NJ Family Legal Blog

ESTATE CAN ATTEMPT TO RECOVER FUNDS AGAINST DESIGNATED BENEFICIARY DUE TO WAIVER IN DIVORCE

Robert A. Epstein — Sun, 08 Apr 2012 19:30:21 -0500

As part of the give-and-take negotiation process involved with Marital Settlement Agreements, oftentimes one party will waive his or her right to the proceeds of the other party's retirement plan assets. What happens, however, when the spouse retaining those assets dies before changing the former spouse as the retirement plan's designated beneficiary?

While one might think that the assets then pass to the Estate of the deceased spouse, the answer is actually more complicated. In 2009, the Supreme Court of the United States in a case known as Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009), definitively held that the retirement plan administrator must, in accordance with the detailed statutory provisions of the Employee Retirement Income Security Act ("ERISA") pay the asset proceeds to the designated beneficiary - in accordance with the plan documents. Thus, even if the former spouse waived her rights to the retirement assets as part of the divorce decree, she could still stand to receive those benefits should she remain the designated beneficiary in the plan documents. The Supreme Court even characterized the plan administrator as having done "its statutory ERISA duty by paying the benefits to [the ex-wife] in conformity with the plan documents."

In such a situation what is the estate to do? Is it without remedy, no matter how unfair the outcome may seem? Actually, the Supreme Court left the question open as to an Estate's avenue of remedy and, thankfully, the Third Circuit Court of Appeals recently addressed this issue of first impression in the precedential decision of Estate of William E. Kensinger, Jr. v. URL Pharma, Inc.; Adele Kensinger.

In Kensinger, the husband, William, was enrolled in an employee-sponsored deferred savings plan ("401(k) plan") through his employer. The plan was governed by ERISA. At the time of enrollment, William was married to Adele, whom he designated as the plan's primary beneficiary. In 2008, the parties divorced and the settlement agreement reached provided that each party waived their respective interests in the other party's retirement assets. Nine months later, William died before changing Adele as the designated beneficiary on the 401(k) plan. The Estate argued that, because Adele had waived her interest in the asset as part of the settlement agreement, that it was entitled the proceeds of the asset. Adele argued that ERISA trumped her waiver.

Reversing the decision of the United States District Court, the Third Circuit held that the Estate could sue Adele to enforce her waiver and recover the disputed plan proceeds. In so doing, the Court rationalized that the proceeds must first be distributed to Adele to remain consistent with the Supreme Court's decision in Kennedy, but then the Estate could challenge her right to the funds due to her waiver. In so holding, the Court looked to the decisions of other federal and state courts, also noting that several federal cases have held that a creditor can sue a named beneficiary to recover plan benefits once those benefits have been distributed. Essentially, ERISA's protections no longer apply once the funds are paid to the beneficiary.

One notable issue raised by Adele, but dismissed by the Court because it was neither raised before the District Court nor mentioned in its opinion, was whether William, despite the divorce decree, perhaps intended to leave Adele as the beneficiary. It is this very type of fact-based question that the Kennedy decision attempts to eliminate. Since the reach of Kennedy, however, essentially stops once the funds are distributed to the designated beneficiary, a protracted litigation could certainly result to determine the decedent's intent in leaving the forms as is prior to his death. Certainly the settlement agreement would carry great weight due to it having been formalized in writing, and one would think that such a changed expression of intent would similarly be memorialized. The resolution to such a question will ultimately be left to the trier of fact.

The takeaway from this case, however, is that as soon as the divorce is over, people should change their beneficiaries to avoid such problems.

____________________________________________

Robert Epstein is a contributor to the New Jersey Family Legal Blog and a member of Fox Rothschild's Family Law Practice Group. Robert practices throughout New Jersey in all areas of family law and family law litigation. You can reach Robert at (973)994-7526, or repstein@foxrothschild.com.

Madoff Mess Hits the Divorce Court - The End

Eric S. Solotoff — Tue, 03 Apr 2012 13:09:51 -0500

The Simkin v. Blank case in New York has been a frequent topic on this blog. It was game over for Mr. Simkin today when the NY Court of Appeals ruled that this Madoff victim could not revise his divorce deal.

We first wrote when the case was filed. In this case, in June 2006, the parties agreed to evenly split the $5.4 million in an account they had with Madoff Securities. As a result, the husband gave the wife $2.7 million in cash, and retained the account. As a result of the alleged Madoff Ponzi scheme that has essentially rendered the account worthless, the husband filed suit seeking the $2.7 million that he paid the wife. The husband alleges that because the account turned out to be valueless, the spirit of the agreement was broken.

We next wrote when the trial court first ruled, dismissing the matter. I even participated in a podcast about this ruling. Acting New York State Supreme Court acting Justice Saralee Evans decided that the husband is stuck with his decision to keep the account instead of withdrawing his money before the December 2008 collapse of Bernard L. Madoff Investment Securities LLC. The Justice noted that while the husband claimed the Madoff account held no assets, he did not allege it had no value. Key to the decision was that in 2006 and "the several years after that plaintiff maintained this investment," the account "could have been redeemed for cash, presumably significantly in excess of its 2004 value." In addition, the Justice held that "An investor's ability to redeem an account for value, was the assumption on which the parties relied in dividing their property and in doing so they made no mistake."

The next installment was about the Appellate Division's decision which reversed the trial court decision and reinstated the Complaint. The Appellate Court found that dismissal was improper and the husband had the right to try to pursue both the issues of mutual mistake (i.e. there never really was an account) and that the wife was unjustly enriched. In coming to its decision, the majority of the court held:

The dissent states: “[a]t the time of the agreement, Steven had an account in his name with [Madoff].” Untrue. Steven never had an account in his name with Madoff; on Madoff's own admission there were no accounts within which trades were made on behalf of investors.

The dissent then states, “Steven liquidated part of the account to fund his payments to Laura.” Untrue. In Madoff's Ponzi scheme what appeared to Steven and Laura to be a partial liquidation of an account was simply a payment to Steven that came from funds deposited by a more recent “investor” in what the “investor” believed was his own account.

The dissent further observes, “[Steven] did not liquidate the rest of the Madoff account ... and he continued to invest in it.” Untrue. There was no account which could be liquidated, as became apparent when Madoff received $7 billion worth of “liquidation” calls from investors in 2008. Nor was Steven “investing” in an account; his further contributions went directly to pay other “investors” in the scheme.

On April 3, 2012, the NY Court of Appeal (the highest court in NY) reversed the Appellate Division and ruled that the complaint should be dismissed.

As an initial matter, the Court rejected Mr. Simkin's claim that the alleged mutual mistake undermined the foundation of the settlement agreement. The Court noted that the agreement provided that the $6,250,000 payment to wife was "in satisfaction of [her] support and marital property rights," along with her release of various claims and inheritance rights. The court further noted that:

Despite the fact that the agreement permitted husband to retain title to his "bank, brokerage and similar financial accounts" and enumerated two such accounts, his alleged $5.4 million Madoff investment account is neither identified nor valued. Given the extensive and carefully negotiated nature of the settlement agreement, we do not believe that this presents one of those "exceptional situations" warranting reformation or rescission of a divorce settlement after all marital assets have been distributed.

The Court then rejected the claim that the account was non-existent when the parties executed their agreement, noting:

Even putting the language of the agreement aside, the core allegation underpinning husband's mutual mistake claim -- that the Madoff account was "nonexistent" when the parties executed their settlement agreement in June 2006 -- does not amount to a "material" mistake of fact as required by our case law. The premise of husband's argument is that the parties mistakenly believed that they had an investment account with Bernard Madoff when, in fact, no account ever existed. In husband's view, this case is no different from one in which parties are under a misimpression that they own a piece of real or personal property but later discover that they never obtained rightful ownership, such that a distribution would not have been possible at the time of the agreement. But that analogy is not apt here. Husband does not dispute that, until the Ponzi scheme began to unravel in late 2008 -- more than two years after the property division was completed -- it would have been possible for him to redeem all or part of the investment. In fact, the amended complaint contains an admission that husband was able to withdraw funds (the amount is undisclosed) from the account in 2006 to partially pay his distributive payment to wife. Given that the mutual mistake must have existed at the time the agreement was executed in 2006, the fact that husband could no longer withdraw funds years later is not determinative.

Rather the court analogized this to an asset that lost value after the divorce, when it stated:

This situation, however sympathetic, is more akin to a marital asset that unexpectedly loses value after dissolution of a marriage; the asset had value at the time of the settlement but the purported value did not remain consistent. Viewed from a different perspective, had the Madoff account or other asset retained by husband substantially increased in worth after the divorce, should wife be able to claim entitlement to a portion of the enhanced value? The answer is obviously no. Consequently, we find this case analogous to the Appellate Division precedents denying a spouse's attempt to reopen a settlement agreement based on post-divorce changes in asset valuation.

