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Our friends at the Delaware Trial Practice Blog recently summarized a Delaware case involving a familiar Pennsylvania support concept - the mortgage deviation.

Leslie Spoltore of our Wilmington office discusses how the court upheld the reduction of a father's support obligation by considering the mortgage expense related to the marital residence.  The expense were directly to the needs of the children (i.e. "shelter") and it resulted in cancelling out the father's child support obligation completely.

The mortgage deviation in Pennsylvania is found at Rule 1910.16-6(e) and allows for the party residing in the residence to seek a deviation (either upward or downward depending on who has the support obligation) in the support amount regardless of who is the support paying party.  This deviation is available at the discretion of the court and different counties have different ways to deal with it beyond just the math - some counties are less inclined to award the deviation if the house is not being sold or there is a concern that this inflation (or deflation) of support could be a long term adjustment.

Regardless, the only absolute in Pennsylvania's rule is that a mortgage deviation is not permitted after a final resolution of all outstanding economic claims.  In other words, if you get divorced and went through equitable distribution, your ex-spouse is not going to be required under any circumstance to contribute to your mortgage even if you can not afford it.

Delaware uses a different methodology, but the outcome between the two rules is similar.

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Typically, the purpose of columns such as this is to report on rulings by courts.  But there are times when law becomes established because courts do not rule on a particular issue.  Such is the case with a ruling last week where the Pennsylvania Supreme Court decided not to give further consideration to a ruling by the Superior Court on an issue that has gained lots of attention in the past few years.

We all know that parents have a duty to support children but the law has long held that children may also be held responsible for the debts of their parents.  The law has been rarely used until the last decade as hospitals and nursing homes simply wrote off what they could not collect in third party payments.  But as Medicare has become more reluctant to pay, these health providers have become more aggressive in asserting their rights.

From September, 2007 to March, 2008 John Pittas’ mother was confined to a rehabilitation center by reason of a car accident.  Upon discharge she left and moved to Greece.  The health care facility brought an action against one of her sons.  Curiously, they did not institute it against all of her children nor did they join Mr. Pittas’ father.  Arbitrators ruled against the HCR Manor Care facility but the Common Pleas Court reversed the ruling and entered judgment against Mr. Pittas (the son) for just under $93,000.  The son appealed to the Superior Court and in May, 2012 that Court affirmed the trial court judgment for $93,000. 2012 Pa. Super. 96.

Section 4603 of the Domestic Relations Code states that children may have legal responsibilities to provide for an indigent parent. The statute excuses such support if the child cannot afford to contribute or the parent had abandoned the child for more than ten years of the child’s minority. The person or institution seeking to impose the duty on the child has the burden to show that the person they have sued can contribute.

In this case HRC Manor Care demonstrated that the child had income of $85,000 a year or more. The Court decided it was not an abuse of discretion to decide that Mr. Pittas had the ability to support his Mother and noted that he did little to provide actual evidence of hardship.  They also dismissed claims that his father and siblings were necessary parties.  The Superior Court ruled that it was his duty to join anyone he felt had a duty to contribute.  Lastly, they argued that indigency was not proven. Here the Court adopted the common law definition recited in Savoy v. Savoy, 641 A.2d 596 (Pa. Super. 1994) and noted that indigence did not equate to “without any resources.”  Again the Superior Court noted that proof of a parent’s resources was something that the Defendant could have shown as part of his defense.

The Defendant asked the Supreme Court to review this case.  In a one sentence order entered on March 27, the Court denied the request to hear the case.  The effect is to affirm the ruling of the Superior Court.  While the legislature has seen some movement on bills to limit child liability, the Commonwealth is not really in a financial position to take on a larger role in funding care for the indigent so a legislative solution is not likely.  In the meantime, make certain that mom stays healthy if she is not already wealthy.

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(Photo by Indi Samarajiva)

The Pennsylvania Support Rules were recently amended on December 30, 2012.  Rule 1910.29, formalizes the presentation of support evidence for Family Law Cases.  Anecdotally, the Rules of Evidence may not always be strictly adhered to in family law cases due to probative value of some forms of evidence weighed against the cost and difficulty of verifying it or authenticating it at trial. 

Rule 1910.29 attempts to eliminate some of ambiguity about the admissibility of some forms of evidence by providing counsel the opportunity to offer the other side copies of those documents they will be offering into evidence twenty (20) days prior to the hearing.  In doing so, provided the other party does not object to the admission of those documents into evidence, they will be accepted as authentic and admitted into the record.  If an objection is made to the records, then the Pennsylvania Rules of Evidence will apply as to the admissibility of those documents into evidence.

This rule also standardizes the admission of medical evidence in both record and non-record proceedings, (i.e. proceedings which are not recorded by a court reporter).  Whenever a party raises a medical issue as preventing them from earning income, that party will need to obtain a Physician Verification Form and have their physician fill it out and verify its contents as accurate.  This Physician Verification Form will hopefully eliminate some of the ambiguity for those parties who claim a disability, but conveniently have failed to file for Social Security Disability or worker’s compensation benefits. 

If the party who has introduced the Physician Verification Form at the non-record hearing would like to have it entered into the record at the record hearing, then the above rules will apply with giving the other party twenty (20) days notice prior to the hearing and allow the other side the opportunity to file and serve an objection within ten (10) of being served with the document. 

By filing an objection, it is likely that the physician will need to testify since there will not be any medical evidence available for the record and if the court deems that the objection to the entry of the Physician Verification Form was frivolous or unnecessary then it is within the court’s discretion under this rule to allocate the costs of the physician’s testimony between the parties.  This portion of the rule is a not-so-subtle suggestion to attorneys to keep their objections substantive and not use objections as means of delay or obstructing the other side’s case.

This rule update is a significant change in how evidence is admitted in support actions.  This should help streamline litigants’ ability to offer complicated financial evidence and have objections and questions addressed in advance of the trial, rather than bogging down or delaying the substantive hearing by what amounts to a discovery dispute. 

This rule can also have the positive effect of keeping some litigation costs down by allowing a party to produce a non-expert summary and have it pre-approved for admission into evidence, thereby alleviating the need to bring an accountant or other financial expert to court in order to testify as to the information. 

Finally, Pennsylvania Family Law procedure varies from county to county and is reliant upon local practice when dealing with a variety of different issues.  This rule update gives some state-wide uniformity to this form of evidence.

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Darcy Williams of our Chester County office recently provided an entry to our firm's Berks County legal blog by discussing how the Court of Common Pleas dealt with a support modification which was filed less than twenty days after an agreed order went into effect.  Citing the Pennsylvania Support Code with respect to filing modifications based on changes in circumstance, the Court dismissed the petitioning mother's claim that a mutual mistake occurred when the parties reached an agreement on the amount of support to be paid in this case.  The Court noted that the Mother's remedy was to file an appeal within twenty-days of the Order, not file to modify since no change in circumstance had occurred.

It is an interesting example of procedural nuance and code interpretation and offered in its entirety below:

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(Image: http://tennesseelabortalk.com)

While this topic of this blog post is not exactly what this blog typically covers, I frequently find that litigation in another areas of law either impacts or illuminates an issue dealt with by our family law clients.  One such example would be a recent decision at the Eastern District of Pennsylvania interpreting various terms of the Family and Medical Leave Act (“FMLA”).  In that case, a mother had to take off time from work in order to find a new daycare for her autistic daughter who has significant developmental disorders and physical impairments.  Her employer, Reading Hospital Medical Center, opposed the use of FMLA leave for this purpose.  FMLA leave is designed to allow an individual to take time off from work to address family medical issues without the risk of losing their job.

The Honorable Timothy J. Savage of the Eastern District looked to the Americans with Disabilities Act (“ADA”) to help identify whether or not the mother’s daughter had impairments which would cause her to fall within the “serious health condition” category of the FMLA.  In doing so, there was also the interpretation of whether the change in daycare constituted “changes in care” as it is contemplated by FMLA regulations.  As drafted, the regulations are silent as to whether moving from one non-medical facility to another constitutes a “change in care,” as it would otherwise be considered when moving someone to a facility offering medical treatment.

Judge Savage’s opinion would appear to expand the definitions of some important FMLA terms, but Reading Hospital Medical Center disagrees and does not consider the holding to be a significant expansion of FMLA regulations; they believe Judge Savage’s opinion addresses their narrow set of facts and does not have a broader application beyond this case.  Nevertheless, the holding seems to make a persuasive argument that the regulations now include changes of care for a family member with a serious medical condition, even if the change of care relates to a non-medical facility.  The designation of the medical condition of the individual will dictate whether the time off to facilitate a change in care falls within the protections of the FMLA.

 The application of this case to family law is that informs both attorneys and clients as to how much flexibility they have to make appropriate child care arrangements for a special needs child during work hours.  This could be extremely important to a client with a disabled child who has either a limited support network or a difficult (or even non-existent) custodial arrangement with the other parent. Maintaining consistent child care can be challenging under the best of circumstances, but when medical and developmental issues of a child are factored in, it makes a difficult situation that much harder.   For a single parent, child care coverage means maintaining employment and stability for the child; it would seem like Judge Savage’s opinion reasonably fits into the purpose behind the FMLA.

For more information about other employment discrimination issues, go to Fox Rothschild’s Employment Discrimination blog written by Richard Cohen and Christina Stoneburner of our New York and Roseland, NJ offices, respectively. 

The case involved is Wegelin v. Reading Hospital Medical Center.   An article on the case was written by Saranac Hale Spencer (sspencer@alm.com) and published in the December 4, 2012 issue of the Legal Intelligencer (Vol. 246, No. 108).

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One of the great frustrations of practicing in the domestic relations field is trying to figure out income in a world where it can be a marital asset or an element of support.  That issue is primarily one of timing.  The law is clear that if your company pays you a bonus on January 31 and your spouse tells you “game over” on Ground Hog Day, your bonus is a marital asset.  That part can be simple.

