Chicago Family Law Blog

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pearlman@theelectroniclawyer.com (Alan Pearlman) — Tue, 24 Nov 2009 21:22:52 +0000

Chicago Family Law Blog Receives Honors

pearlman@theelectroniclawyer.com (Alan Pearlman) — Tue, 24 Nov 2009 21:02:04 +0000

Chicago Family Law Blog today received honors as a Top Divorce/Family Law Blog. It is with great pleasure and humility that we are happy to have achieved this honor for the 2009-2010 year and hope that others can appreciate our efforts to bring to the public the news and topics that concern their rights and their families. You can read the story and see the other top bloggers at http://www.attorney.org/law-blogs.html

Establishing Rights and Obligations of Unmarried Couples

pearlman@theelectroniclawyer.com (Alan Pearlman) — Thu, 05 Nov 2009 17:21:04 +0000

The number of couples living together without choosing to get married has more than tripled in the past two decades. Unless the cohabiting couple lives in a state which recognizes common law marriages, living together does not automatically provide them with the legal rights and protections of a traditional marriage. Accordingly, upon separation or death of one cohabiting partner, the law may treat the couple as complete strangers. To prevent such a result, unmarried couples can opt to legally define their relationship by entering into a cohabitation agreement, which will direct a court on how to divide property and assets among the couple.

Cohabitation Agreements

A cohabitation agreement is a legal contract which defines the partnership of an unmarried couple. The agreement is often necessary to preserve some important legal rights, obligations and protections that an unmarried couple necessarily foregoes. In other words, the privileged legal status of married couples, which is provided automatically through custom, statute and agreement, must be affirmatively contracted into by cohabiting couples. Although cohabiting couples cannot achieve all of the legal benefits of married couples (such as tax benefits), a cohabitation agreement provides a good start in defining the rights and responsibilities of each party.

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Cohabitation agreements typically cover the following issues:

Distributing property in case of death or breakup
Obligating financial support during the relationship or upon its dissolution
Handling the payment of and defining responsibility for debts
Dividing the principal residence upon breakup of the relationship
Defining support, custody or visitation rights for minor children (although such an agreement is nonbinding)
Determining the right to serve as guardian/conservator in case of incapacity
Establishing the right to make medical decisions

Distinction Between a Cohabitation Agreement and a Prenuptial Agreement

A prenuptial agreement is an agreement entered into by two parties in contemplation of marriage. Many states have adopted legislation setting forth specific requirements for prenuptial agreements, but very few states have adopted similar legislation governing cohabitation agreements. A prenuptial agreement becomes effective upon the marriage of the parties, whereas a cohabitation agreement is usually no longer valid if the parties marry.

Enforceability of Express Cohabitation Agreements

In general, many courts have begun to recognize express written cohabitation agreements and are willing to enforce such agreements under state contract law. Some states may also enforce express oral agreements to divide real or personal property, provided there is substantial evidence to show such an agreement actually existed.

For example, upon separation, one cohabitant may be able to prove that they had expressly agreed with the other to share their property equally, by combining efforts and earnings during the relationship. This argument may be strengthened if the couple was together for a substantial period of time or if they have children together. In addition, one partner may be able to state a cause of action against the other for recovery of "palimony," or alimony for unmarried cohabitants.

Consequences of Not Having an Express Agreement

As mentioned, cohabiting couples are generally not automatically afforded the same legal rights as married couples. Thus, without an express written or oral agreement with definite and clear terms, the law might treat an unmarried couple as legal strangers upon dissolution or death. This could have the unfortunate effect of leaving one cohabitant with nothing, even where both parties' incomes were pooled in joint purchases of property.

In some cases, one cohabitant may be able to establish that there was an "implied in fact contract," or a contract based on the couple's conduct rather than on an express promise. While responses to such financial claims have been mixed, a few courts have been willing to use doctrines of equity, or fairness, to apportion property and assets in a way that is justified and reasonable to avoid harsh results. In addition, a court may award money to a person who shows that they rendered beneficial services (e.g., household services) to the other with the expectation of being compensated for those services.