While this case now seems to be over, we are still left to question whether the parties really got the benefit of their bargain here since, notwithstanding the ability to access the account for some time, the account really did not exist.

Use of Formula to Determine Alimony Nixed Again

Eric S. Solotoff — Thu, 29 Mar 2012 12:32:23 -0500

Alimony is supposed to be decided based upon the statutory factors, right? There really isn't a formula to determine alimony, right? Even if there is this formula that is used to get a ball park figure for a range of alimony, judge's can't use it, right? So what happens when they do?

We have blogged on the so called "rule of thumb" several times before. In fact, we reported on one case last year that specifically said that a formula approach to determine alimony was impermissible. On the other hand, we also blogged on another case last year where an expert in a legal malpractice case against a divorce lawyer based her opinion that the alimony was too low based upon this formula and the court found this a permissible opinion because the use of a formula was "widely accepted by the members of the matrimonial bar.

The use of the "formula" or "rule of thumb" was disfavored again this month in the case of Eick v. Eick, an unreported (non-precedential) decision from the Appellate Division. Just as it did last year, the Appellate Division stopped short of saying that the trial judge actually used a formula. However, the court held:

Plaintiff argues that the remand judge may have used an impermissible formula to determine the amount of alimony, rather than applying the factors required by N.J.S.A. 2A:34-23(b) to the facts shown by the evidence. He contends that the judge subtracted defendant's annual income of $52,909 from his five-year average income of $94,6322 and then awarded defendant thirty-three percent of the resulting figure. This calculation appears to match the amount of alimony awarded by the judge in this case.

We decline to speculate whether the remand judge used such a formula. Nevertheless, as a general proposition, we agree with plaintiff that use of a percentage formula based only on the parties' incomes is not authorized by law. Such a formula does not weigh and balance particular factors as listed in the statute and as might affect each individual case.

Just as in the case last year, the court was not precluded from coming to the number that the formula determined, but "... but require additional support in the record for its determination." So with all of these cases, is the take away that you cannot use a formula, but if a court does, it should make factual findings supporting the amount ordered?

_________

Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild's Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.

If you think that all meetings with experts can be recorded, think again

Eric S. Solotoff — Wed, 21 Mar 2012 08:23:09 -0500

While it doesn't happen in every case, from time to time there is a request made by a client or opposing counsel to tape the meeting between the opposing expert. This happens more frequently in contested custody cases, but it could happen as to any expert, I suppose. The general rule seemingly had been that these sessions can be taped (with notice - not surreptitiously). Why do people want to do this? Some people are not trusting. Others want to make sure that they are not misquoted in an experts report. Some even do this if an expert is known to ask leading types of questions suggesting a response that may then be used against the party being interviewed.

A question recently arose as to whether the experts can be compelled to tape all interviews, not only of the one party, but of the children too. In a reported (precedential) trial court opinion in the case of Koch v. Koch which was decided last year but approved for publication last week, the judge refused to allow all interviews to be taped. Specifically, the court concluded that concludes that a party has the right to record his or her own interviews with a psychologist or psychiatrist, but does not have the right to compel the other party’s expert to record interviews of the other party or the parties’ children.

As to the general rule noted above, the judge here was not so sure and the opinion included a threshold discussion as to whether expert interviews in a custody case could be taped since the case that lawyers generally relied on involved the taping of a session with a psychologist in a civil litigation. Notwithstanding the conclusion, the judge noted:

Accordingly, a custody evaluation is an expert report where the court expects, and is
assisted by, the independent professional judgment of a licensed mental health expert. Requiring recordings could undermine the very purpose of the evaluation. If the children know that they are being recorded, and know that their parents are in a custody dispute, the children might be less candid for fear that their parents will hear what they say to the evaluator. Such recordings effectively bring the parents into the children’s interviews and could distort the information needed to prepare an accurate and balanced evaluation.

The trial judge then boiled the issue down to it's basics as follows:

The fundamental issue then becomes: is it in the best interest of children to allow their parents to have access to the children’s interviews? The evaluator often observes and has discussions with the parents while the parent interacts with the children. When, however, the evaluator speaks to the children alone, the very purpose of that interview is to obtain the children’s independent views. Giving parents recordings of those interviews, albeit after the fact, undercuts the very goal of the interview and prevents the evaluator from getting the candid views of the children because the children will know that their parents will be listening
to the interviews.

Of even greater concern is the high potential for misuse of the recordings of the
children’s interviews. In contentious custody disputes, it is not hard to imagine how a parent could confront a child with the child’s own words or make a child believe that he or she has somehow been disloyal to that parent. Even the best meaning parents, when concerned by what they heard in their child’s recorded interview, may let words or information from the child’s interview slip that may cause anxiety or harm to the child. It is important to keep in mind that children being interviewed in a custody evaluation are aware that their parents are in a child custody dispute, and they may already have anxiety and concern over their role in that dispute and how the custody arrangements will be resolved.

Against the obvious potential harm to the child, it is hard to identify a legitimate need
for the disclosure of the child’s interview. As already pointed out, the proponent relies on the need for open discovery in custody matters. It is worth reiterating that custody evaluations are not discovery devices. Indeed, the children have not brought the action; rather they are innocent children swept up in a dispute between their parents. In short, litigants’ rights to discovery cannot trump the court’s responsibility to protect the child. As a consequence, if one party hires an expert who chooses to record all interviews and make those recordings available to a party, that party will need to obtain the permission of the court before the expert can release any recording of a child’s interview to any counsel or to any parent.

The court concluded that it had the power to decide if, and under what conditions, any mental health expert can make recordings of children’s interviews available to counsel or a party when that interview is conducted as part of a custody evaluation.

Being a trial court opinion, it is not binding on other trial courts or the Appellate Division, however, it is persuasive. However, since custody reports often quote or characterize things that a child says, one wonders whether the court needed to go this far because parents get to see the reports. The difference, however, is that the report is after an evaluation and not during where a child can try to "change" what he/she said. Moreover, the parent that might use the information in a recording is likely the same parent that would grill a child after their interview with the expert anyway.

In any event, this case does provide some useful guidance and well reasoned analysis.

_________

WHAT DOES EQUITABLE DISTRIBUTION MEAN FOR A MEDICAL PRACTICE?

Sandra C. Fava — Mon, 12 Mar 2012 21:47:24 -0500

You work hard in high school, graduate top of your class in college, go on to graduate medical school, spend the longs hours and dedication needed to finish your residency, and finally after thousands of hours of studying, hundreds of tests and years of hard work - you are a doctor. You start your own practice. You made it professionally. Personally, things are a bit different. You are facing a divorce. What does that mean for the medical practice you’ve worked so hard to establish?

Doctors may face unique issues during a divorce. Long term marriages may have seen years of what is considered relatively ‘average’ income (medical school and residency), followed by a dramatic or steady increase in salary (or a combination of both). It is no secret that self-employed doctors are usually not a typical W-2 employee. So what does this mean in the context of a divorce? What happens to the medical practice when the couple divorces?

Equitable distribution in New Jersey does not automatically mean half or 50% of a marital asset. Equitable distribution is not a simple mechanical division of assets accumulated and/or created during a marriage. The word 'equitable' itself implies the weighing of many considerations and circumstances that are presented in and unique to each case. A judge would not be fulfilling his/her judicial obligation if he/she routinely or mechanically divided assets from a marriage equally.

In a long term marriage, personal assets are usually divided equally. Businesses, including medical practices are a different story. Why? One argument may be that the spouse working in the business created the value of the business through his/her talent and hard work. Because of this unequal division of labor, perhaps there should be an unequal division of value. Other considerations may need to be made regarding the tax consequences of dividing the value of a business. Often times accounting experts are helpful in not only determining the value of a business (based upon different forensic valuation methods) but also cash flow and the consideration of perks that are paid by the business. Every circumstance must be considered independently and in light of all the factors involved.

The matter of Steneken v. Steneken, 367 N.J. Super. 427 (App. Div. 2004), the Appellate Court addressed a situation of “double-dipping” regarding the husband’s support obligation and the equitable distribution of a closely held business. The Court in that matter considered whether it was impermissible “double counting” to use the actual income of a closely held corporation for alimony purposes, but a lower, “normalized” income amount when valuing the corporation for equitable distribution purposes. It held that in determining the income for a closely held corporation for purposes of awarding alimony, there is no requirement that a court use the same method of calculating income that is used to determine the value of the corporation for equitable distribution purposes. The interplay between an alimony award and equitable distribution is subject to an overarching concept of fairness.

Take for example the business of a single medical practitioner. If a court were to award the doctor’s spouse half the value of the medical practice plus an award of alimony based upon the same value used for the business - that could be considered double dipping. The court would have to take into account many considerations, including but not limited to the length of marriage, income from the business, income of the parties, age of the parties, ability of each party to work and contribute to their own support, contributions from each spouse to the business, and a multitude of others. Each case must be assessed on its merits and the specific facts it presents.

