Tag Archive for: divorce

Equitable Distribution and Worker’s Compensation

One asset in equitable distribution or support that parties should consider when getting divorced is worker’s compensation awards. Depending on what state the worker lives, there may be a component not only for lost wages but also an award comparable to a personal injury award. In these instances, the lost wages should be calculated into any support award and the again, you will need to decide whether you want to lump sum the award portion as either income for purposes of support or as an asset for purposes of equitable distribution. In the event that it is considered as income, you cannot double dip and claim it as an asset. If, however, the award is for an injury that occurred outside of the marital period, either before or after separation, you will need to include it as income as you cannot include it as an asset. Your support order should be very detailed and specific and identify exactly what portion of any worker’s compensation is included in the calculation of the income. Whether to have the worker’s comp treated as an asset or income really depends on how the court will treat the asset. In some instances, the court may award the majority of that asset to the injured party and it may be better to then include it income if you are also eligible to receive support. Speaking with your attorney about the expected amounts would be wise to do before you make that decision so that you can decide whether it is better as support or as an asset.

For more information see:/Family-Law-Divorce/Division-of-Marital-Property/

 

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Income or Asset? Avoid the Double Dip

Oftentimes when getting divorced, an asset the generates income can either be considered in equitable distribution or in support. For example, if you receive stock options as part of your employment, they are considered an asset for purposes of divorce. If you cash them in during the divorce, it will either be considered an asset for income, but not both. If you have a pension that accumulated during the marriage and it goes into pay status during the divorce, or if it is already in pay status at the time of the divorce, it may be considered an asset or income but not both. You need to be careful that if you have a support order that the income from that pension or the stock option is not considered into the incomes if you want to have that asset considered an asset for equitable distribution. You need to be very careful that any support order entered specifically states whether any of the income was included, and if so, how much.

Sometimes, an asset may be a hybrid of a marital asset and non-marital asset. For example, a pension may include a portion of non-marital years and a portion that is marital. In that instance, you need to weigh whether it is better to include the entire pension income, or whether you want to include the non-marital portion income and include the marital portion as an asset for equitable distribution. Since you often receive more in equitable distribution than you do in support, oftentimes, the person who is entitled to a share of the pension or a share of the stock option will want to consider it in equitable distribution instead of support. Either way, be very clear in any agreements or order, which is so that there is no double dip if you are paying and that there is no argument it was already included if it was not considered.

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Tips when first separating from your spouse

If you are separating from your spouse, there are various things that you should do or not do during this time:

1. You should freeze any joint credit card debts so that your spouse does not continue to increase debt in your name.

2. You should freeze joint bank accounts if you are not going to be living together. If you need some of the funds to live, it is a good idea not to take more than half and to leave half for your spouse to prevent litigation. Your spouse can and sometimes will wipe out the entire account forcing you into litigation.

3. You should figure out a budget for yourself best on how much you earn and how much you will expect to receive or pay in support so you can figure out how much you can afford when looking for a place to live. An attorney can help you figure out this amount.

4. You should collect your statements from all your accounts both debt and assets so you can establish what the values were at separation.

5. You should not drop your spouse or children from health insurance as you may be required to continue coverage during the divorce.

6. You should not change the beneficiaries on any insurance policies until after your divorce and only if there is no court order to maintain coverage.

7. You should pull your credit report so you do not have any surprises on what may or may not exist during the divorce.

8. You should gather other important documents, including your marriage certificate, your deed, car titles.

9. If you are struggling emotionally with the separation/divorce, you should engage a good therapist to help you through the process.

10. If you are expecting to receive support you should file once you know you are going to move.

11. If you expect to have custody, make sure you move locally or first obtain permission from the Court.

12. Take the personal property items that are most important to you as oftentimes it is very difficult or cost prohibitive to fight over personal property later.

13. If possible, talk to your spouse and try to come to terms on things as much as possible and consider mediation or collaborative law as an option.

14. Hire an attorney who specializes in divorce if you decide that you need legal assistance to help you with custody or support or if you decide that divorce is your next step.  You should not have expectations based on what happened with a friend or relative’s similar situation.

15. Remember to be civil with your spouse. It will be easier and less expensive if you can handle matters with a respectful and practical approach.

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Who Pays What During a Divorce

Child Support: The party who does not have the majority of time pays child support or if the parties have equal custody time usually based on overnights, the party who earns more pays child support.

Spousal Support/Alimony: Paid by the party who earns more income

Mortgage/household bills: Paid by the party who remains in the home

Car Payment: Paid by the party who uses the car

Car Insurance: Paid by the party who uses the car

Medical Insurance: Paid by the party who carries the insurance and allocated during child support and spousal support in proportion to incomes

Home Equity Loan: Depends on what the loan was used for. May require a special relief action.