Considerations for Entering a Cohabitation Agreement

Courts are generally limited by traditional contract principles to impose legal, financial and other obligations on separating cohabitant couples. Without sufficient express and definite terms of intent, courts may be reluctant to try to accurately discern the parties' expectations on the basis of their conduct alone. Accordingly, some reasons that cohabiting couples may consider entering into express (written) cohabitation agreements include:

Guaranteeing that the financially less secure partner receives an equitable settlement
Allowing the more financially secure partner to limit exposure to potential liability
Properly compensating a partner as a caretaker
Disclosing explicit expectations of the relationship
Discouraging opportunistic and marginal claims

About The Firm

techsupport@lexblog.com (Admin) — Thu, 05 Nov 2009 16:54:47 +0000

Since 1974 Alan Pearlman, Ltd. has been helping the people of Chicagoland and Lake County with their family law problems. From that time to the present Mr. Pearlman has focused on Family Law matters.

The firm is made up of Mr. Pearlman, who will personally handle your matter, as well as an office manager. The firm is located on the south end of Lake County in Northbrook, Illinois, and is adjacent to the Edens Expressway, with easy access to the offices at 707 Skokie Boulevard.

Mr. Pearlman has been concentrating on Family Law matters for over 35 years, and the firm can meet your needs regarding Adoption, Child Custody Matters, Dissolution of Marriage(Divorce), Child Support, Visitation and Maintenance (formerly known as Alimony).

Mr. Pearlman is a member of several Bar Association Groups and teaches in his area of practice, as well as in the area of Legal Technology. He currently serves as the Webmaster of the American Bar Association's General Practice Section Internet Board and is a member of the Board of Editors of their GP Solo Magazine's Technology and Practice Guide.

He also serves on many bar association legal technology committees, including:

Chairman of the ABA Section of Family Law Technology Committee;
Past-Chair Emeritus of the Chicago Bar Association Committee on Legal Technology;
Past-Chair of the Northwest Suburban Bar Association Legal Technology Committee;
Past-Chair of the Illinois State Bar Association Committee On Legal Technology.

He is also a member of the Editorial Board of Leader Publication's Legal Tech Newsletter, a division of the American Lawyer Media's Publication group, as well as a participating columnist.

In addition to Mr. Pearlman's involvement in the legal technology community he has also served as:

Member Illinois State Bar Association Family Law Section Council,
Member Illinois State Bar Association Committee on Law Office Management and Economics,
Elected member of the Illinois State Bar Association Assembly,
Committee on Minority and Women Participation,
Traffic Law and Court Section Council,
Special Committee to study the Lawyer Referral Services of the Illinois State Bar,
Past Chair of the Fellows of the Illinois Bar Foundation.

He is currently serving as a member of the FAMILY LAW SECTION COUNCIL of the ILLINOIS STATE BAR ASSOCIATION and he has been their Internet Liaison as well! Mr. Pearlman is a frequent speaker at national Legal Technology Seminars, among them:

American Lawyer Media's Legal Tech Seminar,
American Bar Association's Techshow, Minnesota State Bar's Midwest Tech,
Kentucky Bar Associations Annual Convention,
Virginia State Bar's Law Tech'96 and the Illinois State Bar Association's Annual and Mid-Year Meetings.

Mr. Pearlman is a past Assistant State's Attorney for Cook County Illinois, a past Prosecutor for the Secretary of States Office in Illinois and a past Hearing officer for the office of the Secretary of State of Illinois.

Mr. Pearlman has written extensively on the issues involved in theDissolution of Marriage Process and frequently writes articles in several Family Law Journals, including the American Bar Associations Family Advocate Journal.

Agency Adoption vs. Independent Adoption

pearlman@theelectroniclawyer.com (Alan Pearlman) — Tue, 15 Sep 2009 18:23:09 +0000

Adoption is the process by which an adult becomes the legal parent of an individual who is not their biological child. A finalized adoption severs all legal ties between the child and the natural parents, thereby terminating all parental rights. However, adoption also creates new obligations on the part of the adoptive parents. The new parent-child relationship establishes legal responsibility for child support, rights to an inheritance and/or custody. Typically, adoption laws vary by state and there are several different types or forms of adoption including agency and independent adoption.

General Types of Domestic Adoption
Adoption can occur domestically or internationally. Each state has its own laws governing domestic adoptions. There are several different types of domestic adoption including:

Agency adoption
Independent adoption
Identified adoption
Infant or foster care adoption
Stepparent adoption
Domestic partner adoption
Relative (kinship) adoption

]]> All forms of adoption involve different legal procedures, requirements and are governed by different laws. Two typical forms of adoption include agency and independent adoption.

