Financial Considerations for Individuals Prepping for Divorce 

Going through divorce can be a difficult and emotional process, yet partners must discuss many items before one can be finalized. For example, couples need to determine how they will split marital property, whether or not to keep the family home, as well as if any spousal support will be needed.

Additionally, many individuals worry about the impact divorce might have on their finances and how they will provide for themselves in the future. Although some lifestyle changes are often necessary, there are many steps a person can take to begin building his or her own credit, savings and financial identity.

How to Handle Finances Before and During Divorce

If considering divorce, start protecting your financial interests as soon as possible. For example, collecting your monthly bank statements and past tax returns will be beneficial at your initial consultation with a divorce attorney. In Massachusetts, there is a requirement that the parties exchange three years of financial documents, including investment, retirement and bank accounts.  Also, be sure to avoid unnecessary major expenditures, check your credit report for any errors and begin to build savings for the post-divorce transition.

Once it is time to officially file for divorce, a person will discuss with his or her attorney a tentative budget that includes expected costs. Factors that are considered include a person’s:

·         Income and earning potential

·         Child care needs

·         Necessary living expenses

·         Child or spousal support needs or obligations

·         Anticipated health or insurance costs

·         Life Insurance to ensure support can continue in the event of an untimely death of a party

·         Assets (owned either separately or jointly)

·         Outstanding liabilities

This analysis should provide a good idea of how financially prepared a person is to live a single life and whether any assistance will be needed from his or her spouse. However, the preparation does not stop there.

Most people have beneficiaries listed in their will and on life insurance policies. Do these need to be changed? Have all jointly owned bank accounts or safety deposit boxes been closed?  Does your spouse have access to your credit card as an authorized user? It is often wise to  close joint credit cards or at least terminating access to your spouse's use of a credit card that could adversely affect your credit rating.  If you are unsure whether your spouse is a co-obligor or simply an authorized user, contact your credit card administrator to verify the status. 

It is always best to avoid financial complications down the road and begin preparing today. Speak with an experienced divorce attorney to discuss your options and to begin protecting your financial future.

Braving Valentine's Day: Four EssentialTips to Surviving the Holiday

February 14th marks a day that symbolizes love all over the materialized world. Or, if you are in the midst of a painful divorce, this couple-oriented "Hallmark holiday" can feel like a dreaded event, painfully at odds with what you are experiencing in your life at the moment. Despite whether you choose to shun Valentine's Day or long for years long past, it is important to recognize this day as one of growth and potential for the future.  By keeping in mind our four simple steps, you can turn this Valentine's Day into an encouraging, transformative experience.

1. Value the power of change, and the opportunity that lies in your future. Valentine's Day does not have to be an isolating experience, despite all of those cheesy television advertisements selling romantic escapes and chocolate hearts. This is the most important time to think positively, and remember that this is the the first Valentine's Day of your bright new future! You have overcome the most painful part of divorce, and this Valentine's Day should symbolize your emotional strength, acceptance, and willingness to put your best foot forward.
2. Learn from your experience. Divorce is painfully draining, both physically and emotionally. However, oftentimes it is the way in which we react to even the worst of life experiences that teach us the most about our inner strength and resilience. Apply this deeper understanding in other areas of your life to better your relationships in the future.
3. Make time for YOU this week. Time runs sparingly between work obligations, managing your family's multiple schedules, and trying to adapt to any changes the divorce may have created. It is important to recognize your need for time to yourself, in order to recognize and understand your new identity, and most importantly, embrace it.
4. Accept that change is inevitable, and good. Divorce is a major emotional transformation, and because of this experience you will learn to live a happier, more  fulfilled life. From our failures, we are able to decipher what we truly want from life: whether it be a new career, traveling, or to take that cooking class you've been thinking about, now is your time to take the reigns and embrace your new identity.

