I hope you all are enjoying this gorgeous weather, I love it!  We have been very busy here since March with a number of modification cases, as the new Alimony Law allowed for a large group of payors to file for modification at that time.

Generally, modification occurs as a result of a major change in circumstances; i.e. a new job, a lost job, a need for a custody change or a child reaching emancipation age.  The change is really any change that could be considered a material change in circumstances.  Now the age of the alimony payor and length of the marriage are added to the mix, and can constitute on their own a material change in circumstances.  This new law (which I think has a number of real flaws) has become a touchstone for other states trying to change their alimony structure.

The new alimony law leaves untouched divorce agreements which “survived” as independent contracts.  Without getting too legally obtruse, that was because the parties to those contracts had non-modifiable legal rights that the legislature couldn’t change.  Those agreements can only be modified if countervailing equities are present.  In reality, that generally means one person or the other is about to become a public charge. 

In the next couple of posts I will talk about what the modification process in Massachusetts looks like.

Best,

Nancy

I’ve been playing hooky, and my colleague Andrea Dunbar has stepped up to complete her series on points to consider in gray divorces.

Best, 

Nancy

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DIVIDING RETIREMENT ACCOUNTS

There are important differences associated with dividing retirement plans that are already in pay status and those that are not.  Some people divorcing later in life are already retired, and thus are most likely already collecting from a retirement plan.  This limits the options available for dividing some plans in divorce.  Different plans have different options, so it is imperative to know the rules of the plan you are dealing with. 

Pension plans, as opposed to 401(k) plans or 403(b) plans, once in pay status, pay a fixed sum of money each month for the rest of a participant’s life.  The amount of the payment is typically based on the income the person earned over a period of time.  The payment amount will also depend on whether there was a survivor beneficiary named at the time of retirement and the extent of the continued benefit.

Some pension plans can be divided two ways: either by a Separate Interest Qualified Domestic Relation Order (QDRO) or a Shared Interest QDRO.  A Separate Interest QDRO divides a pension so that one spouse’s share is set aside from the other’s, meaning the non-participant spouse’s receipt of benefits is not contingent upon the participant spouse’s receipt of benefits.  In the case of a Separate Interest QDRO, the non-participant spouse is treated as if he or she had been an employee of the company.  Most plans will not allow a separate interest to be awarded after a pension is already in pay status.   

A Shared Interest QDRO provides rights to the non-participant spouse that are derivative of the participant spouse’s rights.  In this case, the pension share of the non-participant spouse will be based upon the life expectancy of the participant spouse.  Most shared interest plans will not allow the participant spouse to name a survivor beneficiary if one was not named upon retirement, nor can the participant spouse cancel a survivor benefit if one was provided for when the plan went into pay status.  In order to waive a survivor benefit at retirement, a spouse must sign a form.  When divorcing later in life, it is important to verify whether the survivor benefit was waived at the participant’s retirement.

ESTATE PLANNING

The recently passed Massachusetts Uniform Probate Code (MUPC) expands transfers that are revoked upon death.  Divorce has long partially revoked the wills and unfunded revocable trusts of divorcing spouses, so that property transfers to an ex-spouse as well as nominations appointing the ex-spouse as executor or trustee are cancelled.  The MUPC broadens the current divorce rule so that it now expressly applies to non-probate transfers such as life insurance and trusts, whether funded or non-funded.  The MUPC also operates to revoke bequests to relatives of an ex-spouse as well as appointments of such relatives as executor or trustee under certain circumstances.  Instead of relying on revocations that occur as a matter of law, it is always best practice to update a will after a divorce, whether divorcing later in life or otherwise.      

It is also important to update durable powers of attorney and health care proxies upon divorce.  A durable power of attorney gives a person of your choosing the ability to manage your finances and access your assets in the event you are unable to do so.  A health care proxy empowers someone you trust to make important decisions regarding your medical care if you become incapacitated.  Most likely, you do not want your ex-spouse in charge of these decisions, so updating these documents is imperative upon divorce.