Dividing a closely held business or a medical practice can present its challenges. It is important to get the right professionals involved early on so that an appropriate legal strategy can be developed and implemented.

DIVORCING YOUR CREDIT REPORTS

Sandra C. Fava — Mon, 05 Mar 2012 21:08:27 -0500

Going through a divorce can be overwhelming – equitable distribution, visitation, alimony, child support, division of retirement accounts, where to live, re-entering the workforce. All of these are important, long-lasting decisions. But there is one thing that many people fail to consider during a divorce………..divorcing your credit reports.

Today, your credit report can have a significant impact on all aspects of your life - obtaining a credit card, getting qualified for a mortgage, car loans, a job, the interest rates you pay, car insurance, life insurance. Not having good credit can cost you thousands of dollars. That is why it is important to address your credit report, and the lines of credit that your spouse can access as early in the divorce process as possible.

The key to divorcing credit reports is understanding the difference in the way a court views debt versus the way credit companies view debt. A court views debts as either marital debt or non-marital debt, and will divide it according to a variety of NJ statutory factors, which can be found here. Credit companies view debt as either being joint or individual. With joint debt, both spouses signed for the credit and both spouses are responsible for the debt. With individual debt, only one spouse signed for the debt, hence only one spouse is responsible for it.

As an example, if during the divorce a judge orders one spouse to make the payments on a joint credit card, and that spouse fails to do so, in the eyes of the creditor (and reflected on your credit report), both spouses failed to make the payment. Now, you may file a motion asking the judge to order your spouse to pay the credit card and award counsel fees, but even if you win, your credit report will still be negatively impacted. This is why it is so important to take precautionary measures.

First, know where your credit stands. Check your credit report and identify which accounts are joint accounts and which are individual. Since information on the three national credit reports can differ, it is a good idea to check your Experian, Equifax, and TransUnion reports.

Second, consider closing joint accounts or accounts for which either spouse is an authorized user. By closing the account, even if you continue paying down the balance, you ensure that neither spouse can add charges to the account. Be certain that doing this is not a violation of an existing support agreement or Order from the court. It is important to note that creditors cannot, on their own. close joint accounts because of a change in marital status, but can do so if asked.

Third, make sure that all payments on individual accounts and joint accounts are made on time. Protecting your credit during the divorce will make moving on after it financially much easier. If you are interested in learning more about your credit rating, click here.

Sandra Fava is a contributor to the New Jersey Family Legal Blog and a member of Fox Rothschild's Family Law Practice Group. Sandra practices throughout New Jersey in all areas of family law and family law litigation. You can reach Sandra at (973)994-7564, or sfava@foxrothschild.com.

Beware the Lump Sum Alimony Payment

Eric S. Solotoff — Thu, 23 Feb 2012 05:01:14 -0500

Parties often like - well no one really likes to pay alimony - to use alimony as a vehicle to settle issues in a case because usually, alimony is deductible to the payor and includible in the income of the recipient. Because of differences in tax brackets, proper structuring of alimony can create additional cash flow for the recipient and additional tax relief for the payor.

There are times, however, when alimony is paid in a lump sum. Sometimes an alimony obligation is bought out - prepaid if you will (though for the payor, one wonders whether this is a good deal because the recipient can go out and get married the very next day whereas alimony terminates upon remarriage typically (as well as death). Other times, people make a business decision to front load some of the alimony so that the monthly payments in the future are reduced.

However, lump sum alimony cannot be deducted nor is it includible in income. Because of this, consideration should be given to what the lump sum should be by perhaps tax effecting the number so that the recipient does not get the full amount, up front, without having to pay taxes on it.

What happens, however, when parties settle a case that includes the traditional periodic payment of alimony but then they decide to modify this agreement to pay a lump sum? Can this lump sum representing the conversion of a payment that was clearly deductible be deducted?

The IRS recently answered that question in Private Letter Ruling 201206005. While private letter rulings can only be used by the taxpayer submitting the request for a ruling from the IRS, and cannot be cited as precedent, this private letter ruling was interesting.

Therein, the taxpayers wanted to convert periodic payments into a lump sum, however, for some time prior to the lump sum, there would be periodic payment. The IRS determined:

The Modification Agreement expressly designates the lump-sum payment provided under the agreement as excludible from Wife's income and non-deductible from Husband's income for federal income tax purposes. Therefore, the lump-sum payment does not meet one of the factors of § 71(b)(1) of the Code that requires
no such designation of the payment in the divorce or separation instrument in order to meet the definition of alimony or separate maintenance payment for purposes of §§ 71 and 215. Further, there are no past due alimony payments involved in this case. Accordingly, we conclude that the payment of $F in a lump sum by Husband to Wife in return for the extinguishment of his liability to pay alimony to Wife is not alimony or separate maintenance payment as defined in § 71(b), and is not includible in Wife's income under § 71 and not deductible by Husband under § 215. However, the Y month's alimony payments made under the Modification Agreement satisfy all of the factors of § 71(b)(1) and qualify as alimony taxable to Wife under
§71 and deductible to Husband under § 215.

In any event, lump sum alimony can be a trap for the unwary. As such, it would be wise to discuss these issues with experienced and sophisticated counsel and tax professionals.

_________

Issue of Same-Sex Marriage Remains Big News in New Jersey

Eric S. Solotoff — Wed, 22 Feb 2012 11:34:11 -0500

Same sex marriage remains a hot news item these days with the passage into law of the right to marry, most recently in Washington and in other states. Within the past week or so, the New Jersey lawmakers passed a bill permitting same sex marriage, only for it to be swiftly vetoed, as promised, by Governor Christie who is proposing putting the issue to the voters. The counter argument to that which is most often cited is that an issue of civil rights should not be put the voters.

On a parallel path is the pending law suit by Garden State Equality challenging the civil union statute as being discriminatory. The four court complaint Counts asserted, as follows: Count I - a denial of equal protection under Article I, Paragraph 1 of the New Jersey Constitution; Count 2 - a denial of the fundamental right to marry under Article I, Paragraph 1 of the New Jersey Constitution; Count 3 - a denial of equal protection under the Fourteenth Amendment to the United States Constitution, in violation of 42 U.S.C. § 1983; and Count 4 - a denial of substantive due process under the Fourteenth Amendment of the United States Constitution in violation of 42 U.S.C. §
1983.

After motion practice, Counts 2, 3 and 4 were dismissed by Judge Feinberg. However, a motion for reconsideration of the dismissal of Count 3 was filed. That motion was decided yesterday.

In a very well reasoned opinion, Judge Feinberg reconsidered her order and reinstated Count 3. As a result, same-sex couples will be allowed proceed with the case asserting that New Jersey is denying them equal protection of law under the federal constitution by limiting them to civil unions rather than marriage. In the ultimate trial, same sex couples will have the opportunity to demonstrate that the Civil Union statute has failed to afford same-sex couples the same rights and responsibilities as heterosexual married couples. Stay tuned for the next round in this fascinating litigation.
_________

Read Melissa Brown's Informative Article Entitled "How to Find the Right Divorce Attorney for You"

Eric S. Solotoff — Mon, 20 Feb 2012 06:58:19 -0500

Melissa Brown, an attorney in Charleston, South Carolina, is a fellow of the American Academy of Matrimonial Lawyers and one of the preeminent family lawyers in South Carolina. I had the occasion, last week, to read her excellent article on her blog entitled "How to Find the Right Divorce Attorney for You." Melissa has graciously allowed us to re-post her post. Her article is as follows:

When your marriage is falling apart and a divorce is imminent, it is critical to find a skilled, experienced, competent family law attorney to represent your interests. With a little bit of legwork and some patience, you can find a highly experienced divorce attorney who is the “right fit” for you. The following three simple steps outline a basic approach to put your case in the hands of the right attorney.

Step 1: Ask Your Friends for Attorney Referrals
Begin by asking your divorced friends, family members, and trusted coworkers for their thoughts about the attorneys who represented them – and the attorney who represented their ex-spouse.

Do not simply ask “Did you like your attorney?” Dig a little deeper. Be specific. Ask questions such as:

• After your experience what is the most important quality to have in a divorce attorney?

• What did you like the most/least about your attorney?

• Did you feel the attorney listened to you?

• Did you feel your attorney advocated for you?

• What was your opinion about the opposing attorney? (Surprisingly, it is not uncommon for one to have high regard for the opposing side’s attorney. Asking detailed questions about the opposing counsel’s performance can be enlightening.)

• Did your legal fees reflect the value and quality of the legal services that you received?