Massachusetts Homestead Act

On December 17, 2010, Govenor Deval patrick signed into law a bill that will allow Massachusetts homeowners to better protect their family home from debt collectors. This legislation will take effect on March 16, 2011, and will essentially modernize an antiquated verison of the Massachusetts Homestead Act.

The Massachusetts Homestead Act is extremely important because it protects homeowners from losing their homes if creditors attempt to attach liens aganist their properties as well as prohibits debt collectors from compelling the sale of a home in order to pay debt collectors from compelling the sale of a home in order to pay debt. This new legislation will expand coverage for homeowners as well as clear up some uncertainty that was created by the law which was first enacted in 1851. Previously, the statue provided $500,000 in protection from creditors, but only for those homeowners who filed a written declaration with the Registry of Deeds, which can cost between $35 and $100. Under the new act, all Massachusetts homeowners will receive an automatic homestead exemption of $125,000 on the principal residence if they hold that much equity in their properties. This will help reconcile complaints that the previous law was unfair to homeowners who did not possess the training or legal advice to assist with the declaration filing process. For those homeowners who still seek $500,000 in protection, they will still be able to receive this declared homestead exemption by filing a written declaration of homestead at the Registry of Deeds.

Here's a list of other significat changes the Massachusetts Homestead Act will provide:

• For married couples or for any other co-owners, both owners must execute the declaration to received the $500,000 declared homestead exemption. Previously only one owner was allowed to file declaration.
• If you owned a homestead while single and you later get married, the homestead will automatically protect your new spouse.
• Homesteads will now pass on to the surviving spouse and children who live in the family home should death or divorce of a person holding the homestead occur.
• Homesteads are now available on 2 to 4 family homes, manufactured homes, and homes held in trust.
• If a home is owned by two elderly or disable persons, the total exemption in the home can amount to $1,000,000.
• No longer necessary to re-file a homestead after a refinance. Previously lenders required homeowners to either subordinate or release homesteads. Under the new law, homesteads automatically subordinate estates or homestead to mortgages and lenders are prohibited from requiring borrowers waive or release a homestead.
• If Massachusetts homeowners previously declare an estate of homestead at the Registry of Deeds, there is no need to re-file, as you will still receive the benefit of $500,000 in protection.
• Home equity also remain intact if a family member transfers a house to another relative.

Most importantly, the new and improved Massachusetts Homestead Act will protect the growing number of Massachusetts homeowners who find themselves in debt and who would otherwise be at risk of losing their homes to creditors who are seeking to collect those debts.

Prenuptial Agreements on the Rise in Current Economy

           When it comes to marriage, many couples used to think all you need is love. But with increasingly difficult economic times, many now find they also need a prenuptial agreement.  Seventy-three percent of divorce attorneys reported seeing an increase in demand for prenuptial agreements over the past five years, according to a recent survey conducted by the American Academy of Matrimonial Lawyers in September 2010.  What may come as somewhat of a surprise is that 52 percent of these attorneys also said they have seen a rise in the number of women initiating these requests. 

            In order to understand these findings, one must look to the economy.  While many once thought prenups were only for celebrity couples or those with substantial assets, prenups have taken on a greater significance for middle-class couples.   With the recession having such a negative widespread effect on employment rates and financial savings, couples are now focusing their attention on their assets and how to protect them. For those who have had their finances reduced, what they are left with is of greater importance to them and is worthy of safeguarding.

            It is a reality that retirement accounts have been hard hit in the last few years, so people do not want to have their retirement account diminished twice, once when the market weakened and again during divorce. Now, a commitment to marriage often includes the commitment to protect premarital assets, pensions and retirement accounts.  Thirty-six percent of the attorneys surveyed agreed that they have witnessed an increase in retirement savings being a part of the prenuptial agreement. 

            The rise in the number of women initiating prenuptial agreements may be attributed to the fact more women are working outside the house and many have a greater earning potential than their future husband-to-be.  Therefore, these women instinctively want to protect what they have worked so hard to earn.  On the other hand, many  women who leave the job market to become the primary caretaker of a child, may want protections outlined in a prenuptial agreement to ensure they are not left struggling to survive in the even their marriage ends.  

