One Step Closer to Shorter Divorces

Last November the House voted for the passage of Bill 380 which proposes amending Section 3301(d) of the Divorce Code to allow divorce on the basis of separation for a one year period as opposed to the current law which requires a two year separation period. Presently House Bill 380 is in the Senate and still pending a decision as of May 2016. There are several reasons for reducing the waiting period for divorce according to supporters of the Bill. First, reducing the duration for divorce will reduce the turmoil for minor children. There is consensus in the psychological field that continued conflict of the parents is the primary influence on the well-being, or lack thereof, of the children. Second, longer divorces allow for additional litigation and prolonged emotional strain. The third reason offered in support of the bill is the lack of any economic benefit by continuing with a two year separation period. For example, any alimony award will generally be reduced by the period of support received while the divorce was pending such that there is no benefit to a longer separation period.

At this point, Pennsylvania has one of the longer waiting periods for divorce on the basis of separation. New York, Ohio, and Maryland require only one year of separation. New Jersey and Delaware only require six (6) months of separation. The Pennsylvania Bar Association (PBA) has played a major rule in pushing for the passage of the bill. According to the PBA, there has actually been a decrease in divorce since many neighboring states have allowed divorce after only a minimum period of separation. Additionally, a shorter separation period will allow the parties to move on with their lives quicker with less emotional and financial strain as well as promote the best interests of minor children in decreasing the period of uncertainty.

Click here to read more about divorce.

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Should You Keep Your Marital Home After the Divorce?

When you are getting a divorce and own a home with your spouse, you have a few options. One of you may decide to keep the marital home or you can sell it and both move on purchasing or renting another residence. You may love your home, your neighborhood, and want to keep it to provide consistency for your children. Before making any final decisions or trying to negotiate to keep the home for yourself, think about this list of questions:

  1. Can you buy out your partner? As your divorce moves forward your house will be appraised, and the equity you have in the home is up for equitable distribution. If you would like to keep the home you will have to “buy out” your spouse giving them an amount of cash (or equivalent) or negotiate in a unique way.
  2. Refinance the mortgage – can you get a mortgage on your own. You will have to prove that you can so your ex will be removed.
  3. Can you afford the monthly bills? As you know, owning a home can be expensive and goes beyond the monthly mortgage payment. When you factor in taxes, homeowners insurance as well as association fees, cable and power you may be beyond your budget.
  4. Can you afford to maintain the home? When something in your home breaks, the roof starts leaking or a toilet overflows you may need to call in a professional to fix it. These can be costly. In addition to the major repairs all homes require minor repairs every now and again and you must have the funding. Not keeping up with repairs will cause your home to repreciate in value.
  5. Lastly, can you handle it? Maintaining a home with a partner is one thing, what about on your own? If you have significant financial resources you can certainly hire professionals to help you maintain it, but if you have to do it on your own do you have the time, know-how and ability?

Many times parents feel an emotional tie to keep the marital home for the stability of their children. They know their kids are going to go through a bit of an upheaval and feel guilty. In many ways keeping the marital home can cause significant problems if you are unable to financial or physically handle the required maintenance. While you may be emotionally tied to your home it is important to make this decision with an eye on finances as well.  And remember, having financial stability for yourself provides stability for your child.  

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Summer Schedules

Now that warm weather is here and the school year is coming to a close, you may want to review your custody agreement to prepare for the summer months. Your standard schedule may change when the school year is over and you should make plans for that adjustment to go smoothly. If you have shared custody, you will need to consult with the other parent regarding what the children will do for the summer, for example, a certain camp or summer program. Additionally, summer is a popular season for vacations. Often, you must provide advance notice of any scheduled vacation to the other parent. Another scenario to consider is if one party likes to travel during the holiday season and therefore intends to schedule a vacation during that time. Holiday and vacation time will generally supercede the regular custody schedule, however, be sure any custody order makes clear whether the holiday schedule or vacation provision takes top priority.

You should refer to the specific provisions of your custody order as it relates to how many weeks of vacation each party is entitled to per year, how the weeks may be exercised, what type of notice should be given, and what additional information should be provided. Parents should also be careful with planning international travel. Often, express written permission of the other parent or court approval is necessary for travel outside of the country. Both parents would need to sign off on any passports for minor children unless there is a court order.

