Friday, March 27, 2015

Things a Judge Can't Do, but You Can! - Part 4: Parent Coordinators

A number of recent appellate decisions in Massachusetts have addressed the boundaries of what Probate and Family Court trial judges have the power to do.  Agreements reached between the parties, however, can include provisions that the judges don't otherwise have the authority to order.   In this four part blog series we will explore some of the important areas that an Agreement can address but the trial court is limited in addressing.  These are just some of  the most recent examples, and not intended to be an exhaustive list of all the ways that Agreements are better than letting a Judge decide your fate.

Part 4: Parent Coordinator:  Do you want help resolving parenting disputes without returning to court?


In Part 1, we discussed how the Appeals Court in Ventrice overturned a lower court's order that required parties to engage in out-of-court mediation prior to filing any further action in the Probate and Family Court.   While Parent Coordination is different than mediation, the appellate courts have essentially ruled that the court's powers related to ordering participation in either of those types of out-of-court service is limited.  In the case of Bower v. Bournay-Bower, the Massachusetts Supreme Judicial Court has ruled that Judges in the Probate and Family Court cannot grant a Parent Coordinator binding authority over the objection of one of the parties.

While disallowing the appointment in that specific case, the SJC went much further then necessary in order to open the door for what might be the "appropriate circumstances" to order a Parent Coordinator.  In addition, the door is still left open for parties to agree to a Parent Coordinator and to define the terms of that coordinator's role to best fit their case.

This type of agreement is often recommended by attorneys in high conflict cases as a potential solution to avoid multiple court hearings.  A parent coordinator can be cheaper than going back to court again and again, and more effective because they not only assist with the immediate problem but help parents learn how to communicate with each other.  If successful, the parents will no longer need the assistance of the court or eventually even the parent coordinator to help them co-parent effectively.

A theme of this four part series, has been the advantages that parties can obtain when reaching agreements outside of court.  Often these advantages relate to the necessity or likelihood of future court appearances and avoiding the self-feeding monster of litigation.  If you've found this four part series helpful, you may also be interested in one of our previous posts that addresses more specifically the processes that you can employ to reach agreements without going to Court.




Wednesday, March 25, 2015

Things a Judge Can't Do, but You Can! - Part 3: Survived Agreements

A number of recent appellate decisions in Massachusetts have addressed the boundaries of what Probate and Family Court trial judges have the power to do.  Agreements reached between the parties, however, can include provisions that the judges don't otherwise have the authority to order.   In this four part blog series we will explore some of the important areas that an Agreement can address but the trial court is limited in addressing.  These are just some of  the most recent examples, and not intended to be an exhaustive list of all the ways that Agreements are better than letting a Judge decide your fate.

Part 3: Survived Agreements:  Do you want to decide now that certain issues can never return to court?

The issue of survived v. merged agreements can often be a confusing one, but it is actually relatively simple:  Merged agreements can be changed in the future by a Court, and survived agreements can NOT be changed in the future by a Court.

Recently, the Appeals Court confirmed the nature of survived agreements in Lalchandani v. Roddy.  The issue in Lalchandani was whether a husband who had reached federal retirement age can seek to terminate his alimony obligation, despite a survival clause prohibiting modification in a divorce agreement. Since, the Alimony Reform Act is quite clear that surviving alimony provisions cannot be modified under the Act, the only real issue in the case was whether the survival clause in the judgment was ambiguous. Unsurprisingly, the Appeals Court found that the "total disability" clause in the modification agreement was clear and enforceable, and denied the husband's request to terminate alimony on the sole basis of his age.

While in this case, the husband was likely disappointed by his inability to modify the survived agreement, this is the agreement he bargained for.  A trial court cannot create a survived order without the Agreement of the parties and if you take an issue all the way to trial, it is possible that it still might be modifiable in the future.  While in many instances it may not be advisable to survive certain provisions, having the option can often be a useful tool in preventing future court battles.

Next up: Parent Coordinator:  Do you want help resolving parenting disputes without returning to court?