            Since the divorce rate in America is hovering around 41 percent, it is of no surprise that couples want to plan ahead for their future.  Many baby boomers’ children are now of marrying age and have experienced divorce in their childhood,  so many want to avoid the arguments and problems their parents encountered during divorce.  A prenuptial agreement provides a solution to this.

            While prenuptial agreements may be gaining in popularity, they will continue to be a controversial topic in any household.  Many feel that a prenup creates a level of distrust among the couple which leads to inevitable divorce.   A more positive view  is to consider marriage as a partnership. In order to have a successful partnership, parameters need to be drawn to define the relationship and address contingencies such as dissolution of the partnership.  With this in mind, a prenuptial agreement can also be considered an estate planning opportunity for couples to create more certainty in these uncertain economic times. 

Alimony Reform Act of 2011

As Benjamin Franklin once said, “The only things certain in life are death and taxes.”  And for those divorcing in  Massachusetts, one more certainty could be added to this list: lifetime alimony.  That is about to change with the growing momentum of Massachusetts legislation know as the Alimony Reform Act of 2011.

On January 18, 2011, Senator Gale Candaras and Representative John Fernandes announced the filing of legislation intended to reform and improve alimony in Massachusetts.  The bill was comprised of ideas from a legislative task force formed by the chairs of the Joint Committee on the Judiciary whose goal was to minimize the uncertainty associated with alimony awards.  In terms of support, this bill has more than 30 co-sponsors, and is backed by  Massachusetts Bar Association, the Chief Justice of the Probate and Family Court, Steve Hitner and his grassroots organization known as Mass Alimony Reform, and thousands of men and women throughout the state who are affected by the alimony laws currently in place.  With so many influential people determined to keep this bill moving forward, there is a strong possibility that this new bill could be passed sometime this Spring. 

In terms of changes, the proposed Alimony Reform Act of 2011 would radically alter Massachusetts’ existing alimony system. The Major reforms include:

•        Alimony would come to an end when the paying spouse reaches the age of retirement.  Under the current system, courts did not have the authority to limit the duration of alimony.   
•       Alimony could be reduced or terminated if the spouse receiving alimony maintains a “common household” with another person for a continuous period of at least three months.  
•       If the alimony payer remarries, the income of his or her spouse could not be used as part of the analysis to increase alimony to the recipient ex-spouse.   This is extremely beneficial to the payer who will no longer have to view alimony as an obstacle to getting re-married.  
•      A formula would now be implemented so that alimony would not exceed the recipient’s need or 30 percent to 35 percent of the difference between the parties’ gross incomes. 
•      Durational limits would be imposed depending on the length of the marriage.  For marriages of five years or less, alimony would last no longer than 50 percent of the number of months in the marriage.  For marriages between 5 and 10 years, alimony would be no more than 60 percent of the months in the marriage.  For marriages between 10 years and 15 years, alimony would cap at 70 percent of months in the marriage.  For marriages between 15 and 20 years, alimony would be no more than 80 percent of months in the marriage.  For marriages that lasted greater than 20 years, the court would reserve discretion to set alimony for an “indefinite length of time.”

Overall, while many attempts to change Massachusetts’ alimony laws have failed in the past, it appears that the Alimony Reform Act of 2011 has the support it needs to become law.    While alimony in Massachusetts will still be much more generous than it is in other states, the directives of the new law provide more predictability for those who pay alimony and those who receive alimony. 

Same Sex Marriage/Divorce Update Summer, 2010

Same Sex Marriage

Same Sex Marriage/Divorce Update Summer, 2010
There has been substantial judicial movement on the issue of gay marriage from coast-to-coast this summer. In the wake of U.S. District Court Judge Tauro's July 2010 decision that the Defense of Marriage Act (DOMA) was unconstitutional in Massachusetts, U.S. District Court Judge Vaughn Walker overturned California's ban on gay marriage in early August 2010.