But over the years we have evolved from a time and place where compensation consisted of salary and a bonus to one where a paystub reads like the Dresden Codex (an anthology of Mayan astronomical tables).

I write this having just devoted more than half an hour to reading and interpreting two paystubs from folks who are each employed by Fortune 200 companies.  Yes, we had salary, commission, vacation time, etc.  But, one paystub incorporated more than $100,000 of payments under the titles: ECC Disc Incentive; Long Term Cash Vest; RS Unit Vesting; and RSS Vesting.

In each case I am forced to ask what these things mean; when they were granted; when they were paid and whether they are recurring.  My client’s pay history was a little simpler but still had restricted stock.  The happy news is that it appears that all compensation was reflected on a year to date basis.  Last week I dealt with a company that paid commission by separate check but then incorporated the payment in year-to-date earnings.  So the client handed me six months of pay advices each of which showed a $1500 gross but the year to date income total after nine months totaled more than $90,000.

I appreciate the need of American management to “incentivize” all of us.  But these systems make the work of the courts expensive, time consuming and error prone.  If you look at your own pay advice and can’t figure out what SDI/SUI Tax is being extracted or you don’t know what GTL imputed income is, take heart.  You are not alone.  But if you want to save yourself some attorneys fees get your stub.  And call someone in the human resources department to get your “key” to what it all means before you send your lawyer your most recent paystub.

N.B. SDI/SUI is unemployment and disability income tax. GTL is life insurance you get through your company that exceeds the thresholds for free insurance the government says you don’t get taxed on.

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Around this time last year, I wrote about some revisions to the Support Code designed to make repayment of support credits easier.

Recently, additional changes have been made which will go into effect December 5, 2012 which take those changes even a step further.

Notably, Rule 1910.19 has gotten a little more specific by indicating that when there is an overpayment in excess of two months of the monthly support obligation, the domestic relations section will reduce the support obligation by 20% or an amount sufficient to retire the overpayment by the time support order is terminated. Obviously, there can be a big difference between 20% and an “amount sufficient” to ensure the credit is cleared when the order terminates – that could take years.

The revisions offers for the first time a form for the “Petition for Recovery of Support Overpayment in Active Case” and a “Petition for Recovery of Support Overpayment in Closed Case.” These basic forms are helpful to attorneys and clients, alike and will allow for a standardized petition process for bringing this issue before the Court. As the rule indicates, the parties now have 30 days (rather than 60 days) to contest the reduction; if they do, a conference will be scheduled and the local practice will take over for that county. If neither party responds or objects to the reduction notice, the domestic relations section has the authority to reduce the order as described above.

As we discussed last November when Pennsylvania first revised this section of the code, this rule changes represents a more balanced approach to dealing with overpayments when compared to the practice of dealing with child support arrears. While not equal in terms of remedies (child support arrears may be satisfied by tax return intercept, bank account seizure, and other efforts to force payment), it is a much better system for the paying party than in the past.

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Tax issues are an important component of equitable distribution cases and the Pennsylvania support code specifically allows the Court to allocate child tax exemptions between parties. Matt Levitsky, a tax and estate attorney in our Blue Bell, Pennsylvania office, recently took the time to elaborate on the issue of child tax exemption and the dispute that can arise as to which parent may claim the child/ren. 

Matt and some of his colleagues in the tax and estate practice group will be launching a tax blog soon which will be a great source of information on current personal and corporate tax issues. Check back soon with Fox Rothschild’s roster of blogs for the launch of the tax blog or take some time to explore other areas of interest.

Matt Levitsky:

Who Gets To Claim a Child as a Dependent if There is 50/50 Custody?

With the battle over assets being the primary one in a divorce, tax issues may often be overlooked which can have an definite economic impact on a client. One such tax issue is the benefit of who gets to claim children as dependents. In 2012, a taxpayer may receive a $3,800 federal income tax exemption for each child that he or she can claim as a dependent. If a child is young at the time of divorce, this has a substantial economic benefit.

A child can be a dependent of a taxpayer only if he or she is a “qualifying child” of the taxpayer (the child can also be a “qualifying relative”, but this is beyond the scope of this blog entry). In order for a child to be a qualifying child of a taxpayer, four (4) requirements must be met. First, the child must be (i) a child of the taxpayer or a descendant of such child, (ii) a brother, sister, stepbrother, or stepsister of the taxpayer, or (iii) a descendant of any such relative. Second, the child must have the same “principal place of abode” as the taxpayer for more than one-half (1/2) of the taxable year. Third, the child must be under the age of nineteen (19), a student under the age of twenty-four (24), or permanent or totally disabled at some time during the taxable year. Finally, the child cannot provide more than one-half (1/2) of the child’s own support during the taxable year.

Generally, under § 152(e) of the Internal Revenue Code (the “Code”), a child is a dependent of the custodial parent unless a divorce decree or written separation agreement between the parents entitles the noncustodial parent to the dependency exemption. But what if the parents share custody 50/50 and the divorce decree or separation agreement hasn’t been entered into or does not address the issue?

If both parents can claim the qualifying child under the four step test above, you must look at the tie-breaker rule of § 152(c)(4)(B) of the Code. Under the tie-breaker rule, the parent with whom the child resided with for the longest period of time during the taxable year can claim the child as a dependent. But what if the child resides with both parents for same amount of time during the taxable year? In this case, there is a second tie-breaker rule. The child is treated as a dependent of the parent with the highest adjusted gross income (“AGI”).

At first thought, determining the parent with the higher AGI seems fairly clear cut. However, what if one of the parents is employed while the other is a stay at home parent because his or her new spouse works. Do we include the new spouse’s income in the AGI determination? Surprisingly, this issue is not addressed in the Code nor the Treasury Regulations. 

Section 152(d) of the Code concerns claiming “qualifying relatives” as dependents. In clarifying a similar one-half (1/2) support requirement to the four (4) part test above, § 152(d)(5)(B) clearly states that “in the case of remarriage of a parent, support of a child received from the parent’s spouse shall be treated as received from the parent.” Clearly in this context, Congress considered the effect of remarriage. Therefore, one could argue that if Congress wanted a new spouse’s income to be included in the AGI computation, then it would have so provided. On the other side, one could argue that the new spouse’s income should be included in AGI because a stay at home parent should not be penalized because he or she is staying at home and allowing his or her spouse to go out and earn an income.

We recently discussed this AGI issue informally with the IRS. The Service told us that the consensus among those who deal with § 152(e) is that the income of the new spouse is not included in the AGI tie-breaking test. This issue is actually one that the IRS intends to address this year, as indicated in Item 22 under General Tax Issues in its 2011-2012 Guidance Plan ( http://www.irs.gov/pub/irs-utl/2011-2012_pgp_3rd_update.pdf. ).

If you have any questions on any of the issues discussed above, please feel free to contact us.

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In June of this year the Department of Agriculture published its annual report on the cost of raising a child in the United States.  These studies form the basis for the quadrennial changes in support guidelines throughout the US.  In 2011 the average cost of raising a child increased 3.5% over 2010.  The data show that for the average American family having a child in 2011 the cost of raising that child in today’s dollars will be $234,000 or just over $13,000 per annum.  This is the average for Americans earning $60-103,000.  In constant dollars (which is to say on an inflation adjusted basis) the cost of raising a child has increased 18% since these studies were first compiled in 1960. Families earning more than that actually spent almost $400,000 on the same enterprise, a difference of 40%.

The report provides information broken down regionally and by cost category.  The Northeastern US is the most expensive region in the United States.  The highest component of that cost is housing.  It absorbs 30% of the overall cost of raising a child.  Child care and education is the next highest category, constituting 18% of combined cost.  Food costs are 16%.

The full report is available on line at  www.cnpp.usda.gov.

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The allocation of child tax dependency exemptions is a topic of discussion among our clients on a frequent basis. While the guidelines issued by the I.R.S. dictate who is eligible to claim the children, in Pennsylvania the issue may be raised in the context of child support under Pennsylvania Rule of Civil Procedure 1910.16-2(f). The stated purpose of this rule is to "maximize the total income available to the parties and children" and, therefore, the Court has the authority to award the exemption to either party and, when awarding it to the non-custodial parent (i.e. the party who may not be eligible to claim the exemption under the I.R.S. guidelines), order the custodial party to execute the I.R.S. waiver allowing the other parent to claim the exemption.

Leslie Spoltore, a partner in our Wilmington, Delaware office, recently wrote about a Delaware Family Court case which deals with the allocation of the exemption and articulates a much more specific set of criteria for deciding which party should be awarded the exemptions. It is a worthwhile read and gives some insight into a different way to deal with this issue in a family law case.

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Under the Pennsylvania support guidelines, when a party is receiving unemployment benefits those benefits will be considered their income for support calculation purposes rather than a prospective earning capacity. The extension, and now expiration, of unemployment benefits has been a hot political topic for some time. As indicated in this New York Times article, many more people on long-term unemployment will be seeing their benefits stop soon. For people whose income for their support case is based on their unemployment, the cessation of unemployment will be a “change in circumstance” warranting a review of the support order and most likely the application of an earning capacity in lieu of income if that person is still out of work. Earning capacities are extremely fact-driven and that transition could mean an increase or decrease in support depending on the individual’s benefit level versus what the Court determines to be their earning capacity. It is worth noting, however, that since the economic downturn hit a few years ago the Courts seem to be applying more conservative earning capacities to more closely reflect the reality of the tight job market.

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In December, 2011 a panel of the Superior Court decided Love v. Love. 33 A.3d 1268 (2011). This was a Philadelphia County support action wherein Wife came to the United States with husband’s child.  The child was born in 2003.  The husband and wife married in 2005 and the application for immigration appears to have been processed in 2008.  Shortly after Wife was admitted to the United States the couple separated and Wife began an action for support.

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Pennsylvania has recently made considerable changes and revisions to the support section of the Rules of Civil Procedure; some are more significant than others, but one which may make things a little easier for parties and counsel alike is the revision to Rule 1910.11 which goes into effect January 31, 2012.