Agency Adoption

Whether public or private, a licensed adoption agency is regulated by the state in which it is located and must meet certain standards. Public agencies are run by the state and they typically handle adoptions of those children who have become "wards of the state" by virtue of being abused, abandoned or otherwise orphaned. In contrast, private agencies might be run by a charity or social service organization and handle adoptions of children placed there by the natural parent(s) or unborn babies of expectant mothers. In addition to state adoption laws, adoption agencies may impose additional requirements on parents' eligibility to adopt and may consider age, marital status, income, health and religion as factors.

Advantages and Disadvantages of Agency Adoption
Using an adoption agency to manage an adoption can involve several advantages and disadvantages. For example, using an agency may help facilitate the process by handling paperwork and necessary legal issues. However, agencies can also make eligibility requirements prohibitively difficult for prospective parents. Other advantages and disadvantages to using an adoption agency are summarized as follows.

Advantages of using an adoption agency include:

Experience in finding children and matching them with parents
Handling all or most of the legal work and advising on state requirements
Conducting studies and research for the parents
Obtaining necessary consents
Providing counseling for the birthparents, adoptive parents and children

Disadvantages of using an adoption agency include:

Selectivity of parents by imposing additional requirements for eligibility
"Lag-time" between initiation and finalization of adoption procedures which may cause the child to be temporarily placed in foster care
Potentially high costs
Unavailability of services of some public agencies due to overcrowding or low funding

Independent Adoption

An "independent adoption" is where the child is placed with the adoptive parents without using an agency. Most states allow independent adoptions, but they are illegal a very small minority of states. Typically involving an adoption attorney, independent adoptions can occur either with the birthparent(s) directly placing the child with the adoptive parents or through use of a third party intermediary. One particular form of independent adoption is an "open adoption," which is where the adoptive parents have a relationship with the expectant mother and unborn baby during the gestation period. Typically, in the case of an open adoption, the adoptive parents and birthmother agree to keep in some form of contact throughout the child's life.

Advantages and Disadvantages of Independent Adoption

As with all forms of adoption, independent adoptions have several advantages and disadvantages. For instance, although independent adoptions may be more intimate and personalized, they can also become emotional and complicated. Other advantages and disadvantages to independent adoption can be summarized as follows.

Advantages of independent adoption include:

Ability of birthparents and adoptive parents to retain control over the process
Avoidance of long waiting lists often associated with adoption agencies
Potentially less restrictive in eligibility requirements
A faster adoption process (typically one year from initiation to finalization)

Disadvantages of independent adoption include:

Additional state restrictions might apply such as prohibitions on adoptive parents advertising for a birthmother or limiting their financial contributions to the costs of the birthmother's prenatal care and medical expenses
Potentially little or no counseling for the parties
Extended periods, in some states, for birthparents to revoke consent, resulting in less stable adoption agreements
Can be time consuming and costly to find a birthmother

Acquiring U.S. Citizenship at Birth When only One Unmarried Parent is a Citizen

pearlman@theelectroniclawyer.com (Alan Pearlman) — Wed, 09 Sep 2009 23:14:11 +0000

Children born out of wedlock outside the United States to one citizen parent and one noncitizen parent face different requirements for acquiring U.S. citizenship, depending on the gender of the citizen parent. The Immigration and Nationality Act (INA) provides that the child must meet additional requirements to obtain U.S. citizenship when their father (but not their mother), is a citizen. The differential treatment depending on the gender of the unmarried parent citizen in determining the child's citizenship was held to be constitutional by the U.S. Supreme Court in 2001.

Child Citizenship Act of 2000

The Child Citizenship Act of 2000 (CCA) governs the acquisition of U.S. citizenship by children born abroad. Specifically, children born outside the U.S. receive automatic citizenship where the following three conditions have been satisfied:

1. At least one parent is a U.S. citizen (either by birth or naturalization);

2. The child is under the age of 18 years; and

3. The child is residing in the U.S., in the legal and physical custody of the citizen parent

pursuant to a lawful admission for permanent residence.

However, where the child was born abroad and out of wedlock, some additional requirements might apply if only the father is a U.S. citizen.