It is important to understand your rights and options with Social Security, Medicare, dividing retirement accounts and estate planning, and to sit down with a knowledgeable and experienced divorce attorney when divorcing at any point in life.

Gray divorce is on the increase.  As Boomers age they are deciding to divorce.  There are a number of issues that are of particular importance.  My very talented colleague Andrea Dunbar has written today about Social Security and Medicare benefits.

Best,

Nancy 

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While each divorce case presents its own set of complex facts and circumstances, divorces involving older clients (also known as “gray divorce”) can be especially complex.  Issues such as Social Security, Medicare, retirement benefits and estate planning are, more often than not, fringe issues when dealing with couples divorcing at other points in life.  These issues come to the forefront, and sometimes become of critical importance when a divorce occurs later in life.    

Social Security

It is important to know the ins and outs of Social Security when going through a divorce during advanced age.  The rules of Social Security, like most other federal benefits programs, are counter-intuitive and often lead to surprising results. 

A widow or widower at full retirement age or older receives 100% of a deceased spouse’s basic Social Security benefit amount.  The same is true even if the spouses are divorced, as long as they were married for at least ten years and the spouse seeking to collect benefits is not remarried.  Johnny Carson provides an interesting illustration of this rule:  He was married four times, each marriage lasted at least ten years, and none of Johnny’s former spouses remarried.  Upon Johnny’s death, all four of his ex-wives qualified for and received an amount equal to his full Social Security benefit.

The Social Security Administration provides a benefit option to married and divorced spouses known as “claim and suspend.”  Claim and suspend allows a married or divorced couple to simultaneously take advantage of spousal benefits and delayed retirement credits.  A former spouse of a worker who has reached full retirement age and claimed benefits upon reaching full retirement age her/himself,  may claim and suspend, and receive an amount equal to 50% of the worker’s benefit each month without affecting the former spouse’s ability to continue to work until age seventy (70); thus, earning delayed retirement credits which increase the former spouse’s ultimate benefit.  This of course is so long as the former spouse is not remarried and the marriage lasted at least ten years. 

Some state courts take the position that making an equitable division of Social Security benefits upon divorce violates federal law.  Where one spouse worked and the other stayed home, or both spouses worked but one spouse was the higher wage earner, the Court’s refusal to make an equitable division of Social Security benefits can result in serious inequities, especially when a couple is divorcing at or after full retirement age.  Some courts remedy this inequity by assigning a larger share of marital assets to the spouse with the lower social security payout. 

Medicare

I recently attended a Continuing Legal Education Seminar relating to divorcing later in life and learned a great deal of useful information relating to Medicare.  The overview provided by the speaker and materials from the seminar, and summarized below, merely scratch the surface of understanding Medicare benefits.

Medicare is a federal program of health insurance for people age 65 and over (generally).  The benefits are individual and uniform (unlike Social Security where spousal benefits can differ). 

For citizens and legal residents (or their spouses) who have worked a minimum of 40 quarters, Medicare benefits begin the first of the month in which the beneficiary turns 65.  On that date, the beneficiary automatically gets Medicare Part A (hospitalization coverage), which has no premium, and is eligible to receive Medicare Part B (doctors, labs and outpatient services), which does have a premium. 

People who are still employed beyond age 65, and who are covered by their employer’s insurance (together with their spouses), can elect to NOT sign up for Part B, thus avoiding paying the premium without incurring a late sign up penalty.  If an employee retires or otherwise loses employer coverage, the employee (and his or her over 65 year-old spouse) MUST sign up for Medicare Part B within 63 days of losing coverage, even if the employee is offered COBRA benefits.  Failure to do so incurs a Medicare penalty for late sign up that is both financially onerous and permanent.      

When couples divorce, many times the divorce settlement requires one spouse to cover the other spouse under his or her health plan, but only until the non-working ex-spouse reaches age 65.  At that time, the ex-spouse must sign up for Part B to avoid the Medicare penalty.   