Rule 1910.11 will make it a requisite that all support conferences result in a guideline calculation. Specifically, it states that the parties “must provide income information” so that the conference officer can perform a guideline calculation. The only exception is where the parties are represented by counsel and have reached an agreement about the amount of support and contribution to additional expenses; otherwise, everyone else gets a support calculation.

The result of this change is that unrepresented parties and attorneys will have more information to help them understand the support obligation and how it was arrived at by the conference officer. This will also provide valuable information for attorneys who are not involved in the case until after the initial support conference; having a support calculation and basic income information will result in a more complete Domestic Relations Office file and, by extension, allow attorneys and their clients to be better prepared for the next step of the process (which may vary depending on practices of each county).

Though not a major overhaul of the rules or as nuanced as some of the other revisions we have seen over the past year, this revision may have the most day-to-day impact on litigants and attorneys.

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In child support cases, the party that is receiving child support pays the first $250 in unreimbursed expenses per child.  Medical expenses include insurance co-payments and deductibles and all expenses incurred for reasonably necessary medical services and supplies, including but not limited to surgical, dental and optical services, and orthodontia. Medical expenses do not include cosmetic, chiropractic, psychiatric, psychological or other services unless specifically directed in the order of court.  If your child has specific needs, then those needs will need to be specifically stated in the support order.

So what happens after the first $250 in unreimbursed medical expenses?  Those expenses are split in proportion to the parties' incomes.  The parties will have to keep track of the expenses each year, and then submit them to the other party.  To ensure that you receive reimbursement, you should keep a spreadsheet with the receipts attached.  Pursuant to Pa.R.C.P. No, 1910.16-6(c), documentation of unreimbursed medical expenses that either party seeks to have allocated between the parties "shall be provided to the other party not later than March 31 of the year following the calendar year in which the final bill was received by the party seeking allocation."  So to make sure that you receive reimbursement, make sure that you get it to the other party by March 31st.  If you have any trouble getting reimbursement, the Court can always provide assistance.

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Along with the recent revision to the standing provision of Rule 1910.3, the Pennsylvania legislation also made revisions to Rule 1910.19, which addresses the relatively rare, but frustrating issue of support overpayments.

Addressing overpayments related to child or spousal support can be frustrating for the party paying support (the “payor” or “obligor”) because of the disparity in attitude toward overpayments compared to people who do not pay their support on time or at all. For instance, if they were to owe support (be in “arrears”), their tax return would get intercepted, they couldn’t buy or sell a house without satisfying the debt, or they may have other enforcement remedies taken against them.

The policy of the Domestic Relations Office (“DRO”) for overpayments, however, is that it is preferable to carry an overpayment until the support obligation ends. This is policy is reasonable and logical, but it does raise two questions for the payor:

1)         How do I stop the order from charging; and

2)         How do I get the overpayment returned.

The first question received some minor tweaking to Rule 1910.19 which went into effect October 31, 2011. DRO will make an emancipation inquiry within 6 months of the date the child is to turn 18 years of age. If the notice is not returned to DRO within a six (6) month time frame and there is overpayment on the books then DRO shall administratively terminate the child support order on the perspective date of emancipation (18 years of age and graduated from High School).

Now that the Order has been stopped, the next question is to figure out to have the overpayment returned to the payor. Rule 1910(g)(1) and (g)(2) now allow a procedure to accomplish just that:

Section (g)(1) allows that when a charging order is in effect, DRO will reduce the Order by 20% until the overpayment is discharged. The payee can contest this reduction and request a hearing;

Section (g)(2) provides that if there is no charging order in effect (for example, it has been terminated due to emancipation), the payor may petition DRO to recover the overpayment. DRO has, within their discretion, the authority to enter an Order against the payee to pay the overpayment on a monthly payment schedule – basically, a support order in reverse.

Overall, this is a step in the right direction for correcting a procedural conundrum for DRO. While the number of people who will utilize these rules may pale in comparison to those payors who fail to satisfy their support obligations, both payors and payees are entitled to equal opportunity in  addressing their claims.

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An important change to the Pennsylvania Support Code will go into effect very soon. Rule 1910.3 identifies those individuals who are allowed to bring child support actions and beginning November 1^st the Rule will be expanded to allow “any person who may owe a duty of support to a child or spouse” to initiate a custody action.

This language definitively establishes that either party may begin a support action and eliminates some of the ambiguity as to whether a support action must be filed the obligee (the person entitled to receive support). The way the Rule was written, it could be interpreted that any person who has custody – even partial custody – could initiate the support action regardless of whether they were to be the payor or the payee. This put the Domestic Relations Offices and Court in the position of having a party listed as Plaintiff, but whom is in reality should be the obligor. Payor’s filing to start support actions tended to cause administrative confusion for the Courts, so whether or not the action moved forward usually depended on whether the non-filing payee party was willing to let it move forward.

One would assume that any one owed support would file for it, but there could be strategic reasons for holding off on filing for support, especially if there was an alternative source of income for the obligee, or if the obligee was seeking to establish standing to file for support in a more advantageous support jurisdiction. The consequence was that a party who knows they will owe support could not effectively address the situation without the obligee taking the appropriate steps to file and schedule a support conference.

Thanks to this language revision and the addition of Subparagraph (b), any party can initiate the action and the trier of fact will be the one who decides who is the obligee and who is the obligor. As stated in the “Explanatory Comment” the new category recognizes that some people “may want to start paying spousal support or alimony pendente lite to the obligee as soon as possible to avoid the accumulation of retroactive arrears…”

This revised rule is, ultimately, a common sense shift to ensure that any one with a support entitlement or obligation has access to the courts and can have that obligation addressed without any delay or detriment to the child/ren or spouse subject to the Order.

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When it comes to enforcing child support orders, Pennsylvania’s Domestic Relations Offices rely on Rule 1910.20 of the Rules of Civil Procedure and its accompanying rules. These rules allow for the increasing of the arrears payments; seizing income such as tax refunds or settlement proceeds; imposing liens on real property; or even the suspension of the individual’s driver’s license.

In Pennsylvania’s system, failing to appear for a support contempt hearing will result in a bench warrant for one’s arrest. At that point, you are held until you appear before a judge and either volunteer to make a lump sum payment against the support arrears, or are ordered to make a payment and sit in jail until the payment is made.

Once the bench warrant is issued, the usual course of events is that the individual is pulled over for a minor traffic offense or some other reason and the law enforcement officer sees the warrant for his or her arrest, arrests them, and has them before a judge shortly thereafter. Sometimes the Sheriff’s office will send out a task force to serve the warrants and bring people in as part of a larger operation.

This brings me to the tactics of the Lee County, Alabama Sheriff’s Office and some interesting video. Lee County took the creative way of serving their warrants on delinquent parents by sending them letters informing them that they have won two tickets to this season’s Auburn versus Alabama football game. In football crazed Alabama, this game has universal appeal and not surprisingly some excited fans appeared to claim their “tickets.” Lee County kept up the sweepstakes winning fiction right up until the handcuffs were snapped on. 

I have not known of any Pennsylvania’s DRO office that has gone to these lengths to bring in delinquent payor, but Counties are definitely motivated to clear as much support arrears as possible from their books because certain types of state and federal funding can be affected by the amount of support arrears a County carries. Typically, DRO will generate and issue the support enforcement action without the payee ever having to file an enforcement petition with the Court. Though perhaps not as creative as Lee County’s Sherriff’s Department (and admittedly, less controversial), Pennsylvania’s DRO offices will use every tool afforded them under the Support Code.

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Though the recent heat wave begs to differ, the fact is the end of summer is right around the corner and with it, the new school year. During this time of the year, many parents are finding new child care arrangements or renewing their school year child care coverage.

Reasonable childcare costs are a permissible “add on” to child support awards and are specifically factored in the child support calculation under Rule 1910.16-6(a). While it is easy to assume that it is a dollar-for-dollar off-set, the reality is that the calculation will allocate the expense between the parties in proportion to their net incomes after it is reduced for the payee’s tax break from the Child Tax Credit.

Information about the eligibility for this tax credit can be found here. A change in childcare arrangements could constitute a change in circumstances and justify a reexamination of the support order, but it can also open a host of other issues (for example, whether the new – and more expensive – child care coverage is necessary, or whether there is a less expensive alternative).

It is important to provide your attorney with all of your financial information and how you plan to file your taxes for that tax year; there are phase out income levels for this tax credit and it is important to know whether the Domestic Relations Office calculation is automatically reducing your child care expenses, even if you are not eligible to claim the credit. While the Rule states that the child care expenses won’t be reduced if eligible parents does not qualify to receive the credit, it is important to make sure this aspect of the Rule is not overlooked and you are not being assessed a credit you can claim on your taxes.

Finally, as the Rule states, the credit will be applied whether the parent actually claims it on their taxes or not, so if it is being applied, then you should be claiming it!

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Income for purposes of support is defined by the support law at 23 Pa.C.S.A. 4302, and includes income from any source. The statute includes many types of income, such as the following:

(1) wages, salaries, bonuses, fees and commissions;

(2) net income from business or dealings in property;

(3) interest, rents, royalties, and dividends;

(4) pensions and all forms of retirement;

(5) income from an interest in an estate or trust;

(6) Social Security disability benefits, Social Security retirement benefits, temporary and permanent disability benefits, workers' compensation and unemployment compensation;

(7) alimony if, in the discretion of the trier of fact, inclusion of part or all of it is appropriate; and

(8) other entitlements to money or lump sum awards, without regard to source, including lottery winnings, income tax refunds, insurance compensation or settlements; awards and verdicts; and any form of payment due to and collectible by an individual regardless of source.

Most often pay stubs and tax forms are the documents used to determine a person’s net monthly income for support. But what if your spouse/significant other has a cash-based business or is paid under the table? Those scenarios can be complicated, but the Court (if given enough information) can determine a person’s net monthly income without financial documentation by looking at a person’s expenses and his or her ability to pay those expenses. You may need to request the other person’s bank statements, credit card statements, and business records. In complex cases, attorneys work with accountants to determine a person’s income.