Pay attention to others’ responses. Take note of which attorneys’ work was valued and appreciated by their clients and which attorneys were a disappointment. Make a list of the attorneys whose work was appreciated and respected because these are the attorneys with whom you need to meet, interview and consider retaining.

Step 2: Interview Several Divorce Attorneys
There is more to a good attorney than simply knowing the law. A good attorney listens to your concerns, strategizes the best plan of action for you, keeps your goals a priority and knows how to make you feel comfortable during this difficult time in your life. The only way to find the right attorney for you is to interview several. Only you can judge whether an attorney’s style and temperament is right for you.

When your case involves significant assets, debts, or contested custody issues, finding the right attorney is particularly important. In these situations, it is imperative to hire an attorney whose practice is primarily focused on handling family law matters and an attorney who also has a consistent record of obtaining positive outcomes in large, complex cases. When complicated issues arise in a divorce, you cannot risk leaving your children’s welfare and your own financial future in the wrong attorney’s hands.

Additionally, you will want to ensure your attorney of choice is familiar with modern technology, particularly social media sites such as Facebook, Twitter and LinkedIn. Evidence gathered from these sources and others, such as text messages, are appearing more frequently in marital litigation. Your divorce attorney must understand how social sharing sites and modern technology work so the attorney can protect the client when the issues arise in court or when the attorney needs to gather information from these sites to use as evidence for client’s benefit.

Another issue that is beginning to occur with increasing frequency is the existence and ownership over frozen embryos and/or sperm donations. Divorcing parties frequently disagree about the best way to deal with these complicated matters. If the ownership or control over frozen embryos or stored sperm may become an issue in your case, you should ensure the attorney you choose is equipped to handle the issue appropriately.

After interviewing potential attorney candidates, ask yourself these questions:

• Did the attorney hear my fears and concerns?

• Did the attorney believe in my case?

• Am I convinced the attorney will advocate for me and protect my children?

• Did the attorney communicate with me in an understandable way?

• Did the meeting give me confidence in the attorney’s abilities?

• Did the attorney raise issues that never occurred to me but might significantly impact my case?

• Did the attorney’s knowledge about complicated matters further increase my confidence in the attorney’s legal skills?

• Did the attorney raise questions about my financial situation, such as taxes and investments that indicated the attorney knew how to handle these issues?

• Did the attorney explain that I might need to hire additional experts, such as a forensic CPA, mental health professional or a forensic computer specialist?

• Did the attorney prepare me for the cost of hiring these experts and explain the benefit such experts might bring that would help achieve my goals?

• Did the attorney explain other avenues to resolve my case to help save me money such as mediation and arbitration?

• Did the attorney explain the differences between litigation, mediation and arbitration?

• Did the attorney explain collaborative law and whether this method is the right or wrong avenue for me to pursue?

• Did the attorney demonstrate an understanding of social media and modern technology, including social sharing websites such as Facebook and Twitter, and how issues related to those sites might occur in my divorce case?

• Did the attorney ask about the existence of frozen embryos or stored sperm donations that might create issues in my case?

Pay attention to the attorney’s answers and the way in which the attorney delivered the answers to you. Then ask yourself these questions:

• Did the attorney and members of the attorney’s team listen to me?

• Did everyone in the office treat me with respect?

• Did they make me feel comfortable and safe?

• Did they ease my fears when having to divulge highly personal details?

• Did the attorney comprehend large amounts of information and quickly grasp the big picture?

• When grasping the big picture, did the attorney articulate my situation in a manner that helped me understand my situation better than before?

• Did meeting the attorney remove much of my angst or create more stress and worry?

• Was the attorney forthcoming about the costs of representation, and understanding of my financial worries?

NOTE: This PDF file is a checklist that you can print off and take with you to each consultation, to help you collect and analyze your impressions of each attorney you interview.

Do not forgo meeting with an attorney merely because the attorney charges for the initial consultation. In most cases, you get what you pay for. Many attorneys who charge for the initial consultation typically provide the potential client with great value, insight and advice at the very first meeting.

By the same token, higher hourly rates do not necessarily translate into higher legal bills. An attorney’s hourly rate is usually comparable with his or her experience. Thus, an experienced attorney should require less time to accomplish many tasks saving the client money as opposed to a novice attorney who might take much more time to complete the same task as he learns the ropes.

Step 3: Do Your Homework—Search the Internet
Use the Internet later in your search. First, rely upon the steps discussed above. Then, use the Internet to learn more about the attorney’s credentials, training, publications, speaking engagements, teaching engagements and bar organization involvement. The Internet should be used as a tool to narrow your list to assist when making your final choice.

Further, it is important to find out how the attorney’s peers view his or her skills by researching other well-known legal websites. Some of the following respected legal websites grade and rate attorneys according to their skills and experience:

Avvo
Martindale-Hubbell
Super Lawyers
The American Academy of Matrimonial Lawyers
The International Academy of Matrimonial Lawyers

Conclusion: Be Proactive in Your Divorce Attorney Search
You may have to interview a few attorneys before finding the best fit for you. Investing the time to find the right attorney to handle your divorce should pay big dividends later on. Thus, do your homework to protect yourself, your children and your future.

_________

DIVORCE FROM A MENTAL HEALTH PROFESSIONAL'S PERSPECTIVE

Sandra C. Fava — Mon, 13 Feb 2012 21:28:34 -0500

Fox Rothschild's New Jersey Family Law Legal Blog welcomes Kelly Sutliff, MA, LPC, NCC, a licensed professional counselor with Kelly Sutliff, LPC, located in Madison, New Jersey, as a guest blogger.

Having known Kelly for over ten (10) years and speaking at length with her about the trauma that many children suffer through as a result of divorce, I thought it would be helpful for readers to hear about the mental and emotional impact of this process from a mental health professional. Below is an excerpt from a piece written by Kelly to better help parents going through a divorce understand the impact on their child.

"It's my fault". "My parents don't love me anymore". "I lost my family". "I'll never see my mom/dad again". These heartbreaking comments are commonly mentioned by children affected by divorce. Although these comments may be unrealistic, the sense of loss a child may feel as a result of his or her parents' divorce can be overwhelming and devastating. It is important for parents to help their children to cope with the divorce as well as to seek outside professional help, if needed.

Divorce can be an emotionally traumatic experience that can have an impact on a child's feelings of safety, security, and stability. Frequently, the stress children feel as a result of their parents' divorce relates to the family structure changing. Children fear change and the amount of changes that follow a divorce can be overwhelming and frightening. Many children also feel a loss of attachment to one or both of their parents after a divorce. Changes in scheduling and how often they see a certain parent can cause a certain amount of distress. The fear of being abandoned is also a fear that many children of divorced families face. Often, they feel that because one parent has moved out of the "family home", they are likely to lose the other parent at some point as well. They may blame themselves, feel unloved, and worry that they are the cause of their parents' relationship ending. Another factor that can lead to children's feelings of stress is hostility and fighting between parents. Arguments and tension between parents may make children feel angry, guilty, and alone. Some children feel "put in the middle" of their parents' arguments and believe that they are being asked to choose sides. The internal struggle that these children face when feeling this way can have profound negative effects on their behavior.

Parents can absolutely help their children through the process of divorce. Research indicates that it is vital to talk with your children about the divorce. Although this will certainly be painful for you, sharing general information about the divorce with your children will help to open the lines of communication between you and your children as well as foster a sense of trust. During conversations about the divorce, it will help to listen to what your children say and how they feel (even if you do not agree) and to reassure them that they are loved immensely and that the divorce is not their fault. It is also important to clear up any misunderstandings about the divorce that they may have. Another helpful strategy for parents is to maintain structure and stability as much as possible. Divorce causes many changes. It is important to help your children adjust to one change at a time. For many children, dealing with many changes at once can be overwhelming. Creating regular routines for children is helpful.

One of the most important factors in helping your children cope with divorce is maintaining an amicable relationship with your soon-to-be-ex. Although this may be very difficult at times, conflict between parents can have negative consequences on children. Limiting the amount and the intensity of conflicts between yourself and your soon-to-be-ex is vital. Remember, although you are not a couple any longer, you are obligated to parent your children together. Therefore, collaborating about child-rearing techniques and discipline will help your children significantly.

Some children deal with their parents' divorce with relatively few problems, while others have a very difficult time. Through individual and family therapy, children will be given the opportunity to discuss their thoughts and feelings and to communicate their concerns with an experienced professional who can assist them in developing healthy coping strategies. Not only does therapy benefit children, it will also help parents to continue to parent their children effectively, even though they are no longer a couple.

Kelly Sutliff can be reached at (973) 224-2574. Feel free to visit her website at www.kellysutlifflpc.com.

_____________________________________________________

Filing Your Taxes During a Divorce: What to do?