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Immigration and Nationality Act

Children born abroad to unmarried parents of different citizenships face unique citizenship issues depending upon the gender of the "citizen" parent. Under the INA, U.S. citizenship is automatic at birth for a child born to a citizen mother, provided that she has previously resided in the U.S. for at least one year. However, the INA imposes additional requirements for the child to acquire U.S. citizenship if it is the father who is a citizen.

Additional Requirements for Citizen Fathers and Noncitizen Mothers

Where a child is born outside the U.S. to a U.S. citizen father and a noncitizen mother, U.S. citizenship of the child is not automatic. In order to acquire citizenship, the INA requires clear and convincing evidence of a blood relationship between the child and the citizen father. Additionally, before the child reaches the age of 18, one of the following must occur:

The child must be legitimated under the law of his residence or domicile;
The father must acknowledge paternity of the child in writing or under oath; or
The paternity must be established by a court order.

The imposition of additional requirements based on the gender of the citizen parent sparked a constitutional challenge on the ground of denial of equal protection of the laws.

Equal Protection of the Laws Based on Gender

Under the U.S. Constitution, all citizens are entitled to equal protection of the laws. This means that the government is prohibited from enacting legislation which discriminates against a particular class of persons. In general, there are different standards which apply depending on the targeted class of individuals. For example, gender is a "quasi-suspect classification" and any government action which affects one gender more than another must be substantially related to an important government interest in order to be constitutional.

Nguyen v. INS

In Nguyen v. Immigration and Naturalization Service (2001), the U.S. Supreme Court considered whether the INA's parental gender differentiation violated equal protection. Tuan Anh Nguyen was born in Vietnam to an unmarried couple; a Vietnamese mother and an American father. At age six, Nguyen came to live in Texas with his father and became a lawful permanent resident of the U.S. When he was 22, Nguyen was convicted of serious crimes and the U.S. government sought to have him deported as an alien. None of the additional paternity requirements had been satisfied prior to Nguyen turning 18 and he was thus ineligible for U.S. citizenship. Nguyen filed suit, arguing that the additional INA citizenship requirements for children born abroad and out of wedlock where only the father was a U.S. citizen, violated the equal protection clause.

Constitutionality of the INA Classification

The Supreme Court upheld the INA requirements as being constitutional. The majority found that a law which grants or does not grant automatic citizenship to children born abroad to unmarried parents depending on the gender of the citizen parent is justified. Requiring U.S. fathers of children born abroad to take additional steps to establish paternity was held to have promoted the important governmental interest of avoiding proof of paternity problems, which are obviously more difficult to resolve than establishing maternity.

In addition, the Court reasoned that it is more important to establish paternity in order to demonstrate an actual parent-child relationship exists, which was held to be inherent with mothers by virtue of the birthing process. In turn, this relationship provides evidence of a connection between the child and the United States. Finally, the additional requirements imposed by the INA were found not to be overly burdensome and are thus substantially related to important governmental interests.

Divorced Parents' Rights in the Religious Upbringing of Their Children

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sat, 23 Aug 2008 18:17:10 +0000

Parents have a constitutionally protected fundamental right in the care, custody and control of their children. This constitutional guarantee includes the parents' right and freedom to expose their children to their own particular religious beliefs. However, when interfaith spouses divorce, disagreements over the religious upbringing of their children can ensue. In such circumstances, state family courts may be called upon to balance the competing interest of the parents and the children in an effort to resolve the dispute.

]]> Types of Post-Divorce Disputes Regarding Religious Upbringing of Children

Upon divorce, the parent who is awarded the physical custody of their child or children is referred to as the "custodial parent." The other parent is the "noncustodial parent." In some circumstances, parents may be awarded joint custody. In general, disputes over the religious upbringing of children of divorce may be divided into three categories including:

Custodial parents who wish to restrain a noncustodial parent's imposition of their own religious values on their children
Noncustodial parents who object to a custodial parent's religious beliefs as too extreme
Noncustodial parents who object to the lack of religious values of the custodial parent

Regardless of the type of dispute, courts typically must consider what would be in the best interest of the children.

Rights of Custodial and Noncustodial Parents

In the majority of states, the custodial parent is granted the right of directing the everyday management of their children's upbringing, including their religious indoctrination. Despite this right however, most courts hold that the custodian is not thereby entitled to restrain the noncustodian from exposing their children to their own religious beliefs. Thus, the custodial parent's rights in the religious upbringing of their children are not exclusive.