DOMA Ruled Unconstitutional in Massachusetts

In 1996, Congress adopted the Defense of Marriage Act, or "DOMA", which is a federal law that defines marriage as a legal union between one man and one woman. However, DOMA also reaffirms the power of the states to make their own decisions about marriage. In Massachusetts, both the Attorney General's office and Gay & Lesbian Advocates & Defenders (GLAD) successfully challenged DOMA as unconstitutional.
On July 8, 2010, Judge Joseph Tauro ruled that Section 3 of DOMA is unconstitutional, because this federal law violates both the Equal Protection Clause of the 14^th and 10^th Amendments of the U.S. Constitution. [i]
DOMA potentially affects the application of 1,138 federal statutory provisions in the U.S. Code in which marital status is a factor, including copyright protections, provisions relating to leave to care for a spouse under the Family and Medical Leave Act and testimonial privileges.
Under this latest court ruling, gay married couples are entitled to the same federal spousal benefits and protections as every other married couple.
Click here to read Judge Tauro's Order:
As of February 12, 2010, Massachusetts had issued marriage licenses to at least 15,214 same-sex couples. But, as Section 3 of DOMA bars federal recognition of these marriages, Attorney General Martha Coakley argued in Commonwealth of Massachusetts v. Health and Human Services, DOMA has denied federal benefits to these couples. For example, the Department of Veterans Affairs informed the Commonwealth that the federal government is entitled to "recapture" almost $19 million in federal grants if and when the Commonwealth opts to bury the same-sex spouse of a veteran in one of the state veterans cemeteries in Agawam or Winchendon. Here, DOMA is inducing the Commonwealth to violate the equal protection rights of its citizens. As DOMA imposes an unconstitutional condition on the receipt of federal funding, the court found that DOMA contravenes a well-established restriction on the exercise of Congress' spending power.
DOMA also penalizes the state and its citizens in the context of healthcare. Under the MassHealth Equality Act, the Commonwealth is required to afford same-sex spouses the same benefits as heterosexual spouses. Yet the Health and Human Services Centers for Medicare & Medicaid Services states that the federal government will not provide federal funding participation for same-sex spouses because DOMA does not recognize the marriage of same-sex couples. Consequently, the Commonwealth has incurred over $640,000 in additional costs and over $2 million in lost federal funding. Additionally, the Commonwealth has incurred additional tax liability because the health benefits afforded to same-sex spouses of Commonwealth employees must be considered taxable income and the Commonwealth is required to pay Medicare tax for each employee hired after April 1, 1986, in the amount of 1.45% of each employee's taxable income.
In the companion case to Commonwealth of Massachusetts v. Health and Human Services, GLAD asked Judge Tauro to consider whether DOMA violates the right of seven married same-sex couples and three widowers from Massachusetts to equal protection of the law in Gill v. Office of Personnel Management. The Gill case was filed by individual Massachusetts plaintiffs who sought to end the federal government's discriminatory refusal to acknowledge their existing marriages. Some have been denied social security protections, or job protections, typically available to married couples. They have also been forbidden from filing their federal income taxes jointly. GLAD argued that the federal government's different treatment of married heterosexual couples violates the plaintiffs' equal protection rights under the 5^th Amendment. [ii]
Rather than declare homosexuals to be a "suspect class" and therefore subject DOMA to strict scrutiny review, the ruling said that was unnecessary because DOMA fails to even pass the more lenient "rational basis" test. Read the decision here:
Proposition 8 Overturned in California
Proposition 8, also known as California's Marriage Protection Act, was a ballot proposition and constitutional amendment passed in November 2008 which provided that California only recognize marriage as between one man and one woman.
On August 4, 2010 U.S. District Court Judge Vaughn Walker in California concluded that Proposition 8 banning gay marriage violates both the Due Process Clause and the Equal Protection Clause of the 14^th Amendment. [iii]
Judge Walker determined that "Proposition 8 both unconstitutionally burdens the exercise of the fundamental right to marry and creates an irrational classification on the basis of sexual orientation." Because the plaintiffs in Perry v. Schwarzenegger sought to exercise the fundamental right to marry, their claim was subject to strict scrutiny. However, as Judge Tauro did in the Gill case, Judge Walker noted higher standard of "strict scrutiny" is unnecessary because Proposition 8 fails to pass the more lenient "rational basis" test. Therefore, Proposition 8 cannot withstand any level of scrutiny under the Equal Protection Clause, because excluding same-sex couples from marriage is not rationally related to a legitimate state interest.
Read Judge Walker's decision here:
While the decisions from this summer symbolize great strides for gay marriage rights, many legal commentators foresee these cases being appealed to the U.S. Supreme Court. We will have to wait to see what the new season brings.