So, while more complicated, it is possible to "find" and assign an income for support purposes to someone who deals in cash.

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When meeting with a perspective client, one of the most important things we discuss are legal fees. Inevitably, the potential client will ask what he or she can do to help lower his or her fees. Can they do their own photocopying? Can they take filings to the courthouse themselves? Will it save them money if they look for legal authority on the internet and forward it to me?

While I recommend certain things, like being organized, obtaining financial documents yourself, and responding promptly to correspondence and pleadings, I never suggest that a client cut certain corners. Leave the legal work, such as research and drafting, to the lawyers. After all, you are paying for legal knowledge and experience. 

Because many people feel they can not afford a lawyer, yet they make too much money to qualify for Legal Aid, they choose to represent themselves. For some people, this may be a good decision. For many others it leaves them floundering in a legal system that is not designed for navigation by a non-lawyer.

I recently handled a support matter against a gentleman who was representing himself. It was not a simple support matter. While the Master gave him some leeway at trial, the gentleman lacked basic knowledge regarding what information he needed to present to the court and how to present it. When we received the Master’s decision, it was obvious my opponent should have hired an attorney. 

While in a support matter, your mistakes might cost you literally, in a custody matter, your lack of knowledge of local rules and procedure could cost you figuratively. You need to know what to file in order to have your custody matter listed before the court and what to file in order to bring your child with you to court. If you do not file the necessary paperwork, your custody matter might sit indefinitely without ever being heard by a Master or your child might not be able to express his or her desires to the court. You may waive your right to pursue certain claims, such your opposition to a relocation.

There is a reason why attorneys charge money.  Legal work is detail oriented and requires a specialized body of knowledge.  Missing a deadline, failing to present your case effectively, or filing the wrong paperwork can result in a loss for you.

That said, there are plenty of places in Pennsylvania that can help you if you can not afford a lawyer. The place to start is at the law library of your local court house. There, you can find copies of the statutes, cases and local rules that will dictate what you need to file, when you need to file it and how to file it. You can also contact Legal Aid or other similar agencies to see if you qualify for free or low-cost legal services. http://www.palegalaid.net/ 

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Each year I get phone calls from clients around the tax filing deadline asking for advice regarding tax filings.  First of all, your attorney likely is not an accountant and certain tax issues need to be discussed directly with an accountant.  However, there are some important things to consider when doing your taxes during a separation and/or divorce proceeding.

The first question is how are you going to be filing - married filing jointly, married filing separately, etc.  If you are still married on the last day of the tax year then you can file married filing jointly.  If you are filing separately, the second question becomes, who will be claiming the children?  Typically, the parent who has the children the majority of the time gets to claim the dependency exemption. However, the court has discretion to allocate the dependency exemption to the non-custodial parent wherein it would result in a higher net income to that party.  Of course, the parties can always agree to share the dependency exemption, and to do so, they would have to fill out, sign, and file the appropriate federal tax form.

It is important to note that if one party's income is not documented you should be cautious about signing and filing a tax return with that person.  An attorney can prepare an indemnification form to help prevent financial liability, but the Court could possibly hold your spouse to the income reported on the tax return for purposes of support because you signed off on the "income" - meaning your support award could be less.

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The common understanding of an alimony pendete lite (or “APL”) award is that it is a relatively strict economic analysis based on incomes. Due in large part to the prominent reference to “alimony” in this term, it is commonly assumed that APL is treated like alimony in the sense that it is taxable income to the recipient (true) and terminable based on co-habitation (false).

The Pennsylvania Superior Court highlighted this latter fact in a recent ruling in the Childress v. Bogosian case. In that case, the Wife was awarded APL though she was “partially” cohabitating with her boyfriend. The hearing master made a recommendation that Husband be awarded 55% of the marital estate and 60% of the real property that he acquired. The master also applied a retroactive 20% downward deviation in APL due to Wife’s cohabitation and terminated Wife’s APL award that year. 

Wife filed exceptions to the Master’s decision and the trial court granted her exception related to the termination of the APL award, reinstating the award for an additional two years until the Decree was finally entered. Husband then appealed the case and that issue, among others, to the Superior Court.

The Superior Court’s perspective on this issue is that APL is designed to “maintain the standard of living enjoyed during the marriage, so that both parties have equal financial resources to pursue the divorce even though one party has the major assets.” Citing precedence, the Court also noted that “APL may not be denied on the basis that a spouse is cohabitating with another.”

In upholding the trial court’s decision to extend APL payments two years and not take into consider Wife’s cohabitation as grounds for terminating APL, but justifying the downward deviation. The court also recognized the element of husband’s direct impairment of wife’s finances by his willful failure to pay APL payments during the pendency of the divorce.

Unlike in an alimony award co-habitation by an APL recipient will not result in a termination of the support award, but one could expect the facts related to the contribution by the recipient’s paramour will be taken into consideration.

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Rule 1910.19, Subsection(f)(2) of the Pennsylvania Support Guidelines provides for the termination or suspension of the support order when “the obligor is unable to pay, has no income or assets and there is no reasonable prospect that the obligor will be able to pay in the foreseeable future.” As the explanatory comment goes on to state, Subsection (f) is designed to address an increasing “multiplicity of circumstances” in which the existing support order becomes inconsistent with rules or law. In effect, Rule 1910.19(f)(2) addresses what happens when it is impossible for the obligor to pay the support order. The obvious question, however, is what constitutes “impossibility”?

At the Superior Court level, Plunkard v. McConnell, 962 A.2d 1227 (Pa. Super. 2008), addresses support when a party is incarcerated. The Plunkard Court articulates the reasoning that incarceration is a “voluntary reduction of income” and not a “change in circumstances” justifying a modification of support. The Court held that the Rule 1910.19 specifically indicates that modification or termination is to be granted without prejudice and that the Mother (the payee) could file for reinstatement of the Order if the Father (payor) was released from jail. In the Plunkard case, the Court remitted Father’s arrears due to the Rule and that jail was a “compelling reason” for remittance.

I have seen this situation play out in a few different instances; the first situation involving the suspension of the support order while the payor served two years in jail for aggravated assault. My client was stabbed in the chest by his wife during a domestic dispute. The court ruled in that case that while the suspension of the support order was appropriate and warranted – imprisonment led to the “impossibility” of the wife’s payment on the child support obligation – due to the fact that she committed a violent crime against the husband which led to her imprisonment, she was held to the balance of the entire arrears accumulated during her imprisonment. 

In another instances, the support order was suspended due to the payor’s receipt of cash assistance from the state. Under Rule 1910.19, the Domestic Relations Office has no alternative than to suspend an order in which the payor is receiving cash assistance from the state. In my experience, the Domestic Relations Office will schedule a review conference within a relatively short period of time (90-180 days) during which time the payor will have to comply with the rules and conditions related to his or her receipt of cash assistance. Presumably, within that period of time, he or she will find employment in some capacity, or in the alternative, the benefits will expire and she will be held to an earning capacity.

In the case in which this rule applied to my client, the conference officer indicated that upon the expiration of cash assistance, she would begin to gradually increase the payor’s earning capacity to reflect her particular circumstances in this case (background: wife was a high income individual who, due to her own actions, lost her capacity to practice her profession). Due to the fact she was highly educated and, therefore, capable of earning a decent income, the Court would not accept prison as an indefinite excuse. Instead, they set earning capacity low, but will be gradually increase it at steady intervals with the assumption that as time passes, she will be expected to reestablish herself through employment and retraining.

The net effect of the Rule and case law is that a Rule 1910.19 suspension or termination is not the same as a change of circumstances in other situations. Instead, when Rule 1910.19 is applied, the Court will make what amounts to a two-tiered determination as to (1) whether to suspend the order, and (2) when the order is reinstated, the amount of arrears that should apply to the case. Once done, however, there will be the opportunity to reestablish the order as soon as those circumstances preventing payment of support, such as imprisonment, are over.

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We previously examined a case that considered the “primary care giver” role where a father was awarded primary custody after demonstrating that he personified that role. Changing custody from mother to father, in that instance, illustrates that designating a party as the primary care giver will not be reflexively applied as a matter of course (i.e. just because one parent has primary custody does not mean the other is not the main care giver), but must be shown through a factual analysis presented to the Court.

A doctrine similar to the “primary care giver,” but applicable to the support arena, is that of the “nurturing parent doctrine.” Like the role of primary care giver, the Court will not automatically apply or accept this argument and requires a careful factual analysis to determine whether a parent’s role as the “nurturing parent” justifies excusing them from having an earning capacity assessed for support purposes.

Generally speaking, if a party is out of work, the Court will apply an earning capacity that is used to calculate child and spousal support under the Support Guidelines. The nurturing parent doctrine is an exception to this rule by allowing a party to forego employment, and the application of an earning capacity, if they are staying home to care for the parties’ children.

One critical aspect of the doctrine, however, is that the parent asserting the argument must actually spend their time caring for the child, rather than utilize day care providers. An often cited case on this argument, Kelly v. Kelly, 633 A.2d 218 (Pa. Super. 1993), illustrates the premise that the doctrine is designed to prevent a non-working party from being punished for staying home and caring for children. However, this argument will not work, as the holdings of recent state court decisions continue to show, when the children have reached school age, child care is utilized, or in other situations in which the facts demonstrate that the stay-at-home parent is not fulfilling that “nurturing” role. In those instances, the Court will apply an earning capacity in their calculation of support and it will significantly change the child support award.

The specificity of facts will determine whether the nurturing parent doctrine is a legitimate reason to excuse a party from having some measure of income applied to them, or if they are merely looking to increase the disparity between their income and the obligor.

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The long awaited update to the Pennsylvania Support Guidelines is now in effect. Please take a look at Mark Ashton’s analysis of the new guidelines to see how the changes may affect you, and check back with Fox Rothschild’s Family Law Blog for new posts related to the new guidelines and their impact on litigants. 