In contrast, a minority of states have held that the right to determine the religious upbringing of children exclusively lies with the custodial parent. In these states, custodial parents are generally entitled to restrict the noncustodial parent from introducing the child to another religious perspective.

Exception to the Majority Rule: Harm to the Child

Although most states bestow both parents with the absolute right to expose their children to their own religious beliefs after a divorce, there is one exception. Where conflicting religious experiences would cause clear and affirmative harm to the child, the noncustodial parent's rights may be restricted. What constitutes sufficient "harm" to justify the restriction of a noncustodial parent's rights is determined on a case by case basis. Generally, while mere confusion or stress to the child is typically inadequate, stress that is so severe as to manifest into physical symptoms might suffice.

For example, one court found sufficient harm where a boy suffered severe stress from attending and keeping up with both Catholic masses and Jewish services, including bar mitzvah lessons. The boy's stress had caused him to develop encopresis, a bowel control problem, which was alleviated after he was removed from the bar mitzvah lessons, as ordered by the court.

Objection That the Religious Beliefs of the Custodial Parent Are Too Extreme

A general agreement exists among the states that a noncustodial parent seeking to modify custody of their children, due to religious differences, must demonstrate that the custodial parent's beliefs would cause them harm. Where the noncustodial parent can sufficiently show that the custodial parent's religious beliefs are "too extreme," a court may be willing to modify custody. For example, a custodial mother who follows a sect touting that any non-believers are "God's enemies" and who teaches her child to lie to God's enemies could be considered too extreme.

A request to modify custody based on extreme religious beliefs of the custodial parent typically requires the court to balance the interest of the parties. On one hand, the court must consider the custodial parent's right to free exercise of religion and rearing of their children. On the other hand, the court must also determine what is in the best interest of the children. However, custodial parents' rights in the religious upbringing of their children are very heavily protected and courts rarely find the requisite showing of harm to the child.

Objection That the Custodial Parent Lacks Religious Values
In cases where the noncustodial parent is seeking to modify custody based on the fact that the custodial parent is "not religious enough," courts do not typically grant the modification. For example, where a custodial Orthodox Jewish mother fails to observe certain tenets and practices of the faith, the noncustodial father will likely not be granted a modification of custody solely on that basis. In addition, a court would typically not allow modification where the religious noncustodian objects that the custodial parent lacks faith of any kind. These types of cases are also subject to the "harm to the child" exception, but sufficient harm is similarly difficult to demonstrate.

Los Angeles Divorce and Family Law

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sat, 23 Aug 2008 18:09:25 +0000

Ciciliano Law Blog

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sun, 11 May 2008 14:51:57 +0000

Mississippi Family Law Blog

pearlman@theelectroniclawyer.com (Alan Pearlman) — Thu, 10 Apr 2008 22:14:40 +0000

Contracts with Minors are Voidable

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sun, 30 Dec 2007 18:11:41 +0000

In general, individuals must possess the requisite "legal capacity" to enter into a valid and binding contract. Contract law regards such legal capacity as the capability of understanding the nature and consequences of the transaction. In most states, minors do not have capacity to enter into contracts until they reach the age of majority, usually 18 years of age or older. However, this does not mean that minors may not make contracts at all. Rather, the law is designed to protect minors by discouraging other parties from entering into contracts with them. Accordingly, contracts with minors may or may not be binding, depending on the circumstances.

Incapacity of Minors

In order to create an enforceable contract, both parties must have maturity and capacity. If one of those elements is lacking from the bargaining process, one consequence could be the invalidation of the entire contract. Minors, for example, do not possess the legal capacity to enter into contracts with other parties. This is generally because minors are not thought to possess the ability to perceive and process all of the necessary information to make an adequately rational decision. However, this does not mean that minors cannot make contracts, it just means that courts may not enforce the contracts that minors enter into.

]]> Voidability of Contracts with Minors
Contract law, regarding the incapacity of minors to enter contracts, is designed not only to protect minors from their lack of maturity but also to deter others from entering into contracts with minors. The law recognizes that minors might be particularly susceptible to deception. Typically, contracts with minors are "voidable" at the option of the minor but binding on the adult. This generally means that minors can repudiate, or back out of their contracts with other parties, but the other parties are bound by those agreements.