Monday, March 23, 2015

Teen Parenting Support Groups

While parenting of adolescents is challenging by itself, divorce and separated parenting can add even more complication.  We often encourage parents to consider the use of trained therapists to assist when issues arise with co-parenting teenagers.  Carly Baker, a trained Collaborative Coach and therapist, is offering two upcoming 8 week therapeutic support groups for parents of adolescents:

Flyer for Daytime program beginning on Wed, April 29, 2015

Flyer for Evening program beginning on Tuesday, May 5, 2015

Click here for more information on Separated Parenting.


Things a Judge Can't Do, but You Can! - Part 2: Self-Executing Adjustments

A number of recent appellate decisions in Massachusetts have addressed the boundaries of what Probate and Family Court trial judges have the power to do.  Agreements reached between the parties, however, can include provisions that the judges don't otherwise have the authority to order.   In this four part blog series we will explore some of the important areas that an Agreement can address but the trial court is limited in addressing.  These are just some of  the most recent examples, and not intended to be an exhaustive list of all the ways that Agreements are better than letting a Judge decide your fate.

Part 2: Self-Executing Adjustments - Do you want to return to court for changes you can anticipate?

On March 18, 2015, Doris Tennant and Lisa Smith presented to the Massachusetts Council on Family Mediation on the issue of Self-Modifying agreements, also known as self-executing provisions.  The program was an excellent overview of the recent case law relating to these types of provisions and the drafting challenges involved in crafting an effective provision.

While these provisions can be complicated to draft, one of the important take-away points of this presentation, was that the Appeals Court has not restricted parties from being able to craft self-executing provisions in their Agreements.  However, the Appeals Court did rule in the Hassey v. Hassey case that a self-modifying order for alimony created by the lower court should be overturned.

The lower court in Hassey attempted to provide the Wife with further alimony via a self-modifying alimony provision requiring the Husband to pay 30% of Husband's gross income in excess of $250,000.  The Appeals Court had two problems with the Self-Modifying Order.  First, the self-modifying order "is not based on a judicial determination, supported by subsidiary findings of fact, of an increase in the wife's need accompanied by the husband's ability to provide for the same." This determination on a modification would put the burden on the Wife but by creating a self-modifying order the burden is improperly shifted to the Husband.

Second, the Appeals Court found that the self-modifying order is "inequitable because it requires only the husband to disclose quarterly income to the wife."   If the Wife earned income, it would certainly affect her need and the calculation of any formula difference in the future.

While the second issue the Appeals Court raised could be dealt with by an order that accounts for the Wife's income in a formula, the issue the court raises regarding the shifted burden of proof seems like a hard one to overcome at the trial court level.

However, nothing in the decision precludes parties from reaching these types of Agreements themselves.  Particularly when one party has variable income due to bonuses or self-employment, these types of self-modifying provisions on alimony and child support can help parties stay out of court in the long term.  A lot of thought needs to be given to the proper drafting, but crafting thoughtful Agreements is certainly preferable to repeated court battles.  This is yet again, another area where the opportunity to reach Agreements can lead to more common-sense solutions than the trial courts are allowed to provide for in their judgments.

Next up: Survived Agreements:  Do you want to decide now that certain issues can never return to court?

Friday, March 20, 2015

U.S. Tax Court Alimony Decisions: Five Cases You Should Know

Massachusetts Appellate courts have been busy interpreting the recent changes in alimony law, but they’re not the only courts struggling with legal questions surrounding alimony.  The U.S. Tax Court is tasked with interpreting the treatment of alimony under the I.R.S. Code and this has led to some interesting decisions in 2015.  Yes, I just used “tax” and “interesting” in the same sentence, but trust me if you are paying or receiving alimony, or representing clients who are, you need to know about these decisions.

David H. Goodman, CPA/ABV/CFF, CVA of Gosule, Butkus & Jesson, LLP has been kind enough to provide us with summaries of these recent cases:

U.S. Tax Court Alimony Decisions: 5 Cases You Should Know
Guest Post by David H. Goodman, CPA/ABV/CFF, CVA


Below I have summarized five U.S. Tax Court cases in which the Court ruled against the taxpayer on issues involving deductible alimony. In each of these the taxpayer attempted to deduct a payment as alimony and attribute that income to the recipient, and in each of these five cases the Tax Court found that the payments to or on behalf of an ex-spouse did not meet the statutory requirements for alimony.