Many people who turn 65 and are not covered by a company sponsored retirement health plan can buy a Medicare Supplement (or Medigap) policy to make up for Medicare shortfalls.  If a divorcing couple has a company (or government) sponsored retirement health plan (which essentially acts as a Medicare Supplement plan), the plan itself has its own rules about whether or not a divorced spouse can be covered, and whether it covers the surviving spouse or the surviving former spouse of the actual retiree.  In the case of a divorcing couple covered by a company sponsored retirement health plan, you must get the details of who the plan will and will not cover from the company’s Human Resources department to determine its guidelines and policies.    

Social Security and Medicare are just two of the many factors to be considered when divorcing later in life.  In our next post, we will explore estate planning and options for dividing retirement accounts.

Many of you will end up being able to co-parent admirably, and this will include many of you who are struggling with the tough initial stages of working out a co-parenting arrangement.  If no one is pathological, then time will generally settle things down.

In the meantime, here are some tips to keep things from blowing up:

1.  Don’t sweat the small stuff.  In a perfect world the kids would have the same experience in both homes.  That is not going to happen.  Don’t worry if things are different at both houses — different meals, different clothes, and yes, different bedtimes.  These differences help make the children of divorce more resilient than their peers, and resilience is a very good thing!  Do raise some issues; for instance, any surrounding inherently dangerous activities and food if there is a medical/allergic condition that the kids have.  You should agree on those limits.

2. Don’t try to communicate in person or by phone if you or your spouse are still raw.  Email and texting have truly made divorce parenting easier. You are both communicating and creating a record.  Always be civil and polite.  You can make faces at the computer but don’t let the anger show through (and NEVER, EVER make faces or complain about the other parent where kids can see or hear you).  If you get nasty texts or emails from your soon-to-be-ex, take a deep breath, and ignore them.  When you are calm you can reply politely to the meat of the email, whatever it was.  If you are so disturbed by the message, have a close friend read it for you and help you reply.  Non-engagement helps stop the fighting.  Also if matters blow up and parenting becomes a court issue, you will have a good, clear, written record of who said what.  Save all emails and learn how to save texts with your phone.

3.  As soon as possible set up a clear schedule for parenting time.  There are a number of good programs on the Internet that allow you to both enter and see each other’s items on the same calendar.  I have heard a lot of good reports about Our Family Wizard.  The clearer you can be about who does what and when, the easier it will be on both of you AND the kids.

4.  Be sure that both of you have contacted the schools, coaches, doctors and anyone else who has contact with the kids on a regular basis, so that all of those folks have both parents’ contact information and know to call or email both of you.  This saves one parent from feeling left out and one parent being put unfairly in an “assistant” position.  The information about activities, doctor’s appointments, etc. can all go into that mutual Internet calendar so all can see.

5.  I just had an extraordinary client prepare a list of her kids’ friends and their parents’ contact information so that her kids’ dad could get in touch with them directly to arrange sleepovers, etc. on his parenting time.  She even went so far as to check in with these friends’ parents and assure them that their kids would be safe and have a good time at dad’s house.  This type of kindness and foresight may go a long way to alleviating a fight.

And finally, this is a tip from a marriage counselor:  Two phrases not to use are “you never” and ”you always.”

Best,

Nancy

Sometimes the worst of humanity brings out the best — it’s certainly true of Boston this week.  It is true of  the ordinary folks running to help  the victims, of the police, fire, National Guard and medical personnel who did their jobs immediately and in a planned method that saved the death toll from being higher.

And in the sad and scary aftermath it is true of the folks who opened their homes on the Internet, of those folks who have already signed up for next years’s Boston Marathon, and also of the fans at the Bruins/Sabres game last night. 

Bless you Boston,

Nancy

I got caught this April Fools’ Day by a very funny and elaborate April Fools’ prank by my partner Shep Davidson, co-author with Renee Inomata of The In-House Advisor blog.

