Tag Archive for: divorce

Hidden Assets in Divorce

Often in the context of divorce parties may attempt 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/assets of the party are way more than would be expected based on their reported income. A party who has a small business and deals in cash can easily hide money. It may become necessary to hire an expert to analyze the income flow and see if their reported income is correct after a thorough investigation. Top level executives may receive alternative forms of income. Examples include stock options, bonuses, car allowances, and deferred compensation plans to name a few. Military members also often have a compensation package that goes beyond their base salary. It is important to obtainformation on all benefits of employment so they can be either be included as income in a potential support calculation or treated as an asset subject to distribution. Another potential problem as far as hidden assets is offshore accounts. Many offshore banks have confidentiality provisions that deflect detection. Parties should also be weary of the other party transferring assets over to family members or friends.

The first step in tracking down assets, hidden or otherwise, is discovery. Discovery in family matters typically consists of interrogatories (set of questions to the opposing party) and a production request (requesting certain documents be turned over). Tax returns and bank statements are routinely requested and are good starting points for tracing sources of income as well as where the income is going. From a tax return you can see rental income, interest on bank accounts, dividends on stock, etc. Bank statements can show the transfer of money and identify where it went to and for what purpose. Parties in a divorce may also conduct depositions wherein they question a party under oath. Further, the parties can subpoena documents directly from the custodian of the documents if the spouse will not turn them over. If these initial avenues of discovery do not yield the desired results, a party will have to contemplate whether it is worth to invest more money in the chase for hidden assets. Additionally, if a party anticipates that hiding or dissipating assets may become a problem during the pendency of the divorce, it is important to get a court injunction right away preventing the dissipation or transfer of any marital assets.

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

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Division of Pensions in Divorce

Pensions, as well as other retirement plans, are often one of the assets up for division in a divorce. The court will equitably divide the marital portion of a pension plan after considering all the relevant factors in equitable distribution. 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 Superior Court recently released a decision regarding the marital status of post-separation cost of living adjustments (COLAs). In MacDougall v. MacDougall, 2012 PA Super 83, the Superior Court held that Husband’s post-separation COLAs were marital property subject to equitable distribution because they accrued without any effort or contribution by Husband. Wife had filed a Petition for Contempt after discovering that Husband’s monthly pension benefit had continued to increase due to COLAs but he was still only paying her a percentage of the monthly benefit from the date of separation. The trial court ruled in favor of the Husband in finding the post-separation COLAs were not marital, however, the Superior Court reversed their decision.

In reaching its decision, the Superior Court analyzed several previous decisions regarding post-separation increases in pension plans. Most notably, in Berrington v. Berrington, 534 Pa. 393 (1993), the Pennsylvania Supreme Court held that increases in a pension plan due to the employee spouse’s own efforts or contributions are not marital whereas increases not attributable to the employee spouse are marital. In MacDougall, the Superior Court determined the increases based on COLAs were automatic and not dependent on any additional effort or contribution by Husband, thus the COLAs were marital and subject to division. Therefore, the Superior Court held Wife’s share of Husband’s pension should also increase to reflect the COLAs. The case was remanded to the trial court in order for exact calculations to be made as far as Wife’s share of the pension with the COLAs included. This approach is arguably more fair in that it doesn’t allow one spouse to benefit from an increase that wasn’t earned and that the parties likely did not know about at the time of equitable distribution.

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Embryos are Marital Property

Frozen embyros are considered marital property and hence, technically up for division in a divorce, however there is some disagreement on exactly how the “property” should be dealt with. This is a relatively new issue in family law and different states have applied different methods for resolving the matter. The Pennsylvania Superior Court recently released a decision regarding the marital status of frozen pre-embryos in Reber v. Reiss, 2012 PA Super 86. In Reber, the court had to determine what should happen to the frozen pre-embyros of a divorced couple. Wife wanted to use the frozen pre-embryos in order to have children of her own whereas Husband wanted the frozen pre-embryos either destroyed or donated for research.

In reaching its decision, the Superior Court considered how other states have dealt with a similar issue. Some states have focused on whether there is a prior agreement between the parties concerning disposition of the pre-embyros in the event of divorce and if so, will uphold the agreement as enforceable. At the same time, other states have held that enforcing such an agreement is a violation of public policy and have declined to do so. The Supreme Court of Iowa follows a mutual consent model requiring both parties to agree on disposition, however, the Superior Court of Pennsylvania did not find this model feasible since parties would not be in court in the first place if they could agree. The approach that was ultimately adopted calls for the court to balance the interests of the parties.