Partial payment of a combined order is treated as child support first:
TC Summary Opinion 2015-2, Becker versus The Commissioner

In this case the Court ruled that the taxpayer must consider SEC. 71(c) which states that the rules governing alimony “…do not apply to that part of any payment which the terms of the divorce or separation instrument fix (in terms of an amount of money or a part of the payment) as a sum which is payable for the support of children of the payor spouse.”

IRC 71(c)(3) provides that where payment is less than amount specified in instrument for child support then so much of such payment as does not exceed the sum payable for child support shall be considered a payment for child support, and not, therefore, alimony.

The taxpayer was not allowed to allocate a payment less than the combined alimony and child support amounts to part child support and part alimony. The payment must first reduce child support in full, with any excess being applied to alimony.

Alimony paid under a draft un-signed temporary agreement is not deductible alimony:
In TC Memo. 2015-13, Milbourn versus The Commissioner

The taxpayer sought to deduct as alimony payments made for support prior to a written divorce or separation agreement being signed. The taxpayer made payments based on a draft marital dissolution agreement; however the agreement was not signed at the time the judge issued the divorce because the parties could not agree on the alimony amount. The judge left this to be decided in the future. The ex-husband made the payments under the draft agreement and sought to deduct them as alimony.

The relevant Code section is Section 71(b)(2) which defines the term “divorce or separation instrument” as:
(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree,
(B) a written separation agreement, or
(C) a decree (not described in subparagraph (A)) requiring a spouse to make payments for the support or maintenance of the other spouse.

The Tax Court ruled that the draft marital dissolution agreement did not constitute a written separation agreement. The court cites that the agreement was not signed because the parties could not agree on the amount to be made in alimony and in fact no such agreement existed until the parties finally signed the marital dissolution agreement which included the amount of alimony to be paid going forward.

Alimony cannot be tied to a child-related contingency, even if the contingency doesn’t occur: 
TC Summ. Op. 2015-11, Resnick versus The Commissioner

The U.S. Tax Code is very clear that alimony payments cannot be contingent on an event related to a child, irrespective of the needs of the child.  A couple’s divorce decree stated that the husband would pay 75% of the mortgage payment on the mother's home until their learning-disabled son moved out of his mom’s home.  Resnik argued that the contingent event had not occurred and therefore the payments were deductible alimony.

The Tax Court citing Internal Revenue Code disagreed and found all of the payments to be nondeductible child support. Alimony cannot be tied to a contingency related to a child whether or not the contingency has or is likely to occur.

Legal Fees could not be treated as deductible alimony because the obligation did not terminate on the death of the ex-spouse:
TC Memo. 2015-27, Hampers versus The Commissioner

A divorce decree obligated a taxpayer to pay future legal fees of his ex-spouse, however it did not specify whether the obligation ceased on the death of the ex-spouse. Payment obligations to an ex-spouse must cease on the death of the payee to be alimony; unless state law clearly provides that the liability to make the payment is terminated at the ex-spouse’s death. The Tax Court ruled against the payer that the obligation to pay future legal fees were deductible alimony

A pre-payment of Alimony made by IRA transfer was not deductible alimony because it did not revert upon the death of the ex-spouse:
TC Summ. Op. 2015-12., Ringbloom versus The Commissioner

This case concerns transferring an IRA to an ex-wife. An amended divorce decree provided for a taxpayer to pay his ex-spouse alimony by transferring an IRA to the ex-spouse. Distributions from the IRA by the wife were to pay her support. The taxpayer claimed the value of the IRA transferred to be deductible alimony. Interestingly, the Tax Court did not rule on whether the transfer of an IRA interest was an actual cash payment (alimony must be paid in cash). Rather the Court found that because there was no clear provision for the IRA to return to the taxpayer on the death of the ex-spouse that the transfer did not qualify as alimony.

The Court surmised that on the death of the ex-spouse the IRA would go to her beneficiaries and therefore the “alimony” payments extended beyond the death of the ex-spouse. Rather, it was determined to be a tax-free divorce-related transfer.

Assuming the payer was over the age of 59 ½, the payer could have taken distributions from the IRA, and then paid them to the ex-spouse. The IRA distributions would be taxable income, but offset by an alimony deduction.