Click here to read more on child custody.

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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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Wills For Heroes – May 14, 2016

Bucks County has a “Wills for Heroes” event this upcoming Saturday, May 14, 2016. This is a program in conjunction with the Pennsylvania Bar Association that provides free wills, living wills, and powers of attorney to first responders and their spouses/significant others. Proof of military or public service affiliation is required. Appointments are required and can be made on the Pennsylvania Bar Association website. Each appointment is for one hour. At the conclusion of the appointment, each participant will have their final, notarized documents to take home with them. If a spouse or significant other is also participating, their appointment will be immediately following that of the first responder. The program is made possible through the time of volunteers including attorneys, reviewers and witnesses.

This week’s “Wills for Heroes” event is being held at Bucks County Community College, Lower Bucks Campus, 1304 Veterans Highway, Bristol, PA 19007. The event starts at 11 a.m. For more information, you can visit www.pabar.org/wfh/. Our firm is also able to assist with estate planning documents at a reasonable cost including wills, living wills and powers of attorney. Please contact our office if you would like additional information or to set up an appointment.

Click here to read more about estate planning.

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Estate Accounting

One of the most important duties of the executor or administrator is keeping an accurate accounting of the estate assets. Prior to distribution, an executor should prepare an accounting of all of the assets and liabilities of the estate, including all sources of assets (i.e. bank accounts, refunds, sale of real estate) and all liabilities paid and still outstanding (i.e. funeral costs, unpaid credit cards, medical bills).

The accounting must accurately show what went into the estate, what went out, and what is left to be distributed amongst the heirs.

An account is necessary whenever there are multiple beneficiaries receiving a percentage of the residuary estate, or when the executor goes to court to file for an insolvent estate, or when there is a dispute amongst heirs. Without it, the court and/or beneficiaries have no way of determining whether the executor did something inappropriate.

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Do you need a will?

Do you need a will? Most people don’t think so, or don’t get around to it. While an estate can proceed without a will, i.e. by intestacy, a will can resolve many problems.

For example, if you have minor children, a will can designate guardians in case both parents pass away. Likewise, you may appoint a trustee to handle money and gifts that are to be left to children who aren’t yet responsible. You can also put money into trust for children who are adults but not fully responsible. You don’t want an 18-year-old to spend their entire inheritance on an expensive car or a trip to Europe when he or she can use the funds to help offset college expenses or for a down-payment on a house.

Another reason to have a will is when you wish to appoint an individual to be the executor – the person in charge of carrying out your wishes and moving the estate through probate. Without a will, your children or spouses who don’t get along may all wish to become executor or administrator. This can cause many problems and may require court action – something a will can avoid.

You may also give designate certain personal items or money to go to friends or family who otherwise wouldn’t inherit.

For these reasons, it is advisable for everyone to get a will, even if you don’t think you have anything to leave behind.

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Inheritance Tax

Pennsylvania is one of a handful of states that requires a tax paid on inheritances. There is also a federal estate tax, but your estate is exempt as long as your estate is valued at less than $5,450,000 for 2016. Pennsylvania, on the other hand, has no minimum threshold.

The inheritance tax in Pennsylvania only covers tangible property (i.e. furniture, clothes, collectibles, vehicles) and real estate located in Pennsylvania.

Furthermore, there are several exemptions: spouses, parents inheriting from a child who passed away before reaching the age of 21 years, charities, and the government.

The tax rates are as follows:

Spouses: 0%

Children: 4.5%

Parents: 4.5%

Siblings: 12%

Other beneficiaries: 15%

You must file the inheritance tax within 9 months from the date of death, or else there may be penalties and interest. However, you get a 5% discount when the tax is paid within 3 months of passing.

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Opening an estate

In order to open an estate, you must go to the courthouse located in the county where the decedent was residing when he or she passed away.

The executor must bring the original will, signed and witnessed by the decedent. The executor(s) named in the will must be present. If the executor does not wish to handle the estate, then they will need to sign a renunciation which will be presented to the Register of Wills. In this case, the alternate executor can proceed. The court also requires the executor to bring photo identification (i.e. drivers’ license).

Finally, you will need to pay the filing fees, which are based on the size of the estate, plus costs for each short certificate.

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