Credit Card Bills: Responsibility of both parties for what accumulated during the marriage. Typically paid by party whose name it in to protect credit but any payments made after separation should be document for shared reimbursement.

Repairs to House: Routine repairs are paid by party using home. Repairs that increase value f home benefit both parties and any payments made post separation should be documented to seek a credit.

Taxes: Parties may choose to file jointly or separately. If file jointly, usually a joint expense.

College Tuition: Neither parent is responsible for college tuition for children and any payments are voluntary and not reimburseable.

Legal Fees: Each party is responsible to pay their own legal fees

Filing Fees: The party who files

Expert Witness Fees: The party who retains the expert

Business Valuation Costs: The party who seeks the valuation

Appraisal: The party who obtains the appraisal

Pension Valuation: The party who obtains the valuation 

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Another Approach to Divorce – Collaborative Law

When getting divorced, there are several different approaches that a couple can choose. Some people opt for mediation to try to resolve their disputes and save them money. Others, take the traditional approach and opt for attorneys to handle everything. There is another approach that is less known but can be quite effective – collaborative law. Collaborative law, unlike mediation, involves two attorneys similar to the traditional approach. What makes collaborative law different, however, is that both spouses agree from day one that they want to settle everything out of court. They formalize this agreement in writing with their attorneys wherein they agree that they will make any and all efforts to resolve their issues involving divorce, custody, and support out of court. While they always reserve the option to go to court if they cannot reach an agreement, there is a hefty price to pay – loss of representation by both side’s attorneys. Even if one party is still willing to work it out of court, both spouse’s and their attorneys agree that if one of the parties decides to litigate, both attorneys will withdraw from the case and both parties will have to start over with new attorneys.

This option is a great option for parties who are both committed to settling their differences out of court but want the benefit of having legal advice that mediation does not provide. When hiring an attorney, you should ask if they are willing to handle collaborative law cases if this is an option that appeals to both you and your spouse.

 

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Dividing a Pension in Divorce and the Survivor Annuity

Oftentimes when parties get divorce, one of the biggest assets that they have accumulated is the pension of one or both of the spouses. In a Pennsylvania divorce, the pension portion that accumulates during the marriage is what is considered marital. There may also be a non-marital portion for the years of service prior to the marriage or the years of service after the marriage. When getting divorced, there are two methods of getting each spouse their share of that pension. One method is to do a percentage distribution of the marital years. When this method is use, the spouse receives a percentage multiplied by the number of years married that the pension accumulated divided by the total number of years that the pension accumulated. This is usually distributed by a separate document called a Qualified Domestic Relations Order which is often paid to and drafted by a company or firms that handles QDROs. The other method of distribution, and the preferred method by the Court (according to case law) is an offset. Under this method, the marital portion of the pension is assigned a dollar value based on a report prepared by a company who does pension valuations. This dollar value of the pension can then be swapped with other marital assets as an offset.

One often overlooked part of a pension is the survivor annuity. If a party has a pension, then the party who has the pension is given the option at retirement to select from several different options upon their death. This could include no survivor, a 75% survivor, 50% survivor, etc. This survivor benefit election is important in that if no survivor is elected, the one spouse will receive nothing upon death of the party who holds the pension. If a survivor benefit is elected, it reduces the monthly payment of both spouses when they receive the pension. Since only the spouse who will continue to receive the pension upon death of the pension holder will benefit, the surviving spouse has an asset known as the survivor benefit annuity which must be valued separate and apart from the principal of the pension. It is something that should be addressed at the time of divorce as once the pension is in pay status this election cannot be changed.

For additional information see: /Family-Law-Divorce/High-Income-Net-Worth-Divorce/Pensions-in-a-Divorce/

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How to Preserve Premarital Assets without a Prenuptial

If you are getting married and the idea of a prenuptial agreement puts a distaste in your mouth or that of your spouse, but you are still concerned about losing your premarital assets, there are a few things that you should and should not do if you get married without a prenuptial. Never add your spouse’s name to the house or bank account you had prior to marriage unless you are willing to gift this asset to the marriage. This is not to say that the house you own prior to your marriage will not be distributed in a divorce, but you can minimize the amount by keeping it separately deeded. The equity that you have when you get married will remain your asset should you get divorced. You should know what this value is when you get married by having the house appraised and keeping documentation on your mortgage balance at the time of your marriage. Without a prenuptial agreement, the increase in value during the marriage will become marital, whether or not you add your spouse to the deed or title of your account. If you have a mortgage and pay it off during the marriage, you will be accumulating marital equity even if the house does not go up value. In addition, if you have any bank accounts, you will want to keep the funds that you had going into the marriage in your separate name.