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Modifying an existing support order is a simple action requiring no more than filling and filing a petition asking the court to modify the order based on a “change in circumstance.”  Often times a “change in circumstances” means the payee’s or payor’s employment income has decreased in some way and they want a new Support Order to reflect this fact. There are numerous scenarios in which there is a decrease in income and parties in those situation are usually the first to go to their County’s domestic relations office to seek modification.

Not surprisingly, people are not always forthcoming about their increase in income – but they should be. On each DRO generated support Order there is a section of language entitled “Important Legal Notice.”  This section contains language which states, in no uncertain terms, that “[parties] must within seven days inform the domestic relations section and the other parties, in writing, of any material change in circumstances relevant to the level of support…a party who willfully fails to report a material change in circumstances may be adjudged in contempt of court and may be fined or imprisoned.”

Suffice to say, if you do not identify such circumstances, it is difficult to argue ignorance of the law (even if that were helpful, which it is not).

Where a payor can get in trouble from a practical standpoint is that Rule 1910.17 of the Pennsylvania Rules of Civil Procedure allows for the retroactive application of a support order “if the petitioner was precluded from filing a petition for modification by reason of a…misrepresentation of another party.”

Taken with the standard language from the Order and it is clear that it is in a payor’s best interest to inform the payee in writing that they have had an increase in income and put the onus on the other party for modifying the Order. The consequences to not admitting to the increased income will be an instantly accumulated amount of arrears and, depending on the facts of the case, exposure to additional sanctions from the court, including, but not limited to, paying the cost of the payee’s attorneys fees, income capturing methods (like income tax return intercepts), or even jail (in the most egregious of circumstances).

Disclosure between parties is an important aspect of family law. If you have a support order against you and you have experienced an increase in income, you should consult with your attorney as to what measures should be taken to insulate yourself from potential sanctions. Your attorney may be able to work with the payee or their counsel to adjust the support order without having to go to court. However you choose to approach it, you do not want to find yourself on the wrong end of a sanctions order. 

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It is that time of year again: Tax Season. If you have not already, shortly you will start to receive your 1099’s, W-2’s and other financial documents needed to prepare your tax returns. 

But this year, more so than in prior years, you may benefit from reviewing not only your basic tax forms, but other financial data as well. 

The American Recovery and Reinvestment Act of 2009 created a number of tax credits and deductions for individuals that should be kept in mind when preparing your returns. For example, you have probably heard that first time home buyers are eligible for a tax credit. But don’t forget that home buyers who are replacing a principal residence in which they lived for five out of the last eight years are also eligible for a credit. It is also worth reviewing the definition of “first time homebuyer” since your prior homeownership may not disqualify you from claiming this tax credit for your recent home purchase. 

You may not have qualified for the “Cash For Clunkers” program, but if you purchased a new car in 2009, you may qualify for a deduction. 

For more specific information, it is worth visiting the IRS’s site at http://www.irs.gov/newsroom/article/0,,id=204335,00.html

For some creative thinking on the topic, I would suggest Katie Adams’ column at http://www.msnbc.msn.com/id/34848380/ns/business-personal_finance/ 

Obviously, you should review all of your deductions and credits with a tax professional, but as we approach that most wonderful time of the year (do you sense my sarcasm?), it would be a shame to overlook the new credits and deductions.

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According to statistics available through CHIP, there are 197,150 people enrolled in CHIP in Pennsylvania. CHIP in Pennsylvania is available to all uninsured children and teens up to 19 years of age, who do not qualify for Medical Assistance. Due to CHIP’s eligibility requirements – which has no income limit for eligibility – it is often a viable option for people from a diverse range of economic backgrounds. Many times the cost of medical insurance through employment for a child support “obligor” is cost-prohibitive to the payor, while the payee receives less support due to the credit given by the Pennsylvania Support Guidelines to the paying parent. By minimizing both parties’ exposure to medical costs, so long as they are eligible for the benefit, CHIP has the effect of extending medical coverage over children, while possibly eliminating unreimbursed medical expenses to the parties.

CHIP, however, has recently made the news due to its consideration within the new Federal health care legislation. CHIP exists as both a state and federal program, with Pennsylvania enacting CHIP in 1992, and a Federal version being signed into law by President Bill Clinton in 1997. Both the U.S. House of Representatives and the Senate have two different ideas as to how to deal with CHIP within the Federal health care systems.

First, the Senate version of the health care legislation proposes extending federal financing through 2015 (it is currently set to expire in 2013). This amendment, advocated by Senators Bob Casey (D-PA) – whose father, Governor Robert P. Casey, originally signed Pennsylvania’s CHIP legislation into law – and John D. Rockefeller, IV (D-WV) would effectively keep the current version of CHIP in place, allowing for some changes in income eligibility.

The House, on the other hand, advocates eliminating CHIP altogether and funneling participants into Medicaid, the federal-state insurance program for the poor, or to one of the health insurance exchanges whereby medical insurance would be purchased at a reduced cost with government subsidies offsetting the cost.

An excellent summary of the two bills was written by David M. Herszenhorn for a New York Times health policy blog: (http://prescriptions.blogs.nytimes.com/2010/01/03/program-for-children-has-uncertain-future/)

Currently, CHIP eligibility and cost is determined by income and the number of children. http://www.chipcoverspakids.com/assets/media/pdf/2009_income_guidelines.pdf There is no income limit to qualify for CHIP, though income will effect amount of subsidy a child is eligible to receive, while under the proposed legislation, eligibility for the Medicaid option in the Senate plan would include up to 133% of the federal poverty line, while the House bill would be up to 150% of the poverty level.

The outcome of the Federal health care legislation will determine the future of CHIP in Pennsylvania and will be closely monitored in the coming weeks.

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Much as with a presidential election, the Pennsylvania support guidelines are to be revised by the Pennsylvania Supreme Court once each four years.  Drafts of proposed changes to the guidelines were published in July and December, 2008.  In each instance comment from the legal community and public was invited.  But for more than a year now we have been left to wonder how the guideline changes would look once finally completed.

The task was concluded on January 12 of this year when The Supreme Court issued Order 519 amending the guidelines effective May 12, 2010.  Until that date the existing Rules prevail but since the changes in the guidelines are themselves a change in circumstance, any order issued between now and May 12 is subject to further amendment at that time.  So, for practical purposes the guidelines are here today.

The major changes have to do with child support for households with combined net incomes exceeding $20,000 a month.  Under the last set of guidelines any case where income exceeded $20,000 was to be decided based upon proven expenses under a 1984 case, Melzer v. Witsberger. The data and calculations required to do a complete Melzer analysis were complicated and often produced wildly varying results from case to case and judge to judge.  So a decision has been made to take the guideline grids to $30,000 a month.  Where income is higher than $30,000 a formula is provided from which a presumptive amount of support may be calculated.

There are changes in the guidelines themselves although our initial review of those changes do not portend much radical change.  Here are some samples:

COMBINED NET

                                                1                              2                              children

10,000                               1390 (old)                1840 (old)

                                       1385 (new)                1965 (new)

15,000                                1741 (old)                2253 (old)

                                       1782 (new)                2319 (new)

20,000                                2301 (old)               2877 (old)

                                       2144 (new)               3018 (new)

25,000                          Melzer analysis required (old)

                                       2443 (new)              3389 (new)

30,000                          Melzer analysis required (old)

                                       2756                       3777 (new)

Many members of the bar are critical of what they see as an inherent stinginess in these guideline amounts.  In each instance, where combined net income triples from $10,000 to $30,000 a month, the amount of child support essentially doubles even though the parents presumably have much more free money (beyond their own core needs) to contribute to child support.

In cases where the income exceeds $30,000 per month net, formulae are employed to calculate the support amount.  Where one child is involved the support will increase by 6.5 cents for each dollar of income beyond the $30,000.  In the case of two children the support increases by 8 cents for each dollar over the $30,000 threshold.  So, if combined net was an astronomical $50,000 per month, two children would warrant a monthly award of $5,377.  One child would warrant $4,056.

Another significant area of change is in the area of shared custody.  Historically, to qualify for a discount from the standard guideline amount premised upon significant custodial time spent by the child(ren) with the non-primary parent, that parent had to have custody for 40% of the year or 146 nights.  Reaching that threshold entitled the parent to a discount upon his share of the support amount by 10 basis points.  Thus, if Father had the child 146 nights and earned 60% of the combined net income of both parents, his percentage obligation would be reduced by 10 basis points from 60% to 50%.

The new regime assumes that a parent who does not have primary custody still has the child 30% of the time or 109 nights.  If that parent has less than that amount, support may be adjusted upward on the theory that the non-custodial parent is not paying his/her share. This concept did not make it into the rule itself; only the commentary to the rule so that the issue needs to be raised before the Court and argued.  As before, once the 40% custody level is attained there is a 10 basis point reduction.  At 50% it is a 20 basis point reduction.  So if the non custodial parent has 78% of the net income, the support will be 58% and not 78%.  The new rules now state clearly that under no circumstances shall support of any kind be awarded to a spouse where the result would have the payee with more income than the payor.  The commentary states that Courts are to be less concerned about who has the child overnight and more focused upon what child expenses each parent is contributing.

Where each parent has primary custody of one or more children it has now been clarified that in calculating the support amounts the Court does not include the child support due to a parent as part of his income when doing the calculation for the other child or children.  It is only that parent’s net income before any child support award that it utilized.

In a rare case of the Rule of Civil Procedure reversing case precedent, the new rules state that mortgage adjustments in the amount of support for high mortgage cases shall only apply in cases where the parties are not yet divorced.

There are changes to the amount of spousal support and alimony pendent elite (pre divorce alimony) that warrant attention as well where the income of the couple exceeds $30,000 a month net.  In those cases, the commentary directs trial courts to apply the governing formula (30-40% of the difference in incomes depending upon whether there are minor children subject to support payments) but adds that the grounds to deviate from the guidelines recited in Rule 1910.16-5 as well and make a record of whether deviation was warranted.  To that end the commentary states that income and expense statements are to be filed in these cases so that the record may be developed.

