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Breaking up gets even harder to do
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In an uncertain economy and shaky housing market, divorce is becoming increasingly complicated.
The two largest assets in a divorce are typically the family home and retirement savings. But recently the stock market has been struggling, and 401(k) plans are worth less as a result. Houses are losing value and prices are plunging around the country, and many people have mortgaged their homes to the hilt.
What this means, in essence, is that it’s easier to split up equity compared to splitting up debt.
It’s becoming more common to find both the husband and wife are unable to take over a mortgage alone and re-financing has become increasingly difficult. In some cases, the value of the home is less than the mortgage. If a home is foreclosed on, the remaining shortfall has to be divvied up. One possible solution is to give the property back to the bank and negotiate better terms for repayment.
A better situation is if you can afford to have one spouse stay in the home and attempt to sell it, while the couple continues to split the mortgage payments until the house sells. But given the sluggish housing market, only couples who can afford to continue their mortgage payments as well as have one spouse pay for new housing can
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consider this option.
Another challenge is when one or both spouses have been laid off, which has a huge effect on support obligations. Or another is when one of spouses suffers a significant loss of income because of a change in a bonus or profit-sharing plan. This means the division of assets may result in smaller shares.
Relocation is always a potential trouble spot in a divorce. If the economy continues to struggle, it could mean spouses will have to move to different areas of the country to look for employment. This will affect child custody.
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The law of baby making
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Over the last 20 years, assisted reproduction has grown into a multi-billion dollar industry, and the legal issues related to this area are still evolving.
The types of individuals involved can range from a single woman choosing to become pregnant from donated sperm, to heterosexual couples who rely on donations of sperm and eggs as well as a gestational surrogate, to gay couples paying two surrogates to produce a child.
The legal rights of the parties involved must be spelled out clearly in a contract to avoid disputes down the road on issues such as custody and who is the parent of the child.
For example, a contract should state that a surrogate intends the recipient parents to have custody of the child. When the contract is unclear, custody lawsuits can follow.
The contract should also spell out
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what fees are involved, such as a base surrogacy fee, as well as medical insurance, travel costs and monthly expenses.
Also, laws vary from state to state as to whether surrogacy agreements are permitted.
We are available to speak with you should you be considering assisted reproduction.
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California allows gay marriages
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California recently became the only other state besides Massachusetts to allow gay marriage.
The California Supreme Court in a recent 4-3 decision said laws that allowed “domestic partnerships” but banned marriage between same-sex couples violated the equal protection clause of the state constitution.
The case involved challenges to provisions of the California family law statutes, including a ballot initiative passed by voters in 2000, that limit marriage to a man and a woman.
The state attorney general argued that the 2003 Domestic Partners Act allowed gay couples all of the substantive rights of marriage – except for the label of “marriage” – and therefore did not violate the constitutional right to marry.
But the court said the distinction in nomenclature created a “significant risk” that domestic partnership would “be viewed as a lesser state than marriage and, in effect, a mark of second-class citizenship.”
Two dissenting justices said the majority decision violated the separation of powers by inventing a “permanent redefinition of marriage, regardless of the popular will.”
A third dissenter said the equal protection clause requires no more than giving domestic partners “virtually all the substantive legal benefits and privileges” available to traditional couples – something that the state domestic partnership statute already accomplishes.
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The case began in 2004, when the mayor of San Francisco began issuing marriage licenses to same-sex couples in defiance of a ballot initiative recognizing only opposite-sex marriages.
The state Supreme Court stopped the city from issuing the licenses until the constitutionality of the state law was determined. Meanwhile, the city had a suit pending against the state alleging that state law violated the constitution.
Many states have laws that do not recognize gay marriages from other states. But those laws have not seen significant court challenges to date. The number of gay marriages will likely expand significantly since California has the highest population in the country.
Some couples may move to other states and sue to have their marriages recognized.
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Custody battles seeing rise in disputes over religion
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Custodial disputes involving religion are on the rise across the country.