Once you start putting your premarital assets into a joint account, they become a gift to a marriage. This means that if you get divorced and have no prenuptial agreement, the Court will have to decide how to distribute this asset if you cannot agree. If you are in Bucks County, the court will normally apply a diminishing credit value meaning for every year that it was transferred into joint names, 1/20 of the asset will be considered as marital and you can seek a credit for the balance. After 20 years, you will get no credit for the premarital asset you contributed to joint names. When you start gifting your premarital assets to the marriage without a prenuptial in place, you should be very careful to document both the amount of your contribution and the source of funds. This way, if you do end up in a divorce, you will be better prepared to argue for the diminishing credit if you are in Bucks County or a more equitable share of the asset.

For more information on prenuptials, see /Family-Law-Divorce/Prenuptial-Agreements/

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Tips for Keeping Divorce Costs Down

1. Understand that family lawyers charge based on their time. This includes time reading emails, talking to you and anything else related to your case. Sending daily emails or calling constantly to talk about your case is a surefire way to escalate your bill. Instead, keep a journal of your thoughts and schedule one block of time to go over all your issues with your attorney and be sure to engage a private therapist or good friend if most of your conversation is related to emotional struggles instead of legal issues.

2. Weigh the cost of what you hope to gain against what you will have to spend to get that amount. Consider that in support matters, oftentimes, it may not make sense to hire a lawyer to fight over $ 100 difference between what you hope to get and what you spouse would agree to pay. You need to balance the cost of legal fees against the amount of money you hope to gain order to assess whether it is worth the litigation in the financial areas. This applies to support as well as the divorce issues.

3. Gather your own financial records and get organized. You can save money if you are organized and gather your own records that are needed for your divorce. Make sure you have current statements and statements from separation on all your accounts, including retirement accounts, contributions during separation, mortgage statements, credit card statements, etc. and present them to your lawyer in an orderly fashion and you will not only save the money having to have your lawyer gather this for you, but you will be in a better position to possibly settle your case out of court.

4. Consider Mediation. Even if you have an attorney, you are still able to mediate your conflicts if both parties agree. Even if you are unable to come to a global settlement, you can usually narrow down your issues in dispute which will in the long run save both time and money.

5. Understand that your emotional pain has no correlation to what you will receive. Unlike a personal injury claim where you are compensated for pain and suffering, the divorce laws are not structured to compensate you for you pain or hurt. Understanding the factors involved in dividing your assets are based on economic factors rather than emotional factors may help you set realistic expectations and help keep the costs down.

For more information, see: /Family-Law-Divorce/Bucks-County-Divorce/

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Changing the Locks during a divorce

Sometimes the first action in a separation or divorce is when a spouse moves out. When a spouse moves out of the house, oftentimes the spouse who remains changes the locks. This is something that you can do, however, it is not always assurance that they will not get back into the home unless their exit was the result of a Protection from Abuse. Until you have an exclusive possession order signed by a Judge during your divorce, a spouse could legally gain entry to the home by breaking a window or any other method. In order to get an exclusive possession order, you would have to file a Petition for Special Relief and ask that Court to enter an order while the divorce is pending to award you the home. If your spouse left and has another residence that he/she has established, it is very probable that the court will award you the right to live in the home and your spouse will not be allowed in at that point without your consent. Once you have that Order from the Court, you can be assured that a violation of that Order will result in Contempt of Court. If you are the spouse who left, until that Order is entered by the Court, you can usually move back into the house if you change your mind. Getting an Order in place is something to consider to eliminate unexpected surprises.

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My spouse left me, why do I now have to pay the mortgage?

If you are getting a divorce in Pennsylvania, oftentimes the court will require the occupant of the marital home to pay the mortgage. It does not matter whose name is on the mortgage. The theory behind requiring the occupant to pay the mortgage is that only that person is receiving a benefit for use of the home. Consider it fair rental value. The court will normally impose a support obligation on the spouse to pay you if they earn more and you have been married for at least a few years. If you have children with your spouse, you can seek a mortgage contribution as part of child support if they children remain the home with you. The mortgage contribution, however, is never going to be equal to the mortgage, nor is it even half of the mortgage. In some cases, you will not even get a mortgage contribution if your income and the child support amount do not mathematically warrant it. It is also in the discretion of the Judge whether to even award it. If you cannot afford to pay the mortgage between the income you have and the support you receive from your spouse, it may be time to consider selling the home. If you fail to pay the mortgage while living in the house during a divorce, the Court can intervene and order it sold. It is a good idea if you are separating to consult an attorney who can assist you by figuring out approximately how much you can expect to receive. This not only helps in deciding if you can afford to stay in your home during a divorce but will also help you decide how much you can afford to live elsewhere if you have to move. The attorney can also provide you with the documented expectation of support in order to help you secure a rental if your income does not support it alone.

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