There are also smaller changes worth mentioning.  In low income cases, the amount of income a person must have to support him or herself before a child support order may be entered has been raised.  Orders must be tailored so that any obligor retains $867 a month to support him or herself.

The use of earning capacity data (e.g., Dept. of Labor earnings reports) to calculate support orders is being discouraged.  The use of this data is relevant only when the Court finds that the obligor has willfully failed to secure employment consistent with abilities and that finding must be on the record. And earning capacity is to be based on a single full time job rather than some hypothetical construct of how and when a person could work.  The rule does not go so far as to exclude over-time or second job income from consideration in making an award where that income is actually paid.  Whether this means that a litigant could decline additional hours or quit a second job and use that as a basis to seek a reduction in an order premised upon historical over-time or supplemental employment is not really clear.

The guidelines themselves are appended to this summary with the following link:

http://www.aopc.org/OpPosting/Supreme/out/519civ.attach.pdf  rules

A new day begins…

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We are involved in a relatively simple case.  Wife is a homemaker only recently returned to work.  Husband is a mortgage broker.  Like many couples they became a bit over committed in the real estate market of the last few years. They wanted to participate in the real estate gains of the last few years and some of their investments had not panned out.  This is a classic work out settlement of the type we see with increasing frequency.  The smart move is to realize the problem and negotiate a settlement that preserves assets.

We have been litigating this case for the past 18 months.  In our judgment almost all of the litigation was not only unnecessary, but detrimental to preservation of the marital estate.  We entreated our opponents that more litigation was the last thing the parties needed.  Still the other side insisted that the battles go on.  We fought over support for a full day in a world where the incomes of both parties were either agreed upon or plain from the information provided by the employers.

Next we received a counsel fee petition.  The dependent spouse owed her counsel tens of thousands of dollars even after securing a substantial retainer. We resisted this request vigorously arguing that the facts were apparent from the beginning and the litigation almost completely unnecessary.  When the request for attorneys fees did not go in the direction she aspired, the opposing counsel filed a petition to withdraw.

The wife filed an answer professing that she had wanted to settle her case all along but that her attorney had told her the litigation was necessary and that her husband would be required to pay her attorneys fees.

We don’t know whether these allegations are true. But we can state almost without exception, that if an attorney tells a client in a domestic relations proceeding that he or she is certain to secure attorney fees in that proceeding, a second opinion should be secured. Even in cases where there is a contractual undertaking for a party breaching an agreement to pay attorneys fees, we have found that courts award such fees on a very conservative basis.  And in situations where attorneys fees are sought by reason of statutory allowance (i.e., the law expressly allows award of attorneys fees) such awards are usually a fraction of what is sought.

When can one ask for attorneys fees? Absent an agreement, attorney awards require a statutory basis.  Such awards are referenced in the divorce law. 23 Pa.C.S. 3702. Where there is a battle over custody jurisdiction, the statutes provides that counsel fees shall be awarded unless there is a finding that such an award is inappropriate. 23 Pa. C.S. 5452. In support cases Courts “may” award attorneys fees either to the oblige (the person securing support) or that person’s attorney. 23 Pa.C.S 4351 but a subsequent case interprets the statute to mean that the awards should not be a regular part of support proceedings but limited top extraordinary situations. Contempt of any kind of a divorce or alimony order invites a claim for counsel fees. 23 Pa. C.S. 3503(e)(7) and 3703(7). But this does not appear to be the case in a custody ( See Pa. R.C.P. 1915.12) or support case (See Pa. R.C.P. 1910.25) 

The statutes and rules say one thing, but courts remain chary of such awards.

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In recent years the numbers are so frightening, people tend to mention them only in a whisper or with the caution that “of course we are getting some scholarship money”.  But here is the data published by the College Board for 2008-2009 based upon its averages.

                                                Tuition & Fees      Room & Board

Public College                       6,585                      7,748       

assumes attendance in–state

Private                                       25,143                      8,989

So, the public school option will require just under $50,000 in after tax income while the high priced spread is going to be a little more than double at $136,528. See http://collegboard.org.

This author is embarrassed to report that his alma mater again garnered laurels as America’s most expensive private university with 2008-09 tuition of $40,437.  Housing ranges from $6-14,000 and food is another $2500-3500. This student graduated with annual costs of $4-5,000 a year in 1977.  In 2009 dollars that should yield an annual cost today of $14,500 to $18,000.  In real dollars, it means that the cost of college at this one institution is 3x the rate of inflation.  But then Washington today is a far different place than it was during the days for Ford & Carter.

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Almost twenty years ago I was asked to speak to the State Conference of Trial Judges about what then seemed to be a fairly arcane subject; whether adult children could be sued for support by their parents or by individuals or entities providing their parents with necessities.  Countless pages are written about the subject of parents and their duty to support minor children.  But did the duty run in the other direction?

It turned out then that there is such a responsibility. According to Blackstone, this principle comes from Athenian law. 1 Wm. Blackstone, Commentaries on the Laws of England p. 442 (1765).  As he described it just prior to the American Revolution, “….they who protected the weakness of our infancy, are entitled to our protection in the infirmity of their age; they who by sustenance and education have enabled their offspring to prosper, ought in return to be supported by that offspring, in case they stand in need of assistance.

The address to the judges on this concept seemed of little effect at the time as there was no recent litigation addressing this subject. But approximately two years ago I spoke with a fellow attorney from Bucks County, Maryjo Murphy, who said that nursing homes were starting to initiate suits against children for services rendered to their parents.

Monica Yan Kinney’s article in the July 12,2009 edition of the Philadelphia Inquirer at page B.1. gives life to the Athenian law as applied in 21^st century America.  The article tells the story of a Havertown resident, Don Grant who was sued by his mother’s nursing home for $8,000 for services supplied to her.  The ironic twist is that Mr. Grant’s mother does receive social security and a state pension but neither of these income streams is attachable by creditors. So, the nursing home sued Mr. Grant for his mother’s care. Mr. Grant professes that he is estranged from his mother and that he was raised by his grandparents.  But that does not appear to be a defense today just as it was not in Blackstone’s day.  In fact, as Judge Blackstone put it, the statute passed under Queen Elizabeth I provides that a child is “equally compellable, if of sufficient ability, to maintain and provide for a wicked and unnatural progenitor as for one who has shown the greatest tenderness and parental piety. 1 Blackstone p. 442 (citing Stat. Eliz. C.2.)

The Kinney article notes that Mr. Grant did not act promptly to appeal what was probably a district court judgment.  It thus became final.  But there is a Pennsylvania statute, 23 Pa. C.S. 4603 that provides spouses, children and parents of indigent persons have a duty to care for, maintain or provide financial assistance. Perhaps there is new law to be made here. The statute also states that the obligation is premised upon the payor’s financial ability and the obligation is not enforced where a child was abandoned by a parent for 10 or more years of the child’s minority. 23 Pa. C.S. 4603(a)(2).  But the doctrine of parental responsibility does appear today to be a two way street.  And the statute confers the right of suit on the indigent person and any other person or public agency having an interest in the care of the indigent person.

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Part of what makes the law fascinating is that there are certain legal issues that have no clear solutions. In many cases, both sides have equal merit. The matter of whether incarceration should reduce or eliminate a support obligation is one such question.

The Supreme Court of Pennsylvania ruled on this question in Yerkes v. Yerkes, 824 A.2d 1169 (Pa. Supreme 2003). In Yerkes, the court found that criminal conduct was a volitional act and that where one acts in a way that results in incarceration, that person should not be able to use his crime as a basis to avoid a support obligation.

Even though the Supreme Court is the state’s highest judicial authority, the controversy has not ended. In 2000, Melissa Plunkard gave birth to a child by John McConnell. She sought and obtained an order of $275 a month in child support. In 2003, Mr. McConnell was convicted of a crime and sentenced to 6-12 years. In February 2007, Mr. McConnell filed to terminate his support obligation premised upon the fact that his incarceration prevented his earning income. He also sought the elimination of support arrearages that had begun to accrue before his incarceration and continued after he was confined in prison. Under Yerkes, the law would have been clear. But, in 2006 the Supreme Court issued a Rule of Civil Procedure (1910.19) that gave courts the authority to modify or suspend support orders where it was found that the person owing the support had no income or ability to pay and that this condition would continue for the foreseeable future.

So what happened to Yerkes and the principles it espoused? In a word, it fell victim to federal laws regulating federal subsidies. As welfare costs skyrocketed in the 1970s and 1980s, the US government decided to get involved in the collection of child support. Beginning in 1984, the US government began to issue regulations to states. The regulations essentially dictated how state child support systems would operate. If the state failed to comply, federal welfare subsidies to the state would be reduced or eliminated.

To encourage states to collect child support, the system is now rigged with incentives for collection and disincentives for states that have large pools of unpaid support arrearages. Needless to say, from 2003 forward, Mr. McConnell’s support account was an expanding pool of unpaid child support. This caused problems for the state when McConnell’s arrearages, and those of the thousands of other Pennsylvania inmates, came under federal scrutiny. It was not enough to tell the US Department of Health and Human Services that these sums were presently uncollectible. Instead they had to be “written off”. Thus, in 2006 Pa. Rule of Civil Procedure 1910.19 was born and the principle of Yerkes (even parents in jail owe support to their children) was subordinated to the demands of the federal bureaucracy.

But wait. At the insistence of the federal government, Pennsylvania had passed another statute that would have “trumped” the 2006 rule in part. Mr. McConnell was jailed in 2003. He did not seek modification until 2007. The Support Law, 23 Pa. C.S. A. 4352(a) states that except where a child is emancipated, there can be no retroactive modification of arrears. The exceptions to this rule are very narrow. They include a physical or mental inability of the petitioner to file the petition; misrepresentation (e.g., failure to disclose facts required to the other party) or other compelling reason. The statute further says that the party seeking retroactive modification must act promptly once the disability is removed or the misrepresentation discovered.

