Category: Divorce


Obtaining a Divorce in Pennsylvania – The Ancillary Matters are Key

Posted by HKHLaw – February 26, 2018

Obtaining a divorce in Pennsylvania, or any other jurisdiction, is relatively easy.  Pennsylvania is a no-fault jurisdiction, and while it retains certain fault grounds such as indignities, adultery, etc., virtually all divorces are based on no-fault.  While the divorce itself is relatively uncomplicated, the ancillary issues of equitable distribution of property, spousal support and interim alimony and post-divorce alimony, the payment of counsel fees and costs, child custody, child support, and myriad other issues can be present significant complexity and expense to parties who are contemplating a divorce.  All of these ancillary economic issues are raised, when appropriate, in conjunction with a divorce action.

A no-fault divorce can be granted with the consent of both parties after ninety days from the date the action is commenced (the filing date of the divorce complaint).  If the other spouse does not consent, Pennsylvania law permits the court to enter a no-fault divorce decree, even over the objection of the other spouse, after the parties have been separated for a period of two years for separations beginning prior to December 5, 2016, or one year for separations beginning on or after December 5, 2016.  Sometimes the date of separation also becomes an issue.  Even when both parties do not object to the divorce itself, one party will often withhold consent until all of the economic and child issues have been resolved.  Sometimes that resolution can take more than two years from the date of separation (or more than the one year for separations beginning on or after December 5, 2016), in which case one party can ask the court for a unilateral entry of a divorce decree because of the passage of the required separation time.  The court however is not required to grant such a decree when there are economic issues still pending and will sometimes refuse to bifurcate (or separate) the divorce from the economic issues and not enter a divorce decree until everything is resolved.  When courts do enter a decree in divorce but do not yet deal with the economic issues, it is referred to a bifurcated decree and in those circumstances the court retains jurisdiction over the economic issues until they are resolved either by settlement or by litigation.

Are legal fees from a Pennsylvania divorce tax deductible?

Posted by HKHLaw – September 18, 2012

Whether or not a party can deduct legal fees paid by that party depends on federal tax law.  Legal fees paid for the production of taxable income, such as the legal fees paid by a dependent spouse to obtain an alimony award (because alimony is taxable to the recipient), are generally deductible.  However, that deduction may be limited or lost in its entirety because of the alternative minimum tax (AMT).

On the other hand, legal fees paid by the independent spouse to his or her own attorney for the negotiation or litigation of alimony when that spouse ends up paying alimony, are not deductible.  Moreover, legal fees paid by one spouse for the other spouse’s legal fees are also not deductible.  In that circumstance however tax planning is permitted by the IRS and a frequent methodology employed is to have the payor spouse pay the other spouse’s attorneys’ fees in the form of additional alimony.  The alimony is deductible to the payor and, while it is taxable to the payee, when the payee uses that alimony to pay his or her attorney, the fees are deductible by the payee.

Whenever one is dealing with issues of deductibility/taxability, one should always seek the advice of a qualified professional.

Who pays legal fees in a Pennsylvania divorce?

Posted by HKHLaw – September 18, 2012

A frequently asked question is: Will my spouse have to pay my legal fees/will I have to pay legal fees for my spouse?  The statutory law permits the court to award legal fees in a variety of circumstances including in divorce, child support, custody (in some circumstances) as well as for a sanction bad behavior (intentional delays, refusal to comply with discovery, filing repeated and unreasonable motions, lying, and other “obdurate and vexatious” behavior).  Legal fees can be awarded at the end of the case or can be awarded on an interim basis.

Interim legal fees are much more commonly dealt with by means of an interim award of equitable distribution (see interim agreements) where the spouse who may control liquid assets agrees that an interim distribution can be made to the other spouse so that that spouse can retain counsel and experts.  When a case is finally litigated, a court can award legal fees along with equitable distribution, alimony, etc.  However, the awards are frequently puny and it is virtually impossible to obtain an order requiring one spouse to pay 100% of the legal fees of the other spouse.  Factors considered by the court include the reasonableness of the hourly rate, the reasonableness of the services provided, the results obtained, the difficulty of the issue, and the amount in controversy.