Exceptions to Voidability by Minors
There are certain contracts entered into by minors which are not voidable at their option. Since certain transactions provide significant benefits to minors, the law considers those transactions to be binding on them. Typical exceptions to a minor's right to avoid their contract obligations include:

Contracts for necessities such as food, lodging and medical services
Statutory exceptions including insurance contracts and student loans

In addition, as a matter of public policy, some courts will hold minors' contracts regarding military enlistment to be enforceable. Many states also do not allow a minor to repudiate a real estate transaction until after they reach the age of majority.

Emancipated Minors
Emancipated minors are minors who are legally treated the same as adults. Once emancipated, the minor may enter into any contract as an adult. Emancipated minors include those who are:

Legally married
Serving in the armed forces
Legally emancipated through the courts

In addition, emancipated minors are generally held to the same legal responsibilities and liabilities as an adult.

Ratification of the Contract
Most states allow minors to "ratify" their contracts once they reach the age of majority. The effect of ratification is to affirm the contract, which renders it no longer voidable by the minor. However, this right to ratify the contract, similar to the right to avoid it, belongs only to the minor; another party may not seek to ratify the contract. Ratification does not have to be express, it may also be implied through the minor's conduct if they fail to disaffirm the contract or to return the benefits in a timely manner after reaching the age of majority.

Remedies for Repudiation by Minors
In general, when a contract with a minor has been performed completely or in part and is then disaffirmed by the minor, they must return any benefit that they have already received from the other party. If the minor no longer has the benefit that they received under the contract (e.g., consumed goods or services), many courts will not require the minor to pay for the used, lost or destroyed benefit. This result forces the other party to bear the risk of loss. However, minors (or their parents) are typically always liable to pay for the fair market value of all "necessities" even if they no longer have them.

For example, if a minor purchases a car from another party and later decides to back out of the deal, the minor must return the car to the other party in order to get their money back. However, if the car is destroyed in an accident, the minor may still exercise their right to back out of the contract and get their money back (less depreciation or value of benefit already received), but owes nothing to the other party.

Remedies for Misrepresentation of Age
Courts are divided on how to remedy a situation where the minor represented that they were of legal age when they entered the contract. Some courts regard the misrepresentation as immaterial and treat the contract in the same way as any other with a minor. Some courts allow the other party to avoid the contract on the grounds of fraud and get its full value back from the minor. Other courts use the minor's misrepresentation as justification to revoke the minor's right to back out of the contract.

Successful Divorce Mediation

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sun, 30 Dec 2007 18:06:36 +0000

Divorce mediation, an alternative to traditional divorce proceedings, is a means to resolve the complex issues of a divorce. Mediation involves the services of a trained and neutral person who works with the parties to facilitate the settlement of disputed issues. Such person is known as the "mediator."

In traditional divorce proceedings, the judge ultimately determines child support, child custody, spousal support and property issues. Mediation, on the other hand, allows couples to control the outcome of their divorce. Additionally, the mediation process is non-adversarial in nature, which is especially important for couples with children, as like-minded parents can establish parenting plans with minimum disruption to the lives of their children.

]]> Preparation for Mediation
Divorce mediation is most effective when both spouses have accepted that a divorce is imminent. However, even when only one spouse has decided that they want a divorce, mediation may still be a viable option.

Special Issues That May Frustrate the Mediation Process
It is recommended that the couple be in good mental and emotional health before entering into mediation. If the mediator feels that one spouse's emotional health is at stake, she may refer that spouse to counseling before beginning the mediation process.

Mediation may not be the best alternative in all situations. For example, mediation may not be suitable in situations where domestic violence or drug and alcohol abuse are involved. Inherent in domestic violence situations are volatile feelings, and often, emotional abuse. This often creates a communication gap between the parties that even mediation cannot overcome. Where alcohol and drug abuse are involved, mental impairment and erratic behavior can follow, often frustrating the goal of mediation.

Other factors that may frustrate mediation include:

Spouses who lie about finances
Easily intimidated spouses
Contentious spouses
Spouses who feel that the other spouse is incapable of child care

Marital Settlement Agreements and Life Insurance Policies

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sun, 30 Dec 2007 18:00:04 +0000

Many marital settlement agreements require one party to maintain a life insurance policy on his or her life naming the former spouse as the primary beneficiary. While this provides some financial security for the former spouse, it may also result in an adverse unintended tax consequence for the insured spouse's estate.

