MAZUREK v. RUSSELL   2014 Pa Super. 130 (2014)

College provisions in property settlement issues have always been a source of controversy.  The typical provision calls for mutual consent “which consent shall not be unreasonably withheld”.  The language seems clear enough when pen is set to paper but when enrollment time comes the games begin as mother has one set of ideas and father another.  The other wrinkle is that by the time college rolls around a child may be estranged from one parent.  So what is “consent” and can it ever be reasonably withheld?

A case decided on June 24 affords us some insight into these questions.  In Mazurek v. Russell, the parties agreed in 2010 to the typical language recited above.  When Mother filed an emergency petition to compel payment for one of the children to attend Marymount Manhattan college in NY, Father blasted back with several defenses including:

1.            Son had lackluster academic performance in high school;

2.            Son had been estranged from Father for five years despite Father’s best efforts. 

Father then said, he would pay if Luke reconciled with Father, maintained a 3.0 GPA and did not take a car.  His terms were not agreed to.  He then noted that there had been no consultation about the school selection.  

A hearing was held in late July, 2013.  The trial court heard evidence and ruled that Father was on the hook for the college and Mother’s counsel fees. 

On appeal a panel of the Superior Court found the “not unreasonably withheld” consent language to be ambiguous as a matter of law and subject to parole evidence to help interpret the intent of the parties.  The Court then looked at two conflicting cases where consent has been an issue.  The first, Fina v. Fina, 737 A,2d 760 (Pa. Super, 1999) held that mutual consent language required meaningful interaction.  A second case, Wineburgh v. Wineburgh, required payment on the basis that the agreement’s use of language that Father would “have a say” did not require consultation. 

The Mazurek Court sided with the ruling in Fina, noting that “we cannot ignore the significant of {mutual consent} language to which the parties contracted.  The Court found that Father evinced a reasonable basis for withholding his consent.  It also appears from the opinion that Father’s prior history of paying large sums for private secondary school for all children and private college tuitions for two other children were factors that weighed in his favor.  

There is an interesting twist to this reported opinion.  Judge Allen devotes a fair amount of time to discussing the estrangement issue and the opinion has a strong flavor of Judge Cirillo’s famous opinion in Milne v. Milne, 556 A.2d 854 (1989) where nine judges of the Superior Court decided that a child’s conduct toward a parent could be grounds to forfeit what was then a judicially imposed, non-contractual duty to contribute to college.  The question the bar will grapple with in the wake of this opinion is whether “reconciliation” with a parent is a necessary component to consultation and consent.  What makes the question even more complicated is that if Father’s testimony is to be credited, he was estranged from his child two years before he contracted to pay 100% of his reasonable expenses for college.  Did Father not have the last clear chance to demand “reconciliation” as a condition to assuming this pricey obligation?

I hope you enjoy your box full of $20's
I hope you enjoy your box full of $20’s

As we head into the second half of 2014, now is a good time to take stock of your financial and tax situation, particularly if you are separated or divorcing. Over the next few posts, I am going to highlight some areas worth considering if you are in either situation since it is much easier to stay ahead of these issues rather than scramble to catch up to them in January or February next year.

For this post, I wanted to give a brief summary of how monetary gifts are dealt with by the IRS and how they can impact a divorce case.

The first thing to know is that the IRS has a maximum tax exclusion of $14,000.00 for gifts.  The IRS allows up to that amount to be excluded from taxes, however, anything above $14,000.00 requires a Gift Tax Return to be filed by the person giving the gift and the possibility that they will have to pay tax on the gift. The recipient (or “donee”) does not have to file anything with the IRS or pay any taxes on the gift they receive. Anyone giving gifts in excess of $14,000.00 has to file a Form 709. The exception to this rule is if the gifts are made to a spouse.

Understanding the rules on gifts and the threshold for what requires the filing of a gift tax return is important for those receiving financial assistance from a third-party during a divorce action. The donor may be able to contribute the money as an excluded gift.  From the perspective of litigation, it is also important where there are concerns that an estranged spouse is dissipating the marital estate through gifts to third parties. Requesting the production of gift tax returns should be a standard discovery request in most divorce cases.

Though this is really an estate planning concept, it nevertheless can be relevant in a divorce action. There may also be situations where a spouse receives a portion of the estate and there are tax ramifications which he or she cannot address due to their income levels. Gifts and other estate planning devices may be useful tools for managing such issues. If you have questions about gifts and gifts exclusions, speak to your attorney. In my firm, we are fortunate to have many excellent estate planning attorneys who collaborate with us on family law cases to help address such issues.

Form 709 can be found here.

(Photo Credit: www.giftster.com)

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Aaron Weems is an attorney and editor of the Pennsylvania Family Law Blog. Aaron is a partner in Fox Rothschild’s Blue Bell, Pennsylvania office and practices throughout the greater Philadelphia region. Aaron can be reached at 610-397-7989; aweems@foxrothschild.com, and on Twitter @AaronWeemsAtty.