 

How Pennsylvania Handles Spousal Support, Alimony Pendente Lite, and Alimony

Posted by HKHLaw – September 18, 2012

Pennsylvania law provides for three types of support for a dependent spouse.  Alimony is the term given to periodic financial support awarded at the end of a divorce case and intended to run at a designated amount and for a term of years.  Despite repeated efforts by the practicing bar, Pennsylvania’s legislature has refused to adopt any guidelines to assist practitioners, parties, and the courts in determining any type of uniformity in either the amount or the length (the term) of alimony awards.  As a result, alimony awards in Pennsylvania are all over the map.  For example, in Dauphin County when alimony is awarded it is usually awarded for a set amount and a for a set term.  However, the amounts and terms vary not only by the income of the payor and the needs of the recipient and the length of the marriage, but also by the whims of which divorce master or which judge is making the decision.  Generally speaking the longer the marriage the longer the term of alimony but there is no consistency in alimony awards even when comparing marriages of similar length and similar incomes.  In Cumberland County, almost all divorce cases, regardless of the length of the marriage, result in indefinite alimony.  In other words, the term of the alimony continues indefinitely until there is a major change of circumstance (such as retirement, disability, or remarriage) and thus couples otherwise similarly situated may end up with a longer term of alimony in Cumberland County than they would in one of the surrounding counties.  Generally, alimony orders are tax-deductible to the payor and taxable to the recipient (see taxability of support orders).

While there are no guidelines as to amount or term there are 17 factors as set forth by the legislature that the courts must consider when determining whether alimony should be awarded and in what amount and for how long.  These include the length of the marriage, the income of the parties, the needs of the recipient, whether there are minor children, the time needed for a dependent spouse to obtain reasonable employment, the perquisites or extra employment benefits that one spouse may have (health insurance, pension, expense reimbursement), the tax treatment of any award, etc., etc.  Most of the mandated factors lend some assistance to the courts in determining whether or not to award alimony in the first place but give little assistance in determining the amount or the duration, hence the vast inconsistency in alimony awards.

Spousal Support/APL

Where alimony is a post-divorce remedy, a dependent spouse is also entitled to interim support during the pendency of the divorce action, as well as before any divorce action is commenced but after the couple separates.  Interim support can take the form of either “spousal support” or “alimony pendente lite” (“APL” for short).  A dependent spouse can get one or the other but not both; moreover, they are computed in exactly the same way.  The difference between spousal support and APL is procedural in nature and sometimes there are tactical reasons to seek one rather than the other or try to defend against one but not defend against the other.  Such tactical decisions are beyond the scope of this article.

Where post-divorce alimony has no guidelines for amount or term, interim support is for a set term (it generally ends at the time of the divorce decree or the divorce agreement).  The amount of interim of support is very rigidly determined by a mandated formula.  The formula is based upon the net monthly incomes of the parties.  The formula itself is simple: the dependent spouse gets 40% of the difference in the parties’ net incomes, or, if there are minor children, 30% of the difference in net incomes after subtracting the child support from the payor’s income.  There are factors that permit the court to deviate from this formula, but deviation is quite rare.  While the rigidity of this approach can be harsh in some cases, it does allow the parties and their lawyers to very quickly determine what the depended spouse is likely to get or the independent spouse is likely to pay.  The existence of the child support guidelines and the formula for interim spousal support/APL has greatly reduced litigation in these areas.

However, as in child support, the most difficult issue is often in determining the income of the payor spouse.  This is easy to determine when the payor has a salaried job but can be quite difficult when the payor owns a business.

How do Pennsylvania courts identify marital property?

Posted by HKHLaw – September 16, 2012

When the courts determine the equitable distribution of property the court must first identify what property is marital property, and thus divisible in a divorce case, and what property is separate property and thus not divisible.  While one spouse may not be awarded the other spouse’s separate property, the existence of a large amount of separate property owned by one spouse is a factor to be considered in determining the amount of marital property that is awarded to the other spouse.