In the McConnell decision, the Superior Court applied several different approaches. The arrears that accrued before McConnell was incarcerated were not remitted, even though it seems clear that he has no present ability to pay them. And even though the Court expressly finds that Father showed no compelling reason for his failure to seek the termination when first incarcerated, it remitted the arrears anyway. The premise for this decision appears to be the fact that the rule allowing termination was issued by the Supreme Court in May, 2006. How the Court had authority to vacate arrearages that accrued before the Supreme Court rule was changed is a question still lingering in this writer’s mind.

The appellate court also emphasizes a part of the 2006 rule that states that these orders are without prejudice. What does that mean in the real world? Can they later be reinstated and, if so, on what basis? All of this remains to be seen. In the meantime, if you find yourself encountering a petition of the kind Ms. Plunkard did, we would probably recommend that you promptly convert all existing arrearages to a judgment recorded with the Prothonotary.

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We are commonly asked how long child support lasts in Pennsylvania. This is a relatively easy question to answer but one with both a history and some varying results.  By statute and case law, the duty to support a child ends when the child has reached age 18 or graduated from high school, whichever comes later. 23 Pa. 4327 et seq.; Blue v. Blue, 616 A.2d 628 (Pa. Supreme 1992).

The history of this responsibility has some interesting twists.  Beginning in 1963, the Pennsylvania Superior Court embarked upon a series of decisions finding that, in certain cases, parents could be held responsible for the support of adult children attending college. Com ex. Rel. Ulmer v. Sommerville.  For the next three decades this law evolved in a variety of ways within the Superior Court.  In 1992, however, in Blue v. Blue the Pennsylvania Supreme Court challenged the very principle that the Superior Court had such power.  The Supreme Court ruled that the Superior Court was without legal authority to direct parents to contribute to pay post majority support except in circumstances where the child was incapable of supporting him or herself through employment.

The Blue case sent a shock through the judicial system, as tens of thousands of children were already getting support while in college.  In response, the General Assembly passed a bill expressly conferring upon courts the power to direct payment of post secondary educational expenses where the parents were separated or divorced.  In 1994, the Supreme Court of Pennsylvania challenged the bill and held that to discriminate between children of intact families in contrast to separated families was a violation of equal protection.  Therefore, the court found that the statute was unconstitutional and deemed it ineffective.  Curtis v. Kline, 666 A.2d 265 (1995)

So, once again, a child who entered college in 1992 with a college support order found himself stripped of any entitlement to college support.  Interestingly, Curtis v. Kline remains the law of the Commonwealth even though the statute books still contain 23 Pa. C.S. 4327 stating otherwise.

Parents may still contract to provide for post secondary support as part of their divorce and those agreement are enforceable. Where the support order requires payment through the judicial mechanism of Domestic Relations, however, support is supposed to terminate at age 18 unless the child continues to be enrolled in high school and is pursuing a diploma.  In recent years, the courts have become adept at terminating these orders, commonly sending notices to custodial parents of the intention to terminate an order on a child’s eighteenth birthday unless the custodial parents responds that the child is still in high school.  Despite the courts’ action in recent years, it is not wise to rely upon the courts to address this question. Parents should be aware that, until an order is entered terminating the support, the wage attachment will continue to be collected.  And, if the support is collected and disbursed, woe to the payor who asks the Domestic Relations Section to get that money back.  Typically, the payor is told to sue the payee in small claims court for the overpayment.  This is usually not a happy result.

If you have the good fortune to be the parent of a graduating student and there is ANY question of whether the order is terminating, file a petition to terminate and ask for a conference or hearing.  If the order is administratively terminated by the judicial system, your hearing may become unnecessary. Even if you made a contractual agreement to pay support after emancipation, those payments should not be made through the court or wage attached.

If you have a child who lives with you and cannot otherwise support himself or herself, then you, as the parent, have the burden of establishing the child’s dependence if you want support to continue. Com. Ex rel. Magaziner. V Magaziner, 419 A.2d 149 (Pa. Superior. 1980); Brown v. Brown, 471 A.2d 1168 (Pa. Super. 1984).  Support granted should be in accordance with the guidelines, but there is a likelihood that you will be asked what state or federal disability resources you have available to help support the child.  Also, bear in mind that any support petition you bring for an adult child must have the child’s written consent.

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Although our law firm has litigated several of the largest support cases decided in Pennsylvania the matter of how much support children need is one of endless controversy for those who have household net incomes exceeding $20,000 per month. We are often asked to offer second opinions or discuss those cases we have tried.  The fact is that while we have opinions about these larger cases, most of them settle because the range of possible outcomes is so wide even in cases where we believe we understand the approach taken by the judicial officials deciding the law.

Since 1984, Pennsylvania has operated under a Supreme Court ruling in Melzer v. Witsberger,   480 A.2d 991 (Pa. Supreme 1984).  The case created a multi-part formula beginning with an analysis of the income each parent’s available income and then assessing the “reasonable needs” of each parents for his or her own support and graduating to an assessment of the reasonable needs of the child or children in each parent’s household.  Based upon a subjective evaluation of these needs, the court allocates what contributions need to be made from one household to the other to cover the child’s reasonable needs. The process is complicated and rife with opportunity for “judgment” calls. Moreover, most members of the judiciary will candidly admit that a lifetime of common sense experience often leaves them unprepared to decide what is reasonable when wealth is enormous.  Does a one year old need a governess if the primary caretaker is already staying at home.  Does a reasonable vacation expense include first class seats?  Private plane?  747?  While Pennsylvania has not opined on these subjects, other states have had to.

It is rare for high income cases to be reported because they usually settle.  But in January of this year a Schuylkill County case, Rich v. Rich, was decided by the Superior Court based upon their review of a Melzer analysis. 967 A.2d 400 (Pa. Super. 2009)

The case involved support of four children at its beginning.  One was emancipated during the two years of litigation culminating in the final order.  The father was a CEO for several coal and co-generation companies.  Father’s gross income was $9-10 million per annum.  His net worth roughly four times that amount.  Mother was not employed.  Father’s home and contents occupied 150 acres and had an aggregate worth of $2-3 million.  Mother lived in a mortgage free $725,000 home. 

Mother presented expenses of roughly $180,000 a year for the four children.  The trial court accepted these expense and awarded $15,000 a month. Support was not reduced upon the eldest child’s emancipation, the Court finding that other expenses would have risen during the period involved.

Father appealed from the order.  His first complaint is that Ms. Rich failed to document her expenses.  The Rules of Civil Procedure were amended in 2006 to require documentation of expenses in cases decided under Melzer where net income of the family exceeds $20,000 per month Pa.R,C.P. 1910.27(c)(2)(a).  His particular complaint was a $50,000 item budgeted for credit cards charges without supporting data or delineation.  The Superior Court found that Father waived the argument when he agreed that the expenses presented for 2005 were reflective of actual post separation expenditures.

The second basis for the appeal was the trial court’s refusal to reduce support by 25% once the eldest child was emancipated. The appellate court properly noted the law to forbid arithmetic reductions not supported by testimony related to expense savings.  At the same time, it observed that it was also an abuse of discretion to infer that the cost of living increase was equal to the reductions in costs arising from a child’s emancipation.  The case was remanded to the trial court to consider what cost savings would result from the child’s emancipation.

Mother also appealed. T he core of her appeal was that the support was insufficient and she pointed to two cases litigated by Fox Rothschild (on behalf of plaintiff’s) where more support was awarded for children than Mr. Rich was required to pay even though his income was 2-4x greater than the payor spouses in Karp v. Karp, 686 A.2d 1352 (Pa. Super. 1996) and Mascaro v. Mascaro. 803 A.2d 1186 (Pa. Supreme 2002)

The Superior Court easily disposed of this . The support award made by the court was 100% of the budget presented by Ms. Rich even though she claimed that her needs were only 10% of the $15,000 in claimed monthly expenses. Where she pointed to the disparity in accommodations between her $725,000 home and father’s $2-3 million dollar residence, the Court pointed to Colonna v. Colonna, 855 A. 2d 648 (Pa. Supreme, 2004) where the Supreme Court of Pennsylvania held that “case law does not require that all the recreational benefits that the children enjoy when they are with Father must also be provided through support from Father when they are in Mother's custody.  In fact, Mother admitted that the children have continued to attend private schools and summer camps as they did before she established a separate residence.  Our review of the record in relation to Mother's first two issues reveals that the court's conclusions are not in error and no abuse of discretion was committed.”

So, in the 25^th year after Melzer became the law of the Commonwealth, we still do not have an appellate case that thoroughly analyzes what is a “reasonable” expense for a child or even how to allocate things such as auto insurance or propane bills between parent and child.  But we do know that $15,000 is not an abuse of discretion for four children and we are reminded that Mr. Rich’s access to vacation homes while the children are with him does not warrant support adequate to allow Ms. Rich to replicate that lifestyle while with the children.  The case also discusses how to dispose of huge accumulations of credits or arrearages emerging from lengthy proceedings and interim payments. But that will be for another day.

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Although our law firm has litigated several of the largest support cases decided in Pennsylvania the matter of how much support children need is one of endless controversy for those who have household net incomes exceeding $20,000 per month. We are often asked to offer second opinions or discuss those cases we have tried.  The fact is that while we have opinions about these larger cases, most of them settle because the range of possible outcomes is so wide even in cases where we believe we understand the approach taken by the judicial officials deciding the law.

Since 1984, Pennsylvania has operated under a Supreme Court ruling in Melzer v. Witsberger,   480 A.2d 991 (Pa. Supreme 1984).  The case created a multi-part formula beginning with an analysis of the income each parent’s available income and then assessing the “reasonable needs” of each parents for his or her own support and graduating to an assessment of the reasonable needs of the child or children in each parent’s household.  Based upon a subjective evaluation of these needs, the court allocates what contributions need to be made from one household to the other to cover the child’s reasonable needs. The process is complicated and rife with opportunity for “judgment” calls. Moreover, most members of the judiciary will candidly admit that a lifetime of common sense experience often leaves them unprepared to decide what is reasonable when wealth is enormous.  Does a one year old need a governess if the primary caretaker is already staying at home.  Does a reasonable vacation expense include first class seats?  Private plane?  747?  While Pennsylvania has not opined on these subjects, other states have had to.