David H. Goodman, CPA/ABV/CFF, CVA is the Director of Litigation and Business Valuation at Gosule, Butkus & Jesson, LLP.  David performs business valuations and does work in forensic accounting. David has testified as an expert witness and is also trained in collaborative practice.


Thursday, March 19, 2015

Things a Judge Can't Do, but You Can! - Part 1: Dispute Resolution Provisions

A number of recent appellate decisions in Massachusetts have addressed the boundaries of what Probate and Family Court trial judges have the power to do.  Their powers are limited by statute, case law and the Massachusetts Constitution, and sometimes judges exceed those powers by crafting solutions that test the boundaries of their authority.

These limitations, however, highlight one of the reasons that more and more people are seeking out-of-court methods of resolving their family conflict.  Agreements reached between the parties can include provisions that the judges don't otherwise have the authority to order.   In this four part blog series we will explore some of the important areas that an Agreement can address but the trial court is limited in addressing.  These are just some of  the most recent examples, and not intended to be an exhaustive list of all the ways that Agreements are better than letting a Judge decide your fate.

Part 1: Future Dispute Resolution - Do you want to return to court first or as a last resort?

The Massachusetts Appeals Court has ruled in Ventrice v. Ventrice, that a Probate and Family Court Judge violated the Massachusetts Constitution by ordering parties in a divorce Judgment to engage in out-of-court mediation prior to filing any further action in the Probate and Family Court.   While it is typical to include these types of dispute resolution clauses in Agreements, the appellate court found that Article 11 of the Declaration of Rights of the Massachusetts Constitution guarantees free access to the courts.

According to the Appeals Court this provision is "an unconstitutional burden to the parties because it delays an objecting party's right to file a complaint in our courts, and also because it forces the parties to bear a likely costly expense for court ordered mediation services."  The case was remanded on this issue and the Appeals Court directed that the "the judge may in her discretion refer the parties to court-appointed dispute resolution in accordance with the Uniform Rules on Dispute Resolution, but may not condition the right of either party to petition the court on participation in such a process." This essentially means that the trial judge can tell the parties that they should consider mediation, but can't force them to participate in it, and can't force them to pay for it.

However, this is a typical provision in many negotiated Agreements.  Especially when parties have chosen to use an alternative dispute resolution process like mediation or collaborative law in the first place, they will often want to commit to returning to that process before going to court.  The Ventrice decision does not preclude those types of provisions from being enforceable if the parties agree to them.

From a practical perspective, if a party really refuses to participate in good faith and just shows up for a mediation meeting they may fulfill the language of a dispute resolution provision, even if they don't fulfill the spirit.  In most instances, though, if someone is spending their time to meet with a mediator, they will at least give settlement a try, and that's all that a dispute resolution provision requires.  It doesn't require people to agree, it just requires them to try to agree.

This may seem like common sense to those who would rather save their money and time rather than spend endless hours fighting in court, but unfortunately our statutes and case law don't always lead to common-sense solutions.  The court in Ventrice has highlighted one of the weaknesses of the judicial system, and the good news is that nothing in this decision takes away your power to put a common sense dispute resolution process in an Agreement.

Next up: Self-Executing Adjustments - Do you want to return to court for changes you can anticipate?


Wednesday, February 4, 2015

How is Bonus Income included in calculating Child Support and Alimony?

The Alimony Reform Act defines income to include all income as defined by the Massachusetts Child Support Guidelines which clearly includes bonuses in the list of included income.  In Zaleski v. Zaleski, the SJC remanded the issue of alimony in part because the lower court did not include bonuses in the alimony calculation.  Bonus income, therefore, has to be addressed, but that does not mean it's easy to deal with.

Bonuses often vary from year to year so basing a support amount on a specific number could result in an inequity to either the payor or recipient.  Making adjustments periodically presents its own problems as well, requiring a detailed agreement to ensure that the self-modifying calculations are simple enough to avoid future disagreement.  In addition, so-called self-modifying orders have been rejected by the SJC in Hassey v. Hassey, so this is only an option if parties are able to agree.