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[i] The 14^th Amendment "requires that all persons subjected to...legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed'" and where "those who appear similarly situated are nevertheless treated differently, the Equal Protection Clause requires at least a rational reason for the difference, to assure that all persons subject to legislation or regulation are indeed being treated alike, under like circumstances and conditions." The 10^th Amendment states that rights not explicitly granted to the federal government, or denied to the states, belong to the states. The Spending Clause declares that Congress "shall have Power to Lay and collect Taxes, Duties, Imposts and Excises, to pay Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States."
[ii] Under the Due Process Clause of the 5^th Amendment, the federal government shall not deprive any person of life, liberty, or property without due process of law. If the governmental action infringes on a fundamental right, the law or act must pass strict scrutiny review, meaning that it must be narrowly tailored to further a compelling government interest. If the government restriction does not implicate a fundamental right, it must survive rational basis review, meaning the law or act is rationally related to a legitimate government interest.
[iii] The Due Process Clause of the 14^th Amendment provides that states shall not "make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law."

January 13, 2011

Question: 

My husband of 35+ years lost his job in 1994. Initially he said he wanted to temporarily stay at home with the kids, but after 1-2 years, he gave up looking for work and has refused to find a job despite having 2 Ivy-league degrees. He drained his 401K and spent a lot of money on buying things for himself. He does take care of a few things around the house but I work full-time and do more housework than him. We are considering divorce but he says that he should be entitled to 50% of my pension because: 1) he was the breadwinner and earned 2-3X my salary, and 2) his housework qualifies as employment. How do the courts look at this situation when the woman earns more than the man? And how do I prevent him from continuing to spend money and drain our finances?

ANSWER

There is no gender distinction in Massachusetts divorce law.  As the saying goes, what is good for the goose is good for the gander.  Therefore it really should not matter whether the primary earner is the husband or the wife.  However, a divorce judge is given significant discretion in deciding how a marital estate will be divided and whether it is appropriate for alimony to be paid.  Once a divorce action is filed, a judge will be assigned to your case and it is important that you and your attorney are prepared to present a persuasive argument that realistically addresses your concerns and desired resolution.  A judge will consider the length of marriage and a number of factors in deciding whether there will be an equal division (ie 50%50%)or disproportionate(ie 55%/45%;  60%/40% etc) division of assets or payment of alimony by one spouse to another.  Some of those factors include, financial conduct during the marriage, vocational skills, education, employability, health and contributions by each spouse to the acquisition, preservation and appreciation of each party’s estates.  Your concern about your husband continuing to spend money and drain finances should be addressed as soon as possible and before more irreparable financial dissipation  is done.  Once a divorce complaint is filed and the other party legally served with these documents, there is an automatic restraining order in place that is supposed to preclude both parties from utilizing marital funds for any reasons, other than to pay for the customary household expenses and attorney fees.  You may also have a strong argument that income should be attributed to your husband because of his compelling educational credentials and significant work history. 

DISCLAIMER:  The information contained herein, and the receipt or transmission of same does not constitute or create an attorney-client relationship and the information provided does not constitute full analysis of any specific matter.