Sandra C. Fava — Mon, 13 Feb 2012 21:16:00 -0500

April 17, 2012 is the 2011 tax filing deadline and it's quickly approaching. The Government does not care that you are going through potentially the most difficult time period in your life. Like the Godfather, the IRS wants its money. It does not want to hear excuses. It does not want to hear that you always filed jointly and now your soon-to-be ex-spouse will not sign the joint return, or provide their W-2, or disclose the income of the closely held business because they fear it will be used against them in the divorce process.

Filing your taxes can be difficult, especially if you owe money. Trying to file when going through a divorce can be especially difficult. That is why it is important to work with your attorney and a tax professional. There are many decisions to make when filing taxes during a divorce. First, you have to determine your filing status: married filing jointly, married filing separately, or head of household. If you decide to file jointly, make sure to be extra diligent. If your spouse prepares the returns, have your own tax professional review them to ensure that they are accurate. The IRS does not care that your spouse prepared or filed the taxes. If you sign the return, you can be held liable for misreporting.

If you decide to file married filing separately or head of household (if you qualify), the following determinations have to be made (and in some instances negotiated):

1. Who gets the mortgage interest deduction(s) and other itemized deductions?

2. Who gets to claim the child(ren)?

3. Can I deduct the temporary support?

4. Can I deduct my legal expenses for the temporary support?

5. Who gets to claim the Child Tax credit and the Household and Dependent Care credit?

And if you are going to file jointly, as often occurs during a divorce, talk to your attorney and accountant as to whether this makes sense. Some questions here:

1. Should I file a joint return?

2. Will I be penalized if I don't file a joint return?

3. What is an indemnification agreement? Should I sign one? Will it really protect me?

4. What is an innocent spouse and do I qualify?

5. How are taxes due going to be paid?

6. How are refunds going to be divided?

Some of these decisions will be made by your tax professional, but all of these questions need to be answered before filing. Since these issues can have real implications, financial and otherwise, people should make sure they speak to their legal and accounting professionals before making a final decision. Work with your attorney to prepare the information needed by the tax professional to file taxes during a pending divorce. Oftentimes, clients are able to save time and money by coming to an amicable resolution with their spouse regarding the above questions and the filing of the taxes. But there are occasions when going to court to obtain an order from a judge that determines certain tax questions is necessary. Start considering how you are going to file your taxes as early as possible, so you can avoid unnecessary delay. If need be, you can seek an order from the court making the necessary determinations to get your filing done.

_____________________________________________________

Want Your Day In Court? Think Twice.

Melissa Ruvolo — Tue, 07 Feb 2012 21:54:28 -0500

Divorce filings seem to be at an all-time high and, to no surprise, the trial courts are feeling the pressure. Documents filed with the court can get lost in the shuffle. Although motions should be addressed within 24 days from the initial filing date, it can take months until the court actually makes a decision. By then, the issues grow stale or even worse, they grow more complicated. Emotions blaze as time passes. Many would argue that having your "day in court" is becoming somewhat of an illusion. With this in mind, attorneys must be more creative and diligent in addressing issues in a case before they arise. Leaving it to the court can make it worse, especially if the judge does not follow proper procedures in providing their decision and the judgment/order of the court. If the court does it wrong, you may get your day in court - TWICE!

An example of this was discussed in the recently published Appellate Division case of Ducey v. Ducey, which I was involved in on the appellate level. In Ducey, the parties engaged in a 14-day trial that involved three forensic experts. Seven (7) months after the trial was over, the court issued a Judgment of Divorce that simply set forth the court's rulings. A detailed decision was not attached to the Judgment. Rather, the cover letter that enclosed the Judgment advised the attorneys that the "underlying decision would be sent shortly." Three months later, the trial court issued a written opinion, but it didn't match the Judgment. In fact, it wasn't even close. For example, the weekly child support award was increased by 33%, the alimony amount was increased by 35%, the time period to pay alimony was lengthened, and the trial court's value of the husband's business was increased by more than 142%!

On appeal, the argument was simple - it just didn't make sense. The Appellate Division agreed and warned trial courts not to make light of entering final judgments without providing simultaneous, well-reasoned decisions to support those judgments. To do otherwise deviates "from the fundamental due process at the expense of litigants," who are then forced to comply with court orders without knowing why the court entered the order in the first place. In addition, the judge's letter with the opinion directed that the attorneys put the "usual provisions" in the the amended judgment that the court directed to be filed. As the Appellate Division noted, justifying reversal for this reason as well, is that there are no usual provisions.

Today, the Duceys have been separated for almost 6 years. Within the next year, their divorce trial will start all over again, from scratch. What do we learn from this? As attorneys and litigants, we can't assume that "our day in court" will be the end-all-be-all. In this case, they will have their day in court twice - not because the trial court erred on the merits - because the Appellate Division did not address the merits of the appeal. Rather, there will be a new trial simply because the judge erred on the procedure in rendering a decision.

STRIKEOUT? FORMER PITCHER GRANTED RELIEF ON MOTION TO REDUCE SUPPORT

Robert A. Epstein — Sun, 05 Feb 2012 07:04:23 -0500

While decisions from the Appellate Division addressing a former professional athlete's motion to reduce his support obligations do not come around all that often, we have, in fact, previously blogged on the issue. Now from the Appellate Division comes the unpublished (not precedential) matter of Villone v. Villone, where the Appellate Division strictly relied on "triggering" language in the parties' Marital Settlement Agreement in reversing and remanding a trial court's decision that a former Major League Baseball pitcher was not entitled to a modification of support.

The matter involved that of former pitcher Ron Villone, who has played for more franchises than almost anyone else in the history of the game (an interesting record that was recently broken) - 12 to be exact as of Spring Training 2011, when he was released by the Washington Nationals and signed with the Somerset Patriots (an independent, minor league baseball club). He became well known for his travels, earning the nickname "Suitcase" Villone from teammates. Also interesting is that his current wife is on the reality show "Baseball Wives", which, in the context of asking for a support reduction could provide potential evidence for his former spouse to use against him in opposing such request at the trial level.

Taking into account the fluctuating nature of Ron’s major league income, including whether he would be relegated to the minor leagues for a certain period of time, the parties provided defined support parameters in their settlement agreement, as well as specific “triggering events” that would allow for a support review:

B. Payment of alimony in the sum as set forth in "A" shall continue, so long as the Husband has earnings from his current baseball contract, including licensing fees and endorsements, annually between the sum of Nine Hundred Fifty Thousand ($950,000.00) Dollars and One Million Five Hundred Thousand ($1,500,000.00) Dollars. In the event the Husband earns less than said sum, then the Husband has the right to apply to the Court for a reduction in alimony unless it can be otherwise negotiated by agreement between the Parties. If the Husband has earnings in excess of said sum, then the Wife may seek an increase in alimony from the Court.

C. If the Husband's baseball contract provides that he plays in the minor leagues and if he remains in the minor leagues for a period of sixty (60) days, then the Parties agree to re-negotiate alimony. In the event the Parties cannot come to agreement, the Husband has the right to seek the aid of the Court. If and when the Husband shall return to the major leagues and his earnings including salary, endorsements and licensing fees received within a calendar year, equal the sum of Nine Hundred Fifty Thousand ($950,000.00) Dollars to One Million Five Hundred Thousand ($1,500,000.00) Dollars then alimony will return to the sum as originally set forth commencing from the period of the return to the annual salary at the sums as set forth.

The agreement also provided as follows regarding a modification of child support:

Commencing on the first day of January, 2004, and continuing until emancipation or a change of circumstance as defined in Paragraphs B and C above, i.e., wherein the Husband's salary plus endorsements and licensing fees shall be reduced within the calendar year to a sum below Nine Hundred Fifty Thousand ($950,000.00) Dollars and above One Million Five Hundred Thousand ($1,500,000.00) Dollars, the Husband shall make direct payment to the Wife in the sum of Seven Thousand ($7,000.00) Dollars per month allocable to both children. The Husband shall have the right to return to the Court for a re-allocation of child support in the event his earnings being less than $950,000.00 inclusive of licensing fees, baseball salary and endorsements and if he returns to the minor leagues for a period in excess of 60 days.

When they reached the agreement in 2004, Ron was earning an annual salary of approximately $1 million as a pitcher for the Seattle Mariners. Over the next few years, the wife filed for and obtained an increase in support upon Ron's signing of a contract with the Mariners that provided him with a level of annual income triggering a review. In 2009, Ron signed a contract with the Washington Nationals, wherein he earned approximately $1.7 million for 2009. As of April 2010, the team informed him that he would be assigned to pitch for its major league team, where he pitched for more than 150 days and his salary was approximately $59,000.

Shortly thereafter, in September 2010, Ron filed for a reduction in alimony and child support. He certified that the Nationals released him as of August 2010 and that there were no offers on the table, nor were they likely to be made, for a 40 year old relief pitcher.

