The Dangers of Kicking the Can…

Erica Swensson

Recently, I sat in a conference room to settle a divorce that started 10 years ago. It wasn’t a complicated estate—a few businesses, a couple of commercial buildings, and no minor children. I was the 4th attorney for my client; and my client’s wife was on her 3rd attorney.

The question de jour

“How did we get here?”

My answer—bad accounting, poorly managed expectations, and lack of certainty.

The tendency of litigants and attorneys while moving through the dissolution process is to put off a variety of issues until the time of trial—attorneys’ fees, sanctions, reallocation of expenses… the rationale being that it will all shake out with the final numbers at the end.

On the one hand, this approach can avoid tedious negotiations without the benefit of knowing the final the big picture—a potential fee waster. However, the problem comes when too many items are left unattended—they become too unwieldy to track and difficult to present at trial. More often than not, these items slip through the cracks.

During the pendency of your divorce, there is value in memorializing and formalizing certain agreements. The payment of household expenses, who is responsible, and what happens if they do not comply. It can also help you to understand what you should expect at the time of a final agreement.

Back to my conference room of the long, drawn dissolution. Had the parties had clear, definitive financial agreements with respect to the payment of expenses and accounting of business income, they would not have been left with the sticky (and expensive) task of trying to re-write 10 years of banking history. A few simple agreements from the outset may have made the difference in this case.

Talk to your attorney about your financial expectations and goals from the outset. Don’t be afraid of asking questions and exploring what types of agreements may benefit you and your final outcome.

Ch-ch-ch-Changes! Preparing for Trump’s Tax Code Reforms

Michelle Piscopo and Mary Vidas

Donald Trump was sworn in as our country’s 45th President on January 20 and, prior to his inauguration, he vowed to immediately set into motion many of the promises he made during his campaign. One of the promises made by President Trump during his campaign was to reduce taxes across the board—especially for working class and middle class Americans.

Currently, there are seven different individual tax brackets ranging from 10% to a maximum of 39.6%. Under the plan proposed by President Trump, there would only be three tax brackets:

  • 12% for individuals earning less than $75,000;
  • 25% for individuals earning more than $75,000 but less than $225,000; and
  • 33% for individuals earning more than $225,000

President Trump’s plan also proposes raising the standard deduction from $6,350 to $12,000 for single tax filers and from $12,700 to $30,000 for joint tax filers, and eliminating the head of household tax filing status. Under President Trump’s plan, the corporate tax rate would be reduced from 35% to 15%.  While Trump alone cannot change the tax code, the proposal put forth by House Republicans is quite similar to the Trump proposal. The House Republican plan agrees with Trump’s three tax brackets—so changes in tax rates are inevitable.

How will this impact you?

Lower taxes means higher net income. And, that higher net income could impact you if you are paying or receiving child support, spousal support, maintenance, or alimony. For example, under the current tax code, an individual who earns $500,000 per year would be in the 39.6% tax bracket, which results in net income of $302,000. Under President Trump’s proposal, an individual who earns $500,000 would be in the 33% tax bracket, which results in net income of $335,000. That additional $33,000 of net income will impact your support calculation. Depending on whether you are the party receiving support or the party paying support, this could be good news or bad news. We expect quick changes from the new administration and are keeping a close eye on any changes to the tax code. As this issue develops, if you have any questions about how new tax laws could affect your support order, the attorneys in all states of our matrimonial group are prepared to answer them.

The Top Five Things to Do Before You Discuss Divorce with Your Spouse

Lois Liberman and Marilyn Chinitz

You are facing one of life’s most difficult transitions. After putting your financial affairs in order, but before broaching the topic of divorce with your spouse, we recommend that you prepare yourself by consulting experts who can provide the guidance and support you will need. Knowledge is power, and being fully informed will enable you to protect your rights and those of your children.

Consult a Family Law Attorney. An attorney who is an expert in the domestic relations/family laws of the state in which you reside will be able to provide you with vital information and guidance about what you can expect regarding child support, spousal maintenance, the division of assets, child custody, and parental access. Don’t consult someone who dabbles in family law—consult a specialist in the field.

Consult a Child Therapist. To ensure that your children are shielded from the stress and tension that has led you to make this decision, consult with a child therapist in your area. He or she can make suggestions as to the best way to advise your children about the divorce. These experts can also provide you with tools and strategies to deal with many of the questions and issues that will arise once your children have been told.

Safeguard Important Personal Belongings and Documents. Hurt, anger, and resentment often cause people to act out of spite. Before you discuss divorce with your spouse, make sure to safeguard your important personal belongings, which could go missing or be destroyed. Open a safe deposit box or place these items with a trusted friend or family member.