It made me think about a real evidentiary issue in divorce cases, the Spousal Disqualification.  This is not a privilege — privileges can be waived.  It’s a disqualification to testify to the content of a discussion between spouses, if the spouses had a reasonable expectation the conversation would be private.

I think the disqualification was a result of the desire to treat marriage differently from any other relationship.  Privileges exist with other relationships, for example patient/psychotherapist and lawyer/client, among others.  However, in these relationships the privilege belongs to the patient or the client, and they alone can waive the privilege and the testimony will come in.  This is not the case with spousal disqualification because both spouses have to agree to the waiver.  In practice this happens by default; if one person offers the testimony and the other fails to object to the testimony, the disqualification is waived.There are also exceptions which arise often in divorce law, including proceedings arising out of or involving contracts between spouses; paternity and child support proceedings; non support, desertion or neglect proceedings; child abuse/incest proceedings; criminal proceedings involving one spouse victimizing the other; violation of a vacate, restraining or no contact order; and a couple of other circumstances which only apply in the criminal courts.

There are also ways to get around the disqualification if the judge allows (some do, some don’t).  It often arises in divorce proceedings where one spouse has confessed to an affair to the other spouse.  The attorney can have the spouse who wishes to testify describe where the parties were and whether or not any one could have overheard them.  In a restaurant or a public place the expectation of privacy didn’t exist, and of course if the children were present or nearby it arguably didn’t exist either.

Best,

Nancy

This week had two days of arguments on gay marriage at the Supreme Court.  The first case dealt with a challenge to the California law known as Prop. 8, which overturned the California Supreme Court’s allowance of gay marriage.

The second case was of more interest to us here in Massachusetts as it dealt with the potential overturning of DOMA, which is the Federal Defense of Marriage Act.  Enacted in 1996 and signed into law by President Clinton, DOMA defines marriage as between a man and a woman.  As a result, in those states like Massachusetts where gay marriage is legal (and might I add the world did not end), gays who are married do not have the same federal benefits that heterosexual married couples do.  This means that gay married couples cannot file joint federal tax returns, they are denied key benefits in the military, and they lose all sorts of deductions and benefits such as survivor’s rights to Social Security benefits. When gay couples divorce they are taxed on many things at the federal level that heterosexual couples are not taxed on.  Additionally, divorcing gays cannot transfer pensions without tax consequences, there can be capital gains on property division and there is no tax deduction available for alimony, to name a few.

Supreme Court watchers and national political pundits looking at legal tea leaves seem to believe that the challenge to DOMA will prevail and it will be overturned.  I certainly hope this is so, as it would make both marriage and divorce much more fair for gay couples.

Best,

Nancy

It is a perfectly putrid winter afternoon in Boston AND tomorrow is the first day of spring.  Last weekend was Saint Patrick’s Day, so I decided I would write about the endlessly cheery subject of alcohol abuse.

We always have a few divorce cases open here that involve alcohol in one way or another.  Generally the most egregious deal with custody or parenting.  Alcoholism is an insidious disease in that it is both an illness and a choice, and the non alcoholic family members pay a considerable price.  What I had not realized until recently is that heavy drinkers change their brains somehow so that they are less resilient than non heavy drinkers.

It also turns out, and I was not surprised at this, that heavy drinking leads to divorce, especially when only one spouse is a heavy drinker.

If you are contemplating marriage in addition to possibly considering a prenuptial agreement, you should also take a hard look at your partner’s drinking patterns.

Best,

Nancy

On March 12, 2013, the Supreme Judicial Court clarified the standard for modification of child support under the Massachusetts child support guidelines in the case, Morales v. Morales.

Before the Morales case there was an ambiguity in the law, where 0ne portion indicated the standard for modification of child support payments was  a material change in circumstances, which is the usual standard for modifications.  The law itself had said: “In any proceeding to establish or modify an amount of child support, the child support guidelines promulgated by the chief justice of [the trail court] shall apply.” 

