divorce is what will happen to health insurance coverage. Generally, a spouse should not drop the other spouse while a divorce is pending. Health insurance is often addressed in the context of support and spouses are obligated to provide support for each other during the marriage. A support order can mandate a spouse to continue to provide health insurance. The obligation to carry health insurance for the other spouse ends at the entry of the final divorce decree. If you are unable to obtain alternate health insurance on your own right away you can look into COBRA coverage but this can be very expensive. More affordable options may be available on the healthcare marketplace.

If there are children between the parties, the children may remain under the health insurance coverage presently provided. There may be an adjustment to any child support award based on who is paying the premiums on the health insurance for the children. Child support will end when the child is eighteen or graduates high school, whichever is later. After court-ordered child support ends there is no longer a requirement for the parents to share the cost of the child’s health insurance however a parent may elect to continue to provide coverage for the child up until the maximum age of 26. Parties with private agreements can contract to continue to share this cost.

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Steps to take before moving with children

In a custody matter, court approval or permission of the parent is required prior to a relocation. A relocation is defined as any move that will substantially interfere with the custodial rights of the other parent. The specific details of your existing custody schedule are relevant in determining if any contemplated move would cause a substantial interference. Moving to a different school district is not necessarily a relocation though it triggers legal custody issues. Similarly, moving to a different state may not necessarily count as a relocation. 23 Pa CS 5337 lays out the specific procedures to be followed in the event of a proposed relocation which will interrupt the existing arrangements. First, the party seeking relocation should give 60 days notice to the other parent by certified mail, return receipt requested. If not possible to give 60 days notice, notice should be given within 10 days of becoming aware of the relocation.

The notice of relocation should include as much information as possible regarding the new address including names and ages of individuals who will be residing there, home telephone number, name of new school district and school, and date of proposed relocation. A counter-affidavit should also be supplied with the notice giving the other party the opportunity to object to the relocation. If notice is properly given and no objection is received, it is presumed the other parent consents to the relocation. The party seeking relocation would simply need to file a petition for confirmation of relocation. If the other parent objects, a hearing would need to be held prior to the relocation where the court would consider if the relocation will serve the best interest of the children.

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Immigration Considerations

Family-based immigration is one of the more common pathways to legal residence in the United States. It is important to understand how family law actions may affect immigration status. Marriage to a US citizen potentially creates an opportunity for a noncitizen to achieve residence. The marriage must first be valid under state law as with any other marriage, but also must pass the criteria of the Immigration and Nationality Act. Marriage fraud, marriage for the sole purpose of obtaining residence, is a serious concern. U.S. Citizenship and Immigration Services (CIS) will make inquiries into whether there is a bona fide marriage. Additionally, permanent residence is not an option unless the parties have been married for at least two years.

Just as marriage creates an opportunity for residence, divorce can end eligibility for immigration benefits. This is particularly true if the divorce or legal separation occurs prior to the spousal visa being finalized. Divorce may also draw the attention of the CIS to ensure the marriage was bona fide in the first place. If there were children born of the relationship, look into whether the foreign country would recognize a U.S. custody order if one of the parties will be returning to their native county. Federal law governs how the immigration process works whereas family law is governed by state law. Additionally, family law actions do not require any type of legal US citizenship by the parties. Instead, sufficient residency within the jurisdiction of the local court is generally all that is required for anyone to bring a family law action. It is important to consult with an immigration attorney regarding how family law issues may impact your immigration status.

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Filing Fees

Most family law actions that will be filed include a filing fee for the initial complaint or pleading. A part of these filing fees go to fund the Pennsylvania Children’s Trust Fund (CTF). This fund has received approximately $40 million dollars from family law filing fees since inception. The initiative of the CTF is to prevent child abuse and neglect across the state. The main emphasis of CTF is to put prevention programs in place to decrease child abuse and neglect overall. The CTF grants its money to local community programs with the same initiatives. It is up to the respective community programs to apply with CTF to see if they are eligible for a grant. Currently, upwards of 280 community based programs across the state have received grants to aid in the fight against child abuse and neglect.

The PA CTF established a supporting organization, “Friends of the Children’s Trust Fund.” The goal of this supporting organization is to raise additional awareness and financial support for the mission of the CTF. The fund focuses on prevention because of the negative, and potentially long-term, impacts of abuse and neglect. Specifically, abuse and neglect is related to poor physical, mental, and emotional health, social difficulties and behavioral problems. There is also a corresponding economic impact in dealing with the aftermath of abuse and neglect making an even greater case for prevention as opposed to reaction. Many other states have similar funds to aid in the prevention of child abuse and maltreatment.

Please visit pactf.org for more information on the Children’s Trust Fund in Pennsylvania.

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Steps to Take Post-Divorce

Receipt of the divorce decree does not necessarily mean nothing else needs to be done. In a case with a marital residence, the parties may still need to sell the house or one party may have a certain window for refinancing the property and buying the other party out. If you are a party retaining a marital residence by agreement or court order, you can change the locks once the property is formerly awarded to you. The party vacating the residence should be sure to change their address with the post office and update other accounts accordingly. In a case where retirement benefits are being split, the parties may need a qualified domestic relations order or QDRO for short.

A QDRO is a document used to rollover a portion of one party’s retirement plan/benefit to the other party. The benefit of a QDRO is that it allows a tax-free transfer of the funds from one party to their new or soon-to-be ex-spouse. The receiving spouse would then be taxed as they withdraw the money as the tax laws provide. The QDRO ultimately needs to be signed by both parties and the court prior to being sent to the plan administrator for implementation.

You will benefit from having an attorney review the terms of the QDRO before signing off on it and submitting it to the plan. If you have been paying support to your spouse, you should notify Domestic Relations if the support is ending or if it is converting to alimony. If switching to alimony, you should confirm the amount if there is any change from an existing charging order. You should also notify Domestic Relations of the term of the alimony.

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