Marital property is generally defined as all property acquired during the course of the marriage (i.e., from the date of marriage until the date of separation) regardless of how the property is titled.  Thus, assets that are always or usually titled only in one name (such as pensions, stock options, life insurance policies), if acquired during the marriage are nevertheless marital property.  Other types of marital assets are frequently held in joint names such as the marital residence, other real estate, bank accounts, investment accounts, etc.  However, regardless of title, the general rule is that if the asset was acquired during the marriage it is marital property.  Moreover, marital property also can include the increase in value in a person’s separate property.

Separate property is property that one party had before the marriage or property inherited by that party or property that was gifted by a third person (not the spouse) to that party and that property remains in his or her own name.  If one spouse owns separate property and then puts it in the joint names of both parties, generally (but not always) the law presumes that this was a gift to both parties and thus it becomes marital property.  The value of separate property at the date of marriage (or the value at the time of the subsequent gift or inheritance) remains the separate property of the titled spouse BUT the increase in that value, from the date of marriage (or the subsequent date of the gift or inheritance) and until the date of separation, IS marital property.  For example, if the wife owned $10,000 in Apple stock and at the time of separation that stock had increased to $40,000, $10,000 would be the wife’s separate and non-divisible property, and the $30,000 increase would be divisible marital property.  Pennsylvania draws no distinction between active appreciation (such as where it is the couple’s labor that caused the value of husband’s separate business to increase) and passive appreciation (when the growth occurs purely by the operation of market forces and has nothing to do with anything that the parties themselves may have done such as where shares of stock increase in value); all appreciation in Pennsylvania is marital property.  As discussed separately, the parties can exclude appreciation in separate property by means of a prenuptial agreement or a mid-nuptial agreement.

Interim Agreements in Pennsylvania Divorces

Posted by HKHLaw – September 12, 2012

During the course of the divorce proceeding it is quite frequent that the parties may enter into a variety of interim agreements often for the purpose of avoiding anticipated problems or resolving interim issues that would otherwise be litigated.  These agreements can include the following:
  • Exclusive Possession of the Marital Residence: Where one party is allowed to use the marital residence and the other party is not permitted to enter the residence except upon limited and very specifically set forth terms.
  • Advance Distribution: Parties frequently agree on an interim or advance distribution of assets, often for the purpose of providing funds for attorneys’ fees, expert witnesses, the down payment on a car or a home, etc., etc.  These advance distributions are intended to be accounted for and recognized when the parties ultimately reach a final settlement or when they go to court to have the court determine what will be the final distribution of assets.
  • Freezing of Assets: Where there is a risk that one party may dissipate an asset or attempt to remove it beyond the control of the court, the other party can ask the court to freeze that asset or a group of assets.  This might arise when a spouse has cleaned out a joint bank account, or has threatened to do so, or where a party may have significant accounts in that party’s own name, or when a party has the ability to borrow against or liquidate a pension account, etc., etc.  The threat of or actual initiation of litigation to prevent further dissipation or to freeze funds inappropriately removed, frequently results in the parties reaching an agreement to freeze those assets or proceeds.  Such agreements are often entered as stipulated (or “agreed upon”) orders.

Post-Nuptial Agreements / Marital Settlement Agreements / Property Settlement Agreements in Pennsylvania

Posted by HKHLaw – September 11, 2012

The most common type of agreement in a divorce case is a post-nuptial agreement, frequently referred to as a Marital Settlement Agreement (“MSA”) or a property settlement agreement (“PSA”).  Such agreements are entered into when the parties have reached an overall comprehensive agreement and frequently include custody and child support terms as well.  MSA’s are intended to evidence the terms of the parties agreements on distribution of property, use or sale of the marital residence, the filing of future tax returns, the disposition of past tax refunds, alimony or interim support, how and when pensions will be divided, and any number of other issues that may have arisen in the course of the divorce proceedings.

As in other settlement type agreements (such as prenups and midnups) these agreements require clarity in drafting and full and fair disclosure.