In response to Ron's application, his ex wife argued that there was no change in circumstance justifying a support modification, relying upon the income and asset information contained in Ron's Case Information Statement filed with his motion. The trial court agreed with the wife, denying Ron's application based on a finding that he had failed to fulfill his initial burden of proving a change in his financial circumstances, including his failure to show that any change was permanent.

On appeal, rather than address whether Ron had fulfilled his initial burden, the Appellate Division concluded that the MSA's "triggering language" constituted the "equivalent of a changed circumstance" which, when met would allow a trial court to consider a modification application without the moving party having to establish the initial burden of proving additional changed circumstances (it actually relied on its own prior decision in this matter in so finding). Since Ron had played in the minor leagues for more than 60 days, Ron did not have to prove any additional changed circumstances. The Court noted, "In this case, the parties explicitly recognized in their agreement that plaintiff's career and earning capacity would vary over the years and that there were certain objective criteria that represented substantial changes in his income relevant to a determination of his support obligations."

Since Ron had fulfilled a "trigger" in the MSA, the Court concluded that he had also satisfied the "good cause standard" applicable to his request for discovery and a plenary hearing to determine what change, if any, should be made to his support obligation.

This case provides an interesting glimpse into the life of a professional athlete in the context of family law. The shelf life of such an athlete is fleeting and can end suddenly (just ask Peyton Manning, who may be on the verge of retirement due to health concerns). Family law practitioners must, therefore, be diligent in properly structuring agreements to address these relatively unique issues.

__________________________________________________________________

How to Not Settle Your Case

Eric S. Solotoff — Sat, 04 Feb 2012 06:34:38 -0500

Having just experienced several months of "interesting", to say the least, negotiations on several matters, it got me thinking about creating a list of things to do if you really don't want to settle your case. Hey, every body is entitled to their day in court if they want it. So what if there is nothing that can be gained from it. So what if you can't win. So what if forcing the matter to trial will create other legal issues. So what if trial will cost tens of thousand of dollars. Here is the list:

10. Ignore your expert's advice. What do they really know about the value of your business or how a judge will likely assess your total income/cash flow? What does an accountant know about taxes, or more importantly, how the IRS may address the creative accounting practices that you or your business have employed? What does the custody expert really know?

9. Ignore your lawyer's advice. What do they know anyway? If your lawyer is telling you that you should jump at the deal on the table because it looks like a huge win, disregard it. If they tell you that you have real exposure on certain issues or may be forced to pay your spouses legal fees, roll the dice. If your attorney tells you that they are willing to try your case, but that you should consider settlement because the cost of the settlement will be less than the cost of the trial plus the absolute minimum you have to pay, don't believe it. And what does your lawyer know about the law or the judge anyway?

8. Ignore the facts of your case. Trust your ability to spin the facts in a way that doesn't make sense. Plus, how can they prove if you're lying.

7. Ignore what the neutrals are saying. What do the Early Settlement Panelists know? What does the mediator know? When the judge has a settlement conference and gives directions, what does she/he know? Assume that the people that have no "horse in the race" are aligned with your spouse or their attorney, have been bought off, or are just plain ignorant. Really, it has nothing to do with the facts of your case or the reasonableness of your position.

6. Ignore the law. It doesn't apply to you anyway.

5. Continue to misrepresent things, even when the other side has documents to disprove virtually everything you are saying. Assume that you will be deemed more credible than the documents.

4. Believe that the imbalance of power that existed during the marriage will allow you to bully your spouse into an unfair settlement. Assume that your spouse's attorney wont try protect her/him. All lawyers roll over on their clients, right?

3. Take the position that you would rather pay your lawyer than your spouse. Ignore that fact that this tactic usually ends with your doing both, and maybe your spouse's lawyer too.

2. Pretend as if your spouse never spent a second with the kids in the past and has no right to do so in the future. Make false allegations of neglect or abuse. Ignore the social science research that says that it is typically in the children's best interests to spend as much time as possible with each parent. What do the experts know about your kids anyway? And while you are at it, bad mouth your spouse to or in front of the kids. Better yet, alienate them. Then fight attempts to fix the relationship.

1. Take totally unreasonable positions implementing any or all of above and on top of that, negotiate backwards. Ignore the maxim "Pigs get fat, hogs get slaughtered." Put deals on the table and then reduce what you are offering. Negotiate in bad faith. Negotiate backwards. Don't worry that this conduct may set your case back.

The above is clearly facetious and tongue in cheek. I do not recommend this behavior. It is usually self destructive and short sighted. But, believe it or not, these things happen all of the time. While I am not saying that no case should ever be tried, because sometimes trials are necessary, if you want to ensure a costly trial that may not go well for you, try the things on this list. And if it is your day in court that you want, be careful you wish for.

_________

Taxes and the Child Support Guidelines

Jennifer Weisberg Millner — Fri, 27 Jan 2012 06:12:59 -0500

Beware the tax calculations in the child support guidelines' automatic calculator. You be getting less support that you should be. At a time when the NJ Child Support guidelines are notoriously low, it is important to make sure that an obligor's net income is appropriately calculated in order to asses whether the correct amount of child support is being paid. Child support is calculated based on the net income of the parents. Net income for support purposes is calculated by taking gross income, deducting taxes, mandatory retirement contributions ( such as a state pension deductions), union dues, and other allowable deductions listed in the Guidelines. The more the net income, the more the support award. The issue of taxes must be carefully looked at, particularly in this age of automatic calculators.

The child support guidelines that are on various computer programs including the state's judiciary web site, and ones used by attorneys regularly, have automatic tax calculators. In other words, if you know that your spouse makes $150,000 per year, you can plug that in and the computer will spit out a "net" number after hypothetical taxes are paid out. Similarly, if you look at the guidelines in the appendix to the current court rules, there is a table that similarly calculates an amount to deduct for taxes.

The problem, however, is that these calculations consist of an estimated tax amount based upon the tax bracket of the payor, rather the actual tax rate. There's a difference, and in some cases, it can be significant. A tax bracket is the percentage of income that is taxed ate the top rate. We live in a country that has a progressive tax, an so higher income levels are taxes at higher rates. However, when you hear someone say that that are in the 35% tax bracket, that does not mean they necessarily pay 35% in taxes for all of their income. In fact, most individuals, when you review a tax return with all of their deductions, actually pay a far lower amount of taxes as a percentage of their income. So in other words, even if you think someone is in a 25% tax bracket, there is a good possibility that the actual percentage of their income that noes to taxes is something closer to 11% depending on how they file (married, single,head of household), the deductions that they can take, and the dependents that they claim.

The result of all this is that when you simply look to the calculators in these programs, you may be shorting yourself when it comes to support. This is not to say, however, that the calculators do not play an important role in calculating support. There are times when you know that the obligor may not have significant deductions and in fact the amount may be spot on. In other times, you may not have the information and a judge needs to make a "best guess." However, when the information can be available, it is always preferable to a review tax returns.

_________________________________________________

Jennifer Weisberg Millner is a contributor to the New Jersey Family Legal Blog and a member of Fox Rothschild's Family Law Practice Group. Jennifer practices throughout New Jersey in all areas of family law and family law litigation and is resident in the firm’s Princeton office. You can reach Jennifer at (609) 895-6712, or jmillner@foxrothschild.com.

If Your Agreement Has a Mediation Clause In It To Resolve Future Disputes, You Actually Have to Go to Mediation To Resolve Future Disputes

Eric S. Solotoff — Mon, 23 Jan 2012 14:18:15 -0500

For whatever reason, it is not unusual for a Marital Settlement Agreement and/or Custody Agreement to have a mediation clause in it which requires parties to go to mediation before bringing an issue to the Court by way or motion. For some issues, like enforcement, one questions the obligation to go to mediation. Either someone violated the agreement or they didn't. Other issues require a more swift decision and mediation could only slow the resolution down, especially for the party who might benefit from the delay. And while we see these clauses all of the time, I have also seen many judges ignore the clause and adjudicate the dispute.

This, however, is not what happened in the Decilveo n/k/a Woolf v. Decilveo case decided today by the Appellate Division in an unreported (non-precedential) opinion. In this case, the parties divorce agreement stated:

In the event that any differences arise out of the interpretation, construction or
operation of this Agreement, the parties further specifically agree as follows:

(a) They shall first attempt in good faith to resolve such differences amicably and directly with each other, retaining the right to seek advice of counsel;

(b) If they are unable to resolve any dispute between themselves or with the assistance of counsel, or through mediation, either side may submit same to a Court of competent jurisdiction for resolution.

Arguably, this provision does not appear to specifically apply to enforcement or modification, two major parts of this litigation but the trial judge interpreted the agreement broadly, forcing the parties to mediation to address their numerous disputes.