Consider Your Legal Options for Resolution. There are many options available, but not all options work for all parties. Negotiation and/or Litigation between two parties each represented by counsel; Mediation—in which a neutral third party attempts to help the parties reach a compromise; Collaborative Divorce—where each party has an attorney, but the adversarial milieu is replaced by a philosophy of harmony and the goal of getting along. If there is one party who is very controlling or there is an uneven balance of financial power, mediation may not be the best option. If there is a party who is acting unreasonably, you could find yourself having to go back to square one in a Collaborative Divorce because you entered into a contract in which your collaborative attorney cannot represent you in litigation. Seriously consider the dynamic between you and your spouse when selecting your path to resolution.

Ensure That You Have a Support Network. Surround yourself with people whom you trust, to not only provide you with the emotional support that will be essential, but who will also tell you the truth throughout the divorce process—even when it is difficult to hear. Whether that support network is made up of family, friends, and/or mental health professionals, make sure they are in place before you embark on your journey.

Excerpted from “10 Things You Should Do Before You Discuss Divorce With Your Spouse,” by Lois Liberman and Marilyn Chinitz, originally published in ModernMom on March 8, 2016.

Considering Divorce? Put Your Financial House in Order

Stacy D. Phillips

While you may have come to the conclusion that your marriage is over, we recommend that you take the following steps before “crossing the Rubicon” and sharing this news with your spouse. Knowledge is power and your first order of business should be to put your financial house in order.

Know Your Financial Picture. In too many instances, we have met with clients who are unaware of their complete financial situation. Be knowledgeable about both your and your spouse’s finances. Summarize income from all sources. Identify assets and liabilities (in your name, your spouse’s name, and jointly held), including when and how these assets were acquired. List your family’s insurance coverage (medical, dental, property, auto, and life). Once armed with this information, you will be able to obtain a clearer understanding of your entitlement under the law.

Understand Your Monthly Expenses. Be able to articulate how much you realistically spend on a monthly basis both on basic needs and discretionary items. This fluency with regard to your expenses will enable you to better understand your needs on both a temporary and permanent basis.

Obtain Financial Records. Before you even utter the word “divorce” to your spouse, look for bank statements, canceled checks, tax returns, life insurance policies, credit card statements, closing records/binders, loan documents, etc.; make copies of those records; and keep them in a safe place.

Open Your Own Bank Account. It is important to have funds in your own name in case of an emergency and in the event that your spouse attempts to reduce your access to money and credit cards after your announcement. This will also enable you to hire an attorney when you are ready.

Build Your Credit. If you don’t have credit cards in your name, apply for them so that you can build up good credit. Use the cards and pay the entire balance each month. By doing this, not only will you establish your own credit, but it will enable you to document your expenses.

Not So Fast—New PA Law May Not Shorten Your Wait to No-Fault Divorce

Mary Vidas and Michelle Piscopo 

Pennsylvania is set to shorten the time parties need to be living separate and apart from two years to one year, but will that really enable you to get a divorce faster?

Pennsylvania is a “no-fault” state for establishing the grounds for divorce. There are two no-fault grounds— mutual consent by both parties 90 days after the filing and service of a divorce complaint, OR living separate and apart for a period of two years. The grounds for divorce must be established before the court can determine the equitable division of the marital estate and enter a divorce decree. This week, the Pennsylvania legislature approved a bill to shorten the time period for living separate and apart from two years to one year and the bill is on Governor Wolf’s desk waiting to be signed into law. Once the bill is signed, it will go into effect 60 days later.

This new law has been greatly supported by the Family Law Section of the Pennsylvania Bar Association and the PA Chapter of the American Academy of Matrimonial Lawyers. Often times, the party who will not consent to a divorce will do so in order to collect support for a longer period of time or simply out of spite (we know…hard to believe). The benefits of a shorter waiting period have been discussed and debated for years and most practitioners agree that the shorter waiting period will lessen the emotional turmoil that comes with a divorce and lower legal costs.

All in all, a shorter waiting period sounds like a good thing. However, this new law will only apply to divorce actions filed or to parties who separate AFTER the law goes into effect. While that hardly seems fair, it seems that the only option to avoid the longer waiting period would be to withdraw the divorce action, reconcile and then separate again. Not a very likely solution for most couples.

While there may not be anything you can do if you are already involved in divorce litigation to speed up the process, if you have been contemplating a divorce but haven’t actually separated from your spouse or filed for a divorce—wait! If you suspect that your spouse will not be so willing to consent to a divorce, the best thing you can do to avoid having to wait two years instead of just one year is to put the brakes on separating from your spouse. If you wait to separate until the new law goes into effect, you can potentially shorten your waiting time by a year. While not ideal, the benefits of waiting may outweigh staying in the relationship for a few more months. However, we would never encourage anyone involved in an abusive relationship to delay leaving.

For more information on how this new law may impact you, please contact the Philadelphia attorneys in our Matrimonial Practice Group.