A party’s right to claim one’s child as a dependent on income tax returns depends upon the number of overnight custody periods the child spends with that parent. The parent with the greater number of overnight custody periods of the child during a tax year will be entitled to claim the child as a dependent on their tax returns for that tax year. If the child spends an equal number of overnights with each parent during the year, the parent with the higher income is entitled to

claim the child as a dependent on his or her tax return. The parties can also agree on which parent can claim the child as dependent, but must execute the proper tax form to effectuate such agreement.

Categories: Custody, Uncategorized Tags: , , ,

In the recent case of U.S. v. Windsor, 133 S.Ct. 2675 (2013), the United States Supreme Court struck down a major provision of the federal Defense of Marriage Act (DOMA). This was a sea change in the law, and many observers believe this will usher in same-sex marriage as a constitutional right. In Windsor, the Supreme Court held that the IRS could not levy an inheritance tax against Ms. Windsor, who received an inheritance from her same-sex spouse, because the definition of spouse cannot be based upon the sex of the parties. The administration of President Obama was in a bit of quandary prior to the decision in Windsor, as it is in support of same sex marriage, but it has a duty to uphold the law. The executive branch, through the Justice Department, is required

to enforce the laws of the United States, even where the President believes the law in question may be unconstitutional. In this case, the President stated that DOMA would continue to be enforced by the executive branch. However, the President further instructed the Department of Justice not to legally defend DOMA in the Windsor case. Instead, a group of Congressmen, unsuccessfully, led the legal battle to defend the statute.

Categories: Same-Sex Marriage Tags: , , ,

In the recent case of U.S. v. Windsor, 133 S.Ct. 2675 (2013), the United States Supreme Court struck down a major provision of the federal Defense of Marriage Act (DOMA). This was a sea change in the law, and many observers believe this will usher in same-sex marriage as a constitutional right.

DOMA was passed by Congress in 1996, just as many states were engaging in public and legislative debates regarding same-sex marriage. The law has two key provisions; first, it provides that no state is required to give effect to a same-sex marriage granted by the law of any other state. See Windsorat 2682, and 28 U.S.C. § 1738C. Second, it defined “marriage” as follows: In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.” 1 U.S.C.A. § 7. This second provision, while not banning same-sex marriages granted by states, did preclude the protection and benefits afforded by marital status in over 1,000 federal laws. Windsor at 1683. It is this latter provision that has been struck by the Supreme Court.

The facts of Windsor reflect some of the issues at stake in the debate over permitting same-sex marriage: In 1963, two women (Edith Windsor and Thea Spyer) began a

long-term relationship; in 2007, the couple was married in Canada, but remained residents of New York state. In 2009, Thea died, having left her entire estate to Edith. Windsor at 2683. Under the Tax Code, Edith was required to pay inheritance taxes upon receipt of the estate, because she was not considered a spouse of Thea, which status would have barred any tax on the passing of the inheritance. See 26 U.S.C. § 2056(a). Edith Windsor then filed a lawsuit to obtain a refund of the $363,053 she paid in taxes. Windsor at 2683. The District Court awarded Edith back taxes, and this award was upheld on appeal to the Circuit Court. Ultimately, the Supreme Court affirmed the award of back taxes, finding the definition of marriage in the statute to be unconstitutional; because the marriage between Edith and Thea was valid in the State of New York, the IRS could not levy inheritance taxes against Edith as Thea’s surviving spouse.

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A child support obligation generally terminates at age 18, or when the child has graduated high school, whichever date occurs later, despite the fact that the age of majority in Pennsylvania for purposes other than support is 21. Because the obligation of child support is based upon the parent-child relationship, the obligation ends when a decree terminating parental rights incident to adoption is entered, even if the adoption has not concluded. A parent may be required to pay support for a child who is over 18 but because of a physical or mental condition is not self-supporting or emancipated. This determination is a question of fact, which must be made on a case-by-case basis. Parents may also

be liable for support of an adult child who has been adjudicated delinquent and is participating in a court-ordered program. The duty to pay child support ends upon the death of the payor; therefore, no claim for child support may be made against the parent’s estate. Child support obligations are not dischargeable in bankruptcy. There is no duty to provide child support while a child is attending college. However, the law does not preclude parents from reaching an agreement to pay for the cost of their child’s college education. These types of agreements to pay or provide a college education for an adult child are binding, enforceable contacts that must be complied with by the respective parties.

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Support awards may be enforced by contempt proceedings against the person failing to pay, by seizing assets to satisfy back-support, or by wage attachment. The court may also order the suspension of licenses for non-payment. Where support is paid according to a court order, a wage attachment is typically mandatory. Employers must comply with wage attachment orders, or contempt proceedings may be brought against them. Most forms of government payments to a person are also subject to attachment to pay support, but special rules apply in the case of veterans’ benefits; support may be obtained directly from the Veterans Administration. Tax refunds may be intercepted for the payment of past-due support. Where support is paid according to an agreement between parties, the agreement may be enforced under the Pennsylvania Divorce Code to the same extent as a court order. A person’s wages may not be garnished in an amount greater than fifty percent of the person’s wages. Agreements or orders entered in other states are similarly enforceable under the Code. Generally, support obligations are not dischargeable in bankruptcy. Alimony obligations may be enforced in the same

manner as child and spousal support orders. By operation of law, a judgment exists by with respect to each support payment on and after the date the payment is due. Overdue support may operate as a lien on real estate. The court may enforce orders entered in a foreign jurisdiction upon registration of such orders in the state of Pennsylvania. The federal Child Support Recovery Act and the Deadbeat Parents Punishment Act of 1998 allow for criminal actions for violation of support obligations in interstate actions. Federal law also provides that the states must give full faith and credit to the support orders of other states.