Not only that, the trial judge granted the defendant's cross motion to hold plaintiff in violation of the Agreement for failure to attempt mediation prior to filing her motion and directed the parties to attend mediation "to resolve any and all outstanding economic issues between the parties."

Citing Parish v. Parish, a case that I know a little about since it was my case, the plaintiff argued that the Agreement's "restraints" on her right of immediate access to the courts to have claims adjudicated violated the Due Process Clause of the Fourteenth Amendment. In Parish, the Appellate Division found that a trial judge's order requiring the parties to try to settle their disputes by holding a four-way conference before filing post-judgment motions to be an impermissible restraint on a party's due process right of access to the courts.

The Appellate Division distinguished Parish noting that, in this case, the parties voluntarily agreed
to attempt to settle their disputes through mediation before filing in court. The Court noted that while a court cannot prohibit access to the Court's the parties can and did do so by agreement.
Moreover, the Appellate Division further noted that "mediation is a recognized and appropriate process for the voluntary resolution of family disputes."

So the take away from this case is that if you are going to include a mediation in your agreement, some consideration should be given as to whether it should be for all issues or whether things like enforcement or emergencies should be exempted from mediation.

ENFORCEABILITY OF DOMESTIC VIOLENCE RESTRAINTS THAT PROHIBIT A DEFENDANT FROM ATTENDING ANY LOCATION WHERE PLAINTIFF MAY ALSO BE PRESENT

Lisa Steirman Harvey — Thu, 19 Jan 2012 18:06:08 -0500

As family law practitioners who frequently represent parties in domestic violence actions, we are often confronted with clients who, having been the victim of domestic violence, seek to prohibit their spouse’s presence at any location where they will also be present. Until just recently, the law remained silent as to whether a restraining order could provide such broad prohibitions. On January 17, 2012, the legal silence ended by way of the matter of State v. S.K., Docket No. A-1488-10T1, which has been approved for publication and is, therefore, binding law upon the trial courts of our state. As established in S.K., a provision in a domestic violence restraining order that prohibits a defendant from “any other place where plaintiff is located” is not generally not enforceable as The Prevention of Domestic Violence Act does not authorize such non-specific restraints. N.J.S.A. 2C:25-17 to -35.

In addition to the more ‘common’ relief of barring defendant from plaintiff’s place of residence and employment, the final restraining order in S.K. went one large step further by prohibiting defendant from “any other place where plaintiff is located”. Over five years after the restraining order was entered, defendant attended the soccer game of the parties’ children at a local high school that plaintiff also attended. While plaintiff sat in the bleachers, defendant stood near the bleachers, watching the game. Upon seeing defendant, plaintiff telephoned the police and advised them that defendant was in violation of the final restraining order. At no time did plaintiff accuse defendant of communicating or contacting her in any way. No action was taken by the police at that time.

The day following the soccer event, plaintiff filed a “citizen’s complaint” against defendant for violation of the restraining order. In response, the police filed a formal complaint, charging defendant with “disorderly persons contempt” in violation of N.J.S.A. 2C:29-9b, as well as “petty disorderly persons harassment”, in violation of N.J.S.A. 2C:33-4a. Accordingly, defendant was arrested and processed and released from custody. Trial was held six months later, wherein the State offered defendant a plea agreement in exchange for serving no jail time. Defendant agreed to plead guilty to the contempt charge conditioned upon the State dismissing the harassment charge.

Finding in favor of plaintiff, the Appellate Court reversed plaintiff’s conviction and remanded to the trial court for dismissal of the complaint filed by the Sate and consideration of an appropriate amendment of the final restraining order to delete the invalid provision.

The Appellate Court grounded its decision in the express language of The Prevention of Domestic Violence Act, which provides that a defendant may be restrained:

from entering the residence, property,school, or place of employment of the victim or of other family or household members of the victim and requiring the defendant to stay away from any specified place that is named in the order and is frequented regularly by the victim or other family or household members. N.J.S.A. 2C:25-29b(6) (emphasis added).

In addition to the express language of the Act, the Appellate Court relied upon its prior decision of Finamore v. Aronson, 382 N.J. Super. 514 (App. Div. 2006), wherein it held that a restraining order must “distinctly describe[]” the “specific relief[] necessary to protect the victim”. Id. at 520 (further holding that a provision in a final restraining order that prohibited defendant from attending his children’s extracurricular events would not be enforced where the order failed to provide the factual basis for the provision). The Appellate Court further stressed that, just as in Finamore, the order at issue failed to describe a specific location from which defendant was prohibited and, instead, simply “prohibit[ed] him from wherever his ex-wife may be”. Such language was too broad to satisfy the statutory prerequisite that the order refer to a “specified place” from which defendant was barred.

Due to the inappropriate generality of the order, defendant was left in a position where “he could not, as a matter of law, be found to constitute a knowing violation of an existing domestic violence restraining order." (quoting State v. Finamore, 338 N.J. Super. 130, 132 (App. Div. 2001)). In other words, as the order did not specify those locations from which defendant was prohibited, defendant was unable to determine whether his otherwise innocent act of appearing at a public location would result in a violation of the restraining order if plaintiff also chose to attend the same location without his prior knowledge. As noted by the S.K. Appellate Court, “Defendant should not be compelled to abandon his lawful presence in a public or other location only because his ex-wife also chooses to be present in the same general location…such an order puts defendant at risk of being arrested and charged, as occurred in this case, for otherwise innocent conduct, such as watching his children play soccer, going to their school, or shopping at a grocery store.” Without prior knowledge of his wife’s attendance at the soccer game, defendant could not have “knowingly” violated the restraining order, a state of mind that the State was required to prove in order to establish the disorderly persons contempt of court charge against defendant.

Based on the foregoing, the S.K. Appellate Court held that the prohibition at issue “was not authorize[d]” by the Act since it failed to “describe a specific place from which defendant [was] barred but [instead] generally prohibit[ed] him from wherever his ex-wife may be.

Although holding that the inappropriate broadness of the prohibition violated the Act, the S.K. Appellate Court nonetheless left the door open a crack for the validity of such general prohibitions by focusing on that portion of the Act that grants the Court discretion to expand upon the Act’s terms by ordering “any relief necessary to prevent further abuse". N.J.S.A. 2C:25-29b. Relying on this authority granted by the Act, the S.K. Appellate Court cautioned that there may be instances where “extraordinary circumstances might justify as broad a prohibition as was included in the restraining order in this case.” Unfortunately, the parameters of those “extraordinary circumstances” are not addressed by the S.K. Court.

So, it appears that the question as to the enforceability of these broad prohibitions in domestic violence restraining orders has been answered in the negative. Or has it? S.K. does provide that provisions that generally prohibit a defendant from all locations where plaintiff might be are unenforceable pursuant to the Act. However, S.K. simultaneously provides that there may be “extraordinary circumstances” that justify the expansion of the Act to include the validity of such broad provisions where “necessary to prevent further abuse”. N.J.S.A. 2C:25-29b. The nature of these “extraordinary circumstances” remains unknown to the practitioner. What is known is that, although only slightly cracked, the door has been left partially open for practitioners (and litigants) to define such “extraordinary circumstances”.

This author is left with questions for the S.K. Appellate Division that, for now, go unanswered.

· If, as determined in S.K., such general prohibitions in a restraining order per se preclude a defendant from having the requisite “knowledge” to violate the order, how could there ever be “extraordinary circumstances” that would justify the entry of such an order? Without defendant conceding his “knowledge”, the resulting order could never be violated and would, therefore, be meaningless in terms of protection to plaintiff.

· No matter the “extraordinary circumstances” that might warrant entry of such a broad prohibition, is entry of a final restraining order that contains such a broad prohibition ever fair to defendant who, essentially, must face every day not knowing whether his next innocent step could result in arrest?

Until there is more case law, this author’s questions remain legally unanswered, although fodder for debate.

Another day, Another Judge lost

Jennifer Weisberg Millner — Wed, 18 Jan 2012 08:06:59 -0500

There is no secret that New Jersey is suffering a significant crisis with respect to judicial vacancies. This year alone has seen a significant number of retirements without replacements being named. The effect on the family courts, and in particular, the divorce docket, has been catastrophic. I was at a meeting of family lawyers just recently at which the assignment judge of a county in the southern part of the state was kind enough to come and discuss directly with the bar the situation. And while I deeply appreciated the fact that he did, and the efforts that the judges are making to accommodate the needs of the public, the fact of the matter is that the situation is untenable throughout the state. In some counties, the situation is so bad that there are no, I mean no, trials for contested divorce cases. In others, a case will not reach a judge for final disposition for three years, In several counties, judges have upwards of 500 cases to handle. Only a superhuman can give a matter the attention it deserves when having that type of case load.