For example, if the ex-husband is required to maintain a $1 million life insurance policy on his life, naming his ex-wife as beneficiary, on the ex-husband's death his ex-wife will receive the $1 million face amount of the policy directly from the life insurance company. If the ex-husband was the owner of the life insurance policy and paid the premiums on the policy, the IRS will include the $1 million face amount of the policy in the ex-husband's estate for the purposes of calculating the amount of estate tax owed by the ex-husband's estate. If the ex-husband died in 2007 with a taxable estate of $3 million plus the $1 million in life insurance, the inclusion of the life insurance proceeds would result in a $450,000 increase in the estate tax owed.

The foregoing result may be avoided through the use of a tax-sensitive marital settlement agreement and an irrevocable life insurance trust. The ex-husband may still be required to maintain a $1 million life insurance policy with his ex-wife as beneficiary, but the life insurance policy would be owned by the trustee of the irrevocable life insurance trust. The ex-husband may transfer money to the trust for the payment of the premiums. Since the payments are required pursuant to a court order, the payments are not considered taxable gifts. Since the irrevocable life insurance trust, not the ex-husband, is the owner of the policy, the $1 million life insurance policy will not be included in the ex-husband's estate for the purpose of calculating the estate tax owed.

Divorce-Related Federal Income Tax Principles

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sun, 30 Dec 2007 17:50:45 +0000

Prior to filing for divorce, various federal tax considerations should be reviewed due to their potentially profound implications. Among the major issues commonly covered in a divorce decree or agreement are: alimony, sometimes referred to as "spousal" or "separate maintenance" support; division of property; and child support. Each has its own tax treatment and implications.

Division of Property

Most divorces involve a division of the property owned by the couple. Such a division of property is not usually a taxable event, i.e., neither owes taxes nor gets a deduction from income because he or she receives certain property as a result of the divorce.

There are, however, tax implications following divorce that affect future taxes. More specifically, selling personal and real property in the future may require spouses who received such property (pursuant to a divorce) to pay taxes in connection to that property.

Personal and real property have a "basis" for federal tax purposes. The basis is usually the purchase price of the property. When the property is sold later, the amount by which the sales price exceeds the basis is called "capital gain." Capital gain is usually taxable at special rates. Thus, when property distributed pursuant to a divorce decree is subsequently sold by the receiving spouse, the receiving spouse may be required to pay taxes on the proceeds of the sale.

For example, in a divorce, the wife may receive the family home while the husband might receive stock or other investments equal in value to the house. If the house has a lower basis than the stock, when both are sold, the husband could end up with significantly more money, because he owes less capital gains tax.

On the other hand, under tax law applicable at the beginning of 2004, the first $250,000 (for individuals) or $500,000 (for couples) of the taxable gain on the sale of a qualifying personal residence is exempt from tax. In light of these tax issues, selling the house before the divorce, then dividing the proceeds, might make more sense.

]]> Child Support
The parent who is granted custody of the child or children from the marriage, usually receives a set amount of money per month as "child support." Child support payments are not includable in the taxable income of the receiving spouse and are not tax deductible by the spouse making the payments.

If the written agreement or divorce decree orders both child support and alimony and the spouse making the payments pays less than the required total amount, for tax purposes, the child support obligation is deemed paid in full first. Only money exceeding the amount of the child support obligation is treated as alimony.

Alimony or "Spousal Support"
In general, for federal income tax purposes, alimony and "separate maintenance payments" are "deductible" from the income of the spouse paying and includable in income for the recipient. "Deductible" for federal income tax purposes means it is subtracted from a taxpayer's gross income before taxes are calculated, resulting in lower taxes. Taxpayers with a threshold amount of deductions must file a particular form with the IRS when paying income taxes and list such deductions.