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What date is used to value marital property during equitable distribution of the marital estate? Because the value of some assets fluctuates from time to time, the valuation date of marital property is generally the time of distribution unless the property is no longer in existence. In some instances, a date of separation value may be appropriate, where an asset, such as a business, is in the sole control of one of the parties during the period of separation. A date of separation value does not necessarily require the imposition of prejudgment interest, although such a claim may be asserted. The marital property increase in value of separate property is as of the date of separation or date of distribution, whichever date produces the lesser increase in value. In instances where marital property was disposed of prior to distribution, a pre-distribution valuation date will be employed. The valuation date selected by the courts is intended to effectuate economic justice between the parties. Therefore, a party can suggest a valuation date to the court; however, the party

will have the burden of proof to demonstrate the appropriateness of the proposed valuation date. A valuation date may be upheld even though a different valuation date is more appropriate if no objection is raised at trial. Any party may give opinion testimony as to the value of assets in which the party has an ownership interest because of the presumption of special knowledge derived from ownership. Where evidence offered by one party is uncontradicted, the court may adopt this value, although the resulting valuation would have been different if more accurate and complete evidence had been presented. If the value of an asset is significant, an opinion of the value of the asset from a qualified expert should be obtained.

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Stock options are considered deferred compensation, much like a pension, thus marital property subject to distribution in a divorce. As options are usually not transferrable, a “buy-out” of the non-employee spouse is required. The simplest method to value a buy-out is to subtract the exercise price of the options from the market value. However, this method does not consider that the employee might never exercise the options. The discount to present value method applies discounts for the possibility of forfeiture

or death, and items such as taxes and lack of marketability. The most complicated, but more accurate method is to apply a complex valuation formula known as Black-Scholes. This method, while theoretically sound, still invites speculation. Accordingly, in some cases the court might defer valuation and buy-out until the options are actually exercised. This method is exact, but may entail the disadvantage of delaying final economic resolution of the divorce for years.

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A party may be ordered to maintain health insurance for his or her spouse and/or children as part of a support order, where the health insurance coverage is available for the payor spouse at no cost or at a reasonable cost. The payment of health insurance for a spouse and/or children is factored into the total support award (child or spousal support) and included in the support order. The cost of the health insurance is allocated as part of the support award based upon the income percentages of the parties. While a spouse has no obligation to cover his or her former spouse after divorce, the obligation to provide health insurance coverage for one’s children may continue until the child support obligation has concluded. The child support obligation terminates on the later date of the child turning eighteen years of age and graduating high school. After the divorce decree has been entered, a former spouse, if eligible, may elect to continue insurance coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA applies to private employers having more than twenty employees as well as to state and local health plans. COBRA provides for eligible individuals to continue their health insurance coverage under the employer’s group policy for a period after the date of the divorce decree. The eligible individuals must

pay the premium costs for the continued coverage, with the former spouse having no responsibility for the payment of the premiums. Once the COBRA period has expired, the individual must obtain their own health insurance coverage. The issue of health insurance coverage continues to be an important matter in many divorce cases. Parties should consider such costs as part of the equitable division of the marital estate and/or an award of alimony.

Categories: Divorce, Uncategorized Tags: , , , ,

If an interest in a closely held business arises during the marriage, divorce will typically involve the distribution of the business to one spouse; a buy-out of the other’s interest is often necessary, as divorcing spouses cannot be expected to work together. However, where spouses will have little contact, the court may award the business to both spouses. Sometimes a trustee may be appointed to oversee the operations of the business.

To determine the buy-out price, parties must rely on expert opinions. The valuation most commonly performed is according to the price that a business could attract in the open market, that is, what a willing buyer would pay a willing seller when neither is under any pressure to buy or sell. Tax Revenue Ruling 59-60 dictates

review of all relevant factors, including: 1) the nature and history of the business; 2) the economy and economic outlook; 3) book value; 4) earnings; 5) dividends; 6) intangible value such as goodwill; 7) actual sales similar companies; and 8) the stock value of similar publicly traded companies.

The “goodwill” of a business may or may not be appropriate for valuation. “Goodwill” is an intangible asset that may be defined as the reasonable expectancy of repeat business that will ultimately generate more revenue than the assets of the company alone. Accordingly, most any successful business will have goodwill; however, if the goodwill is solely due to the positive reputation of a single person, such goodwill will not be something that can be distributed in a divorce.

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The Pennsylvania Divorce Code provides for Equitable Distribution of Marital Property. What does this mean?

Marital Property is a property interest acquired between the date of marriage and final separation of husband and wife. Property is marital regardless of whether it is held in joint or individual names if acquired during this time period, unless it was acquired in exchange for pre-marital, gift or inherited property (non-marital or separate property). Increase in value of non-marital property accruing during the marriage through final separation is, itself, also marital property.

Equitable Distribution is the property division between husband and wife upon divorce. Unlike community property, the division of marital property may or may not be equal and is based on equitable principles; in one case, property division may be 50-50 between the spouses, while in another it could be 45-55 or most any other division found to be fair by the Court.

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