The purpose of this blog is not to pass blame, nor to comment of the swirl of political posturing that goes on when this subject comes up. Rather, despite the fact that the vast majority of judges that I know are working late nights and weekends, they simply can’t keep up effectively. And that means that attorneys and litigants have to find an alternate method to resolve their cases in order to save money and get on with their lives and those of their children. Any good family lawyer will have an honest conversation about the cost ridden road to the Courthouse. Certainly, there are times that judicial intervention is necessary and as lawyers, we are prepared to take a case to the judge. However, alternate dispute resolution is an important piece of the puzzle.

There are several effective methods of alternative dispute resolution that must be considered by litigants. Some of these are woven into the court system. Some are complimentary to the system. Before filing for divorce, talk with your lawyer to determine whether mediation, or arbitration is a viable option for your situation.

Mediation can occur any time during the process, and can happen with or without attorneys. Many times litigants will agree to go to a mediator to resolve their differences and then the mediator will prepare a memorandum of the agreement that the parties have reviewed by their respective counsel. Sometimes, someone may be uncomfortable going through mediation without legal counsel. In that case, going with a lawyer can be a cost and time effective method to settle the case. When you go with a lawyer, you can make sure that your rights are protected, and you do not agree to anything without having the opportunity to discuss the ramifications.

Mediation by its very nature requires a level of trust between the litigants that each will come to the table with the intention of negotiating and dealing in good faith. Sometimes that simply does not exist. In those cases, arbitration may be an excellent alternative to the court system. In some counties, arbitration is widely used. In others, not so much.

Arbitration is a good option for litigants who are unable to sit down in mediation and need a decision for contested disputes. There are many excellent arbitrators who specialize in family law, including many retired judges who are more than capable of rendering a sound decision. Arbitration is much like a trial in that there can be a hearing and each party can present witnesses if appropriate. The parties enter into an agreement in which they set the ground rules, and arbitration can include the right to appeal a decision. In the vast majority of cases, a decision is made by the arbitrator very soon after the hearing, letting the litigants go on with their lives.

Our reality is that there may need to be more use of some of these mechanisms in order to assist break up the log jam that exists in the Family Court.
________________________

Court Says Incomplete Records and Inaccurate Tax Filings from the Self Employed Common in Divorce

Eric S. Solotoff — Mon, 16 Jan 2012 05:01:05 -0500

On Friday, I blogged on the judicial estoppel aspect of the Romano case decided last week by the Appellate Division. While that was the major issue in that case, there was another part of the case that jumped out at me, when I read this line related to the court's valuation of the husband's business and calculation:

John also maintains that Judge Becker should not have accepted Dana's expert testimony with regard to the value of his business and the income it generates. John did not provide sufficient reliable information to allow Dana's expert to use valuation techniques based on tax reporting, so the expert was forced to consider the family expenses as a means to gauge the income generated by the business.

This scenario is not uncommon in divorce matters where a sole proprietor provides neither complete business records nor reliable Internal Revenue Service filings. We defer to Judge Becker’s fact-findings concerning the value of the business and its revenue. (Emphasis added).

Unfortunately, when dealing in cases with small (and some times not so small) businesses, this is a common occurrence. Often, it becomes a game of "tell me how much you can find and I tell you how much I have." In this case, the non-owner has the laboring oar to try to reconstruct the exact income.

Many years ago, I had a case where the husband listed just enough income to pay for the mortgage and utilities on the $2 million marital home. Much of the families expenses were paid for in cash, thus, no documents existed evidencing their purchase. This included things such as groceries - his explanation for not having grocery expenses were that his wife and daughter were "always on diets." He had no good explanation for why there was no close expense to explain the 1000 square foot closet filled with designer clothes nor any evidence of the purchase of cigarettes where both parties smoked several packs a day. I can go on but the point was that the income and lifestyle had to be reconstructed through expenditures. This is difficult when you have proof of family expenses and even harder when even the expenses have to be reconstructed.

There was another related line in the case that I also found interesting. The Court noted that, "Judge Becker determined John receives $82,000 in income and, due to his tax reporting methods, does not pay taxes on that income."

That brings up two issues. First, when a judge makes a finding that someone is not reporting all of their income and not paying taxes on it, pursuant to a case called Sheridan v. Sheridan, the judge is supposed to report the matter to the IRS. There is no indication in this opinion whether that was done in this case. As I have previously blogged, despite the fact that a judge has this affirmative obligation, it is often honored in the breach.

The second issue raised, and it is not clear about what exactly happened, is whether the court really took into account the fact that the husband wasn't paying taxes on his income. Put another way, the self employed person who makes $82,000 and doesn't pay taxes has more available income and an ability to pay more support than a W-2 employee who makes $82,000 and has withholdings/pays taxes on his/her full income. On one hand, you would expect the person not paying taxes to pay more support. On the other, can a court actually base it's decision on the fact that a person is perhaps breaking the law.

In any event, this case evidences some of the issues related to cases where a party is self employed.

_________

Everything You Say Can and Will Be Used Against You in a Court of Law - Especially if you said something different in another court

Eric S. Solotoff — Fri, 13 Jan 2012 14:28:54 -0500

We have all seen and heard those familiar words in the title of this entry in moves or on TV. This is part of the "Miranda" warning administered by a police officer when they are arresting someone. Do these words also have a place in divorce court? Not in the same way, but in reality they do.

Other than settlement communications, attorney/client and other privileged communications, everything else is just about fair game. That is why Facebook, emails and texts have become such a treasure trove in divorce cases as people freely put things in writing that they might not otherwise say, and perhaps even broadcast it to the world.

But what about what you say in another court in another case? Can that be used against you? Sure can. The concept is called judicial estoppel, and it was on display again yesterday in the unreported (non-precedential) decision from the Appellate Division in Romano v. Romano.

Without getting in to all of the details of this case, the relevant details relating to judicial estoppel are as follows, On the wife's name was on the deed of the marital home, a finding made by a judge during a domestic violence trial, despite the husband claiming he was on the deed. Thereafter, the husband filed for bankruptcy relief. In that filing, he answered "none" on the part of petition asking if he had a legal or equitable interest in any real property. In the later divorce case, he listed the aforementioned home as a marital home subject to equitable distribution.

The trial judge awarded the home to the wife based on the husband's representation to the bankruptcy court that he had no interest in the property.

The Appellate Division affirmed, noting:

Judicial estoppel is intended to protect the integrity of the judicial process. Cummings v. Bahr, 295 N.J. Super. 374, 387 (App. Div. 1996) (citing Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982)). It "operates to 'bar a party to
a legal proceeding from arguing a position inconsistent with one previously asserted.'" Id. at 385 (quoting N.M. v. J.G., 255 N.J. Super. 423, 429 (App. Div. 1992)). The doctrine "prevents litigants from 'playing fast and loose' with, or otherwise manipulating, the judicial process." State v. Jenkins, 178 N.J. 347, 359 (2004) (quoting N.J. Dep't. of Law & Pub. Safety v. Gonzalez, 142 N.J. 618, 632 (1995)). "Central to that concern is the principle that a litigant should not be allowed to
mislead courts by having one tribunal rely on his or her initial position while a subsequent body is led in a different direction." Ibid.

The applicability of judicial estoppel as a complete bar to a subsequent inconsistent claim arises "when a party advocates a position contrary to a position it successfully asserted in the same or a prior proceeding." Ali v. Rutgers, 166 N.J. 280, 287
(2000) (internal citations and quotations omitted). A prior successful assertion of a contrary position is required because "[a] party is not bound to a position it unsuccessfully maintained" in a prior lawsuit. Id. at 288 (internal citations and quotations omitted). As with most judicially crafted remedies, judicial estoppel should be invoked only to prevent a miscarriage of justice. Ibid.

Here, John's conduct provides almost a textbook example of facts calling for the application of judicial estoppel. By his own admission, John advanced inconsistent positions regarding his interest in the marital home. John failed to disclose his
alleged interest in the home in the petition he filed under oath before the federal bankruptcy court. In addition, John filed an amendment to his bankruptcy petition in September 2010, but did not alter this critical detail. A bankruptcy plan was subsequently approved based on John's financial representations.

John's testimony that his bankruptcy lawyer advised him to deny any ownership interest in the marital home does not absolve him of responsibility for his certification. John did not call his bankruptcy attorney to testify as support for his assertion. Certainly, a witness should not be permitted to hide behind the
unsubstantiated excuse that his lawyer told him to lie on a sworn document.
John's assertions in support of this action before Judge Becker are materially irreconcilable with the position he adopted before the federal bankruptcy court. The judge did not abuse his discretion in finding that John was attempting to manipulate the legal system to his advantage and to the disadvantage of his creditors and Dana. The application of judicial estoppel is warranted under such circumstances.

The bottom line is that you cannot select a different story to get the best result based upon the audience at the time. When you do, whatever you say can and will be used against you in the next proceeding, as the husband found out in this case.

_________