The SJC has held that the child support guidelines are the standard, and there is no need to prove a material change in circumstances to obtain a modification.  A parent needs to show only an “inconsistency” between what he or she is paying in child support and what the guidelines say he or she should be paying.  This is quite easy to prove and I anticipate many child support-paying parents to seek modifications in court.

It is also both good law and common sense.

Best,

Nancy

It’s tax time again!  I know this because I am cleaning closets at home to avoid pulling my taxes together.  If you are in the middle of a divorce, you need to be careful about how you file your taxes.  Jennifer Green, my very knowledgeable tax colleague, has some suggestions for this.

Best,

Nancy

Married spouses who are in the process of seeking a divorce should think twice about filing a joint income tax return.  That decision should not be made in haste.  Although you can amend your income tax return to change your filing status from married filing separate to married filing joint, once you file a joint income tax return, you cannot later change your mind and amend your tax return for that year to change your filing status to married filing separately. 

Many married couples choose to file a joint income tax return in order to take advantage of certain tax credits and other benefits attributable to this filing status.  However, there is major disadvantage in filing a joint income tax return.  As joint filers, both spouses are jointly and severally liable for the tax and any additions to tax, interest or penalties for that tax year even if the couple later divorces.  A divorce decree stating that a former spouse will be responsible for any amounts due on previously filed joint income tax returns does not prevent the IRS from seeking full payment from both spouses.

What happens if the IRS seeks collection from you on a joint income tax return where your former spouse omitted or under-reported income or claimed improper deductions or credits without your knowledge?  Although you may no longer be married to your spouse, the IRS will still hold you liable for the taxes, interest and penalties attributable to the joint income tax return, unless you can establish that you qualify for spousal tax relief.  You may be entitled to spousal tax relief if you did not know (and had no reason to know) of the understatement of tax (deficiency) and if, considering all the facts and circumstances, it would be unfair to hold you responsible for the understatement. 

Below is a brief overview of the three types of spousal tax relief:

(1)   Innocent spouse relief:  Relieves you of all responsibility for paying tax, interest and penalties if your former spouse failed to report income, reported income improperly, or claimed improper deductions or credits. You must meet all of the following conditions to qualify:

• You filed a joint return that has an understatement of tax that is solely attributable to your spouse’s erroneous item.  An “erroneous item” includes income received by your spouse but was omitted from the joint return.  Deductions, credits and property basis are also erroneous items if they are incorrectly reported on the joint return;
• You establish that at the time you signed the joint income tax return you did not know, and had no reason to know, that there was an understatement of tax; and
• Taking into account all facts and circumstances, it would be unfair to hold you liable for the understatement of tax.

(2)   Separation of liability: Provides for the allocation of additional tax, penalties and interest owed between you and your former spouse or your current spouse from whom you are separated because an item was not reported properly on a joint return.  Under this type of relief, you separate the understatement of tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse).  The tax allocated to you is the amount for which you are responsible, and then the IRS goes after your former spouse for the amount in which he/she is allocated.  To qualify for “separation of liability relief“ you must have filed a joint income tax return and must meet one of the following requirements at the time you request relief:

• You are divorced or legally separated from the spouse with whom you filed the joint return; or
• You are widowed; or
• You have not been a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file the request.

If, at the time you signed the joint return, you had actual knowledge of the item that gave rise to the understatement of tax, you may not qualify for separation of liability relief.                                                                                                                                                                                                                             

(3)   Equitable relief: If you cannot prove eligibility for the first two provisions, you may qualify for this category of spousal relief.  To qualify for equitable relief you must establish that, under all facts and circumstances, it would be unfair to hold you liable for the understatement or underpayment of tax.  There is a substantial list of qualifications and factors that are considered when requesting this type of relief.

Before you agree to file a joint income tax return with your spouse, make sure you understand the tax consequences of that decision.