While this is not a simple question, it doesn't mean you have to reinvent the wheel.  There are numerous common options to deal with bonus income, and it it is worth spending time discussing what both parties prefer and some of the advantages and disadvantages of each.  Below are four common options for dealing with bonus income.  They are presented in no particular order.  This is not an exhaustive list but probably the most common options:

 Retroactive Adjustment  (option A)

Choose a current estimate of annual bonuses to include in the child support calculation.  Exchange w2s and 1099s the following year and then recalculate the child support guidelines. If the recalculation shows a higher than expected figure, then payor pays recipient the difference of what should have been paid in a lump sum.  If the recalculation shows a lower than expected figure, then recipient repays payor the overpayment made in a lump sum.

Advantages and Disadvantages: This type of self-modifying provision can only be done by agreement, but it has the advantage of including changes to the recipient's income.  While this option has the advantage of seeming fair by counting all of the income, it can create disagreements and complications whenever the parties have to recalculate.  If the parties fail to complete the recalculation as required then this also creates potential retroactive issues going forward.

Questions for Option A: When does the Recalculation happen and how long does the person have to pay the adjustment?  What if the recalculation is so significant that the person can't make the adjustment payment in a lump sum?  Are their consequences built into the agreement if one person doesn't provide their w2s and 1099s timely?  Does the payment going forward change after the recalculation?

Effect on DOR collection of child support: DOR would not be able to collect the adjustment without a new court order.

Prospective Adjustment (option B)

Choose a current estimate of annual bonuses to include in the child support calculation.  Exchange w2s and 1099s the following year and then recalculate the child support guidelines. The recalculated figure is the new figure for the following year.

Advantages and Disadvantages: Much like Option A this type of self-modifying provision can only be done by agreement, and it has the advantage of including changes to the recipient's income.  While this option has the advantage of seeming fair by counting all of the income, it can create disagreements and complications whenever the parties have to recalculate.  If the parties fail to complete the recalculation as required then this also creates potential retroactive issues going forward.

Questions for Option B: When does the Recalculation happen?  Does a bonus paid in January affect the recalculation or only count in the following year's recalculation?  Are their consequences built into the agreement if one person doesn't provide their w2s and 1099s timely?

Effect on DOR collection of child support: DOR would not be able to collect the adjustment without a new court order.

% Percentage of Bonus (option C)

Use only the base salary in the child support calculation.  Upon receipt of a bonus, payor provides recipient evidence of the bonus and pays a percentage within a designated period of time.

Advantages and Disadvantages: This option has the advantage of being simple, but it may be difficult for the recipient to verify that the information being provided by the payor is correct.  In addition, this doesn't take into account if the recipient receives a bonus.  This option also forces the recipient to depend on support based on the base income only on a week to week basis, which may require a change in lifestyle.

Questions for Option C:  What is the percentage? Are their consequences built into the agreement if payor doesn't provide the bonus timely?   What happens if recipient's income goes up, does that affect the bonus sharing? Should parties still exchange w2s and 1099s the following year?

Effect on DOR collection of child support: DOR would be able to collect the base support but not the bonus portion.

No Adjustment until new Modification (option D)

Choose a current estimate of annual bonuses to include in the child support calculation.

Advantages and Disadvantages: This option has the advantage of being very simple and require the least amount of ongoing interaction between the parties.  However, if the bonus changes significantly from the estimate used in the calculation than one of the parties is receiving a windfall, and that would not change until one of the parties requests that they revisit the calculation.

Questions for Option D:  Should parties still exchange w2s and 1099s the following year?

Effect on DOR collection of child support: DOR would be able to collect the support.  Any change would require a new court order.

Other questions to consider:

With any of these options there are additional questions that bonus income may raise.  In the Zaleski case, for example, the payor was also paying for private school for the children, and the SJC implied that the lower court might use that fact as a reason to exclude the bonus from the calculation.  Similarly, parties might agree if bonus income is not something they typically count on for maintenance of their base lifestyle that a portion of it could be used for savings purposes, such as college savings.

In addition, with any option that includes recalculation, it's important to have a lot of detail.  For example, if the bonus plus existing income exceeds total income of $250,000, the child support guidelines are not clear how they apply to the income over $250,000.   This doesn't mean the court doesn't consider that income, but that the Court has a lot more discretion in how to handle that income.   How do the parties want to treat the additional income in these situations?  If they are going to recalculate, then they may want to use a specific formula for this portion of the income as well.

Click here for more information on child support and alimony in Massachusetts.

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