The reasons are numerous, including the increased incidence of mixed-religion marriages, and the willingness of more individuals to adopt new religious beliefs. The result is increasing conflict over religious issues among couples.
A case in Oregon demonstrates the contentiousness that can arise in this context. The custody battle involves a divorced couple and their 12-year-old son. The father wants the boy to be circumcised in accordance with the Jewish faith, which the father converted to after the dissolution of the marriage.
The boy’s mother is a member of the Russian Orthodox Church, and while the couple was married, their son was raised in that faith. But about the time of the divorce, the husband began studying Judaism and ultimately converted to the Jewish faith.
The mother was initially awarded custody, but since then a number of legal proceedings involving custody ensured. The father eventually told the mother their son wanted to convert to Judaism – but that circumcision was a prerequisite.
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The mother objected. The Oregon Supreme Court eventually sent the case back because the lower court had failed to assess the boy’s wishes, which is necessary to decide custody, the Oregon Supreme Court said.
A custody case involving religion often involves a parent’s constitutional claim of freedom of religion (such as the Oregon father’s claim he has the right to have his son circumcised), as well as the child’s best interests (in the Oregon case, the mother is claiming that surgically altering her son’s body is contrary to his best interests).
Courts are generally not inclined to rule on which religion is better for a child. In fact, some courts have shown a willingness to say that it’s okay for children to be exposed to more than one religious set of beliefs – even if different from what their parents believe.
But if a religious choice is potentially harmful to a child, courts are more willing to step in to protect the child.
A detailed prenuptial agreement can preempt much of the strife involving a child’s religious upbringing.
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Alimony increases can’t be automatic
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Cost-of-living increases can’t be automatically tacked onto alimony payments, according to a recent court ruling.
A divorcing couple in New Hampshire had worked a variety of part-time jobs to support themselves for the past three decades. When they split, a family court judge ordered the husband to pay $1,100 in permanent alimony, along with an annual cost-of-living increase based on the consumer price index.
The husband appealed. He argued that increases in alimony can’t be automatic, and instead have to be based on a change of circumstances of the parties.
The New Hampshire Supreme Court agreed with the husband.
The court said adjustments to alimony have to be based on factors such as the (i) length of the marriage; (ii) age, health, social or economic status of the parties;
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(iii) occupations and employability of the parties; and (iv) amount and sources of their income.
The consumer price index, the court observed, measures the impact of inflation on an average consumer. Inflation will not necessarily affect the financial condition of every divorced couple, or the fairness of every alimony award, the court added.
In essence, in assessing any changes to alimony, a court has to look at the specific situations of a couple, not the economy as a whole.
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Husband on the hook for depreciated investments
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A husband may be required to compensate his ex-wife for the depreciation of investments that occurred during the period he unreasonably delayed the division of marital property.
The parties’ divorce decree required the husband to execute a “Qualified Domestic Relations Order” (QDRO) dividing his 401(k) plan equally with his wife.
A QDRO creates or recognizes the existence of a spouse’s or child’s right to receive all or a portion of the benefits payable to a participant under a pension plan. QDROs apply only to employee benefit or pension plans subject to the Employee Retirement Income Security Act, the federal law governing private sector pensions.
The husband failed to file the QDRO for more than two years. And due to a
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dispute over the husband’s obligations, it wasn’t until eight years after the divorce decree that the family court judge entered a final order dividing the assets.
The wife argued the husband had to compensate her for any drop in the value of assets in the 401(k) accounts since the time of the initial divorce decree.
The Nebraska Supreme Court agreed, saying the divorce decree specified a valuation date for the 401(k) plans, and assigned to the husband the risk of a decline in value of the assets since he controlled them.
This case is an example of why it’s important to resolve financial matters in a divorce as quickly as possible.
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This newsletter is designed to keep you up-to-date with changes in the law. For help with these or any other legal issues, please call our firm today.
The information in this newsletter is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.
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