Between the time a couple separates and a divorce decree is granted, one spouse may pay money for the support of the other spouse. These payments are deductible as long as they are made pursuant to a decree, court order or a "written separation agreement." In order for alimony payments to be deductible, federal tax laws and regulations require the following:

The payments are made in cash, check or money order (no promissory notes, transfers or use of property, transfer of services, etc.) to the spouse, or to a third party in lieu of alimony at the written request of the recipient spouse, stating the payments are intended as alimony, and the request is received before the tax return is filed
The divorce decree, order or the written agreement of the parties does not identify the payments as something other than alimony
The spouses do not file a joint return with each other
The spouses are not members of the same household when the payments are made, if they are legally separated under a decree of divorce or separate maintenance – separation within the family home is not sufficient
There is no liability to make the alimony payments after the death of the recipient spouse – if part of the payment amount continues after death, that portion is not deemed alimony, and if all of the payment continues, none of it is alimony
The alimony payments are not treated as child support

Qualified Domestic Relations Orders and Divorce Settlements

pearlman@theelectroniclawyer.com (Alan Pearlman) — Sun, 30 Dec 2007 17:40:01 +0000

It has been estimated that more than one half of all first marriages end in divorce; the number of failed marriages is even higher for second marriages. One major issue in most divorces is the division of property. Commonly, a large portion of the marital assets consist of rights in or payments from one or more pension plans.

Pension Plans and ERISA
Divorce and division of property are generally controlled by state law. However, when state law contradicts or is inconsistent with federal law, the federal law "preempts" the state law; federal law controls the outcome. In 1984, Congress passed the Employee Retirement Income Security Act (ERISA), which governs most private pension plans (government and some other plans are not covered).

Federal law prohibits the assignment of pension benefits in ERISA plans. This appeared to include transfers to a spouse during divorce, regardless of a state court decision on division. To remedy this, the Retirement Equity Act of 1984 (REA) established an exception to the rule through use of a "QDRO."
]]> Qualified Domestic Relations Orders (QDRO) and Pension Plans
Often in a divorce, the state court will issue a domestic relations order (DRO) or other judgment dividing the marital property. If the division of an ERISA pension plan interest is part of the order, however, a QDRO must be prepared and signed by the court (or sometimes another entity – especially in the case of child support) to ensure that the order will actually be enforceable and recognized by the plan administrator, and the division will not lead to unwanted tax consequences.

A QDRO creates or recognizes an "alternate payee's" right to receive all or a portion of the plan benefits, or actually assigns that right to the alternate payee. An "alternate payee" may only be a spouse, former spouse, child, or other dependent of the plan participant.

Types of Retirement Plans
Whether a pension plan is divisible as a marital asset depends on local law and the terms of the plan itself. Defined benefit plans, defined contribution plans and IRAs are all subject to division in a divorce:

Defined Benefit Plan: Usually a retirement plan through an employer where the employee becomes entitled to receive a defined sum after being employed for a specified number of years ("vested"). The actual amount paid after retirement is usually based upon salary and years of service at the time of retirement. Such plans are more difficult to split, as the current worth of such a plan is difficult to calculate.
Defined Contribution Plan: Typically a savings, 401(k) type or profit sharing plan through an employer. Such plans are easier to divide, as the current value is usually obvious.

QDRO Form
ERISA, as amended by REA, defines a DRO as a judgment, decree or order which both:

Relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of an ERISA plan participant; and
Is made pursuant to a state domestic relations law, including community property if the state recognizes community property law.

ERISA requires that, to be effective, a QDRO must be a judgment, decree, or order of a court that meets the above requirements and contains the following information:
The name and last known addresses of the plan participant and each alternate payee;

The name of each plan to which the QDRO applies;
The dollar amount or percentage (or method for determining the dollar amount or percentage) of the benefit to be paid to each alternate payee; and
The number of payments or period of time to which the QDRO applies.
Provisions That a QDRO Must Not Contain
Payment of any benefit or any payment option to the alternate payee that is not authorized by the ERISA plan
Payment of increased benefits, determined based on actuarial value
Payments to an alternate payee that are already designated for another alternate payee in an earlier QDRO

QDRO Process
ERISA plans must establish a reasonable, written procedure for evaluating a QDRO and often provide a guide for what is necessary and acceptable. Some even provide a model QDRO form. The plan administrator must approve the QDRO before it becomes effective.

The QDRO may first be submitted to the court for approval and signing, but most seek prior approval by the plan administrator, to save the effort and expense of having to go back to the court to obtain another QDRO, if the plan administrator rejects it. The plan administrator is obligated to give explanations for any rejection; no fee may be charged for considering the QDRO. The plan administrator's rejection may also be appealable in federal court.

After the QDRO has been accepted by the plan administrator and approved and signed by the court, it becomes enforceable in federal court by the alternate payee.