In applying the balancing approach, the court found that Wife’s interest in procreation using the frozen pre-embyros outweighed Husband’s interest against procreation. This decision was based primarily on evidence that the pre-embryos were likely Wife’s only opportunity to procreate along with testimony that Wife would allow Husband to be involved and wouldn’t pursue support in response to the concerns raised by Husband. The court did acknowledge that the party against procreation should normally prevail in a balancing test, however, due to the unique facts of the case, the scales tipped in Wife’s favor. It also seems that the court would’ve likely enforced an agreement on the issue if there had been one. Accordingly, parties who intend to undergo in vitro fertilization should draft a clear, unambiguous agreement as to the disposition of embryos upon separation, divorce or death, or else be subject to a balancing approach by the court.

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Two-Year Separation – Divorce

Most parties pursuing divorce will choose to proceed with no-fault grounds for divorce. A no-fault divorce simply means there has been an irretrievable breakdown of the marriage. There are two different ways to establish an irretrievable breakdown of the marriage under the Divorce Code. First, both parties may consent to the divorce after 90 days from when the complaint was filed and served. This is referred to as a 90-day mutual consent divorce. Alternatively, if one party won’t consent, the other party can move forward after the parties have been “separated” for two years. This is referred to as a 2-year separation divorce.

Separation does not mean the parties have to live separately. Many parties still reside in the same home but are considered to be “separate” based on the definition provided by the Divorce Code. Section 3103 of the Divorce Code defines “Separate and apart” as follows: “Cessation of cohabitation, whether living in the same residence or not. In the event a complaint in divorce is filed and served, it shall be presumed that the parties commenced to live separate and apart not later than the date that the complaint was served.”

Accordingly, the date the divorce complaint is filed will generally be accepted as the date of separation regardless of whether the parties continue to live together or not. However, the date of separation can be an even earlier date. For example, the date one party does move out of the marital home is usually a clear indication the marriage is over, and hence, an acceptable date of separation. Alternatively, even if the parties continue to reside together, a date of separation can be established when one party makes it clear to the other party that the marriage is over by stating so clearly or even reducing it to writing. The party alleging 2-year separation will have to submit an affidavit certifying the date of separation. The other party has an opportunity to object and a hearing may be held if necessary to determine the appropriate date of separation. Accordingly, be sure that the other party is keenly aware of your intended separation, especially if you will continue to reside together and/or hold off on filing for divorce.

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Common Law Marriage

Common law marriage could be established in Pennsylvania up until January 1, 2005. All common law marriages established before that date are recognized as valid marriages. In order to establish a common law marriage, the parties must have exchanged words of intent to be married and held themselves out to their community as being married. Often, the parties also lived together for some length of time. While this is not a requirement in and of itself, it plays into the couple having held themselves out as married. Once a common law marriage is established, it can only be resolved by divorce just as with any regular marriage. Pennsylvania is presently in a transition stage in that while no new common law marriages can be created, there are still inquiries into whether they were previously created and accordingly, how the ancillary issues should be handled, i.e. divorce versus civil suit.

Moser v. Renninger, 2012 PA Super 59 (2011) discusses the procedure and timing for establishing or denying common law marriage.

In Moser v. Renninger, Wife filed a divorce complaint on November 19, 2010 stating that her and Husband had entered into a valid common law marriage in 1985. Husband subsequently filed an Action for Declaratory Relief asking the court to declare that no common law marriage existed. After an evidentiary hearing on the matter the court held a common law marriage was in fact established on June 8, 1985. Husband immediately sought to appeal the court’s finding that common law marriage existed. Husband’s appeal was denied on the basis that it was premature. Because the issue of whether there was a common law marriage was raised in the context of the divorce, the court found that Husband could not file an appeal until the divorce matter is final. If, however, the issue of common law marriage had been addressed separately, an appeal following the decision would be appropriate as the entire matter would be concluded.

This method may be considered favorable in that it allows the entirety of the divorce to be resolved without the delay and disruption of an appeal. On the other hand, it may be a waste of the court’s time to resolve the divorce and all related issues if their ruling that the parties were in fact common law married is later overturned.

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