It is rare for high income cases to be reported because they usually settle.  But in January of this year a Schuylkill County case, Rich v. Rich, was decided by the Superior Court based upon their review of a Melzer analysis. 967 A.2d 400 (Pa. Super. 2009)

The case involved support of four children at its beginning.  One was emancipated during the two years of litigation culminating in the final order.  The father was a CEO for several coal and co-generation companies.  Father’s gross income was $9-10 million per annum.  His net worth roughly four times that amount.  Mother was not employed.  Father’s home and contents occupied 150 acres and had an aggregate worth of $2-3 million.  Mother lived in a mortgage free $725,000 home. 

Mother presented expenses of roughly $180,000 a year for the four children.  The trial court accepted these expense and awarded $15,000 a month. Support was not reduced upon the eldest child’s emancipation, the Court finding that other expenses would have risen during the period involved.

Father appealed from the order.  His first complaint is that Ms. Rich failed to document her expenses.  The Rules of Civil Procedure were amended in 2006 to require documentation of expenses in cases decided under Melzer where net income of the family exceeds $20,000 per month Pa.R,C.P. 1910.27(c)(2)(a).  His particular complaint was a $50,000 item budgeted for credit cards charges without supporting data or delineation.  The Superior Court found that Father waived the argument when he agreed that the expenses presented for 2005 were reflective of actual post separation expenditures.

The second basis for the appeal was the trial court’s refusal to reduce support by 25% once the eldest child was emancipated. The appellate court properly noted the law to forbid arithmetic reductions not supported by testimony related to expense savings.  At the same time, it observed that it was also an abuse of discretion to infer that the cost of living increase was equal to the reductions in costs arising from a child’s emancipation.  The case was remanded to the trial court to consider what cost savings would result from the child’s emancipation.

Mother also appealed. T he core of her appeal was that the support was insufficient and she pointed to two cases litigated by Fox Rothschild (on behalf of plaintiff’s) where more support was awarded for children than Mr. Rich was required to pay even though his income was 2-4x greater than the payor spouses in Karp v. Karp, 686 A.2d 1352 (Pa. Super. 1996) and Mascaro v. Mascaro. 803 A.2d 1186 (Pa. Supreme 2002)

The Superior Court easily disposed of this . The support award made by the court was 100% of the budget presented by Ms. Rich even though she claimed that her needs were only 10% of the $15,000 in claimed monthly expenses. Where she pointed to the disparity in accommodations between her $725,000 home and father’s $2-3 million dollar residence, the Court pointed to Colonna v. Colonna, 855 A. 2d 648 (Pa. Supreme, 2004) where the Supreme Court of Pennsylvania held that “case law does not require that all the recreational benefits that the children enjoy when they are with Father must also be provided through support from Father when they are in Mother's custody.  In fact, Mother admitted that the children have continued to attend private schools and summer camps as they did before she established a separate residence.  Our review of the record in relation to Mother's first two issues reveals that the court's conclusions are not in error and no abuse of discretion was committed.”

So, in the 25^th year after Melzer became the law of the Commonwealth, we still do not have an appellate case that thoroughly analyzes what is a “reasonable” expense for a child or even how to allocate things such as auto insurance or propane bills between parent and child.  But we do know that $15,000 is not an abuse of discretion for four children and we are reminded that Mr. Rich’s access to vacation homes while the children are with him does not warrant support adequate to allow Ms. Rich to replicate that lifestyle while with the children.  The case also discusses how to dispose of huge accumulations of credits or arrearages emerging from lengthy proceedings and interim payments. But that will be for another day.

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For some segments of our society litigation is part of everyday life. Insurance adjusters make their living out of measuring damages and assessing the risk and cost of doing battle over insurance claims. As such, they make judgments every day as to whether a particular claim is something they want to fight over. In so doing, they take into consideration the damage the claimant incurred, the cost of contesting the claim and the likelihood they will prevail over the claimant (or otherwise reduce the claim recovery).

Businessmen are not as immersed in litigation as those in the insurance industry, but businesses deal with various kinds of legal claims every day. Employees sue for wage claims or discrimination claims. Developers battle municipal authorities over home many homes they can build on a parcel. Again, each of these matters involves assessment of risk and benefits associated with potential litigation.

Family law litigants, even those who assess commercial risks and rewards every day tend to lose sight of the fact that they have a role in deciding when to fight versus when to switch. Tell someone that a planned vacation with his/her children for the summer has been abruptly “cancelled” by a former spouse and many will tell you they do not care what it costs to enforce their rights as parents. That may be true until the bill comes in.

In family law, many clients tell us that they are fighting for principle. Principle does have its place and there are times when a matter must be litigated simply to “send the message” that a client takes his or her rights very seriously and will invest in the principle of the matter even when a dollar recovery is remote. But even in these cases, it is worthwhile to ask, how likely is it that the principle I am promoting will be validated by the Court. And what will I invest for that validation.

A classic example involves child support. Even in a world where there are support guidelines with explicit definitions there is still room for battle. Husband loses his job in the current economic environment. Wife says he quit. Husband says he was laid off. Wife wants to assert that support should be based not on his unemployment but his earning capacity. There is a triable issue of fact. But what is the likelihood that each side will prevail? And what is the cost of the hearing or trial.

Let us say that unemployment is $2,000 a month. Husband formerly earned $7,000 a month. Assume spousal support only is in issue. Further assume that Wife is working and making $2,000 a month. Husband’s best case is no support at all as wages are equal while he is unemployed. Wife’s best case scenario is that Husband owes her $2,000 a month in support based on his earning capacity. Now we have a range of outcomes. Let’s assume that Wife’s attorney estimates his chance of a total win at 50%. The value of the claim is no longer his best case of $2,000 a month but half of that amount. Now how long can he expect to collect the support if he prevails. If it is estimated at two years the value of the claim is 24 months multiplied by $1,000 representing the value of the claim. Now the question becomes what are the litigants willing to spend to enforce an outcome that centers around $24,000. If they try the case for a day before a judge or hearing officer they will each invest probably 30 hours between the various preliminary proceedings. At $300 an hour, each will invest $9,000. Now we see an $18,000 investment pursuing a probably $24,000 outcome. Now, bear in mind, each party will only be putting up half but most would agree that $9,000 is a fairly pricey expense where $24,000 is the probably value of the claim.

Take equitable distribution of a case involving $500,000 in assets. The best outcome for a dependent spouse is probably no greater than 60% or $300,000. The primary breadwinner argues that the spouse can make as much as he can and he proposes 50/50. That means Wife gets $250,000; a discount of $50,000 from her goal. The “spread” buys roughly 165 hours of legal time. That may seem like a lot but spread it over the 18-24 months that most divorces take in Pennsylvania and we are now looking at each side devoting 4 hours a month to preparation and litigation of the case.

The point is to use your attorney and pick your fights wisely. Remember that a $100,000 claim where you have an 80% chance of a win is only an $80,000 claim in reality. Meanwhile, the cost is certain to occur. Even when the most important of principles is involved; cost and likelihood of winning are two factors that cannot be sensibly ignored.

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Most of us do not spend our spare time reviewing recent amendments to the US Bankruptcy Code. But if you are contemplating or going through a divorce a bit of attention is warranted because the 2005 amendments to the law change the landscape of what occurs when bad times come about.

A little history tells the story.  Twenty years ago the prevailing bankruptcy law distinguished between equitable distribution and alimony obligations. An obligation to make a payment or asset transfer as part of an equitable distribution payment or order was dischargeable.  An alimony obligation could not be avoided because it was seen as a form of support.  In the mid-1990s the statute was amended which called for a balancing of the hardship of enforcing the order against the consequence to the spouse or family member.  This balancing test was applied to both alimony and property distribution obligations.

In 2005 the Bankruptcy Code was amended again with lots of pressure from the credit card industry to limit the power of consumers to avoid obligations of all kinds.  Congress was bitten by the bug and one of the collateral effects was amendment of Section 523 to provide that any form of Domestic Relations Obligation was no longer eligible for discharge.  Section 101 states that a Domestic Relations Obligation includes debts to spouses, former spouses or children in the nature of alimony or support.  Except in Chapter 13 cases any obligation contained in a Property Settlement Agreement may not be discharged. Chapter 13 cases are essentially personal “reorganization” cases. The new statute will allow discharge of a property settlement obligation so long as it is part of a reorganization plan and is not a support obligation.

Failure to pay support obligations can also thwart a bankruptcy.  The statute permits federal courts to dismiss Chapter 13 cases or to deny discharge from debt premised upon an obligor’s failure to comply with a support obligation. The spouse who is owed the money can even ask that your Chapter 13 plan (essentially a work-out of debt) be converted to a Chapter 7 (a forced liquidation of your assets to pay creditors) premised upon failure to pay support on a timely basis.

What does this mean in practical terms?  It means that you have to watch out what you sign up for. You can sign leases, promissory notes, guaranties and credit card agreements by the bushel. At the end of the day you can pretty much avoid those obligations by filing a Chapter 7 bankruptcy or establish a work out plan through Chapter 13.  But if your obligation is to a spouse or your kids, the rules are different and those obligations are going to survive your bankruptcy.  For high income individuals, there is a tendency to overcommit because the person has a long history of significant earnings.  We commonly have client’s tell us: “I know it’s a lot of money to pay but I have always been able to make money and I will find a way to do it this time. “  Historically, we have tried to structure these deals with a heavy emphasis that the obligation is a property based one and not support with the understanding that property based obligations could be eligible for bankruptcy protection.  Since October, 2005 that technique has lost its vitality. So let the promisor beware.

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No need to drive to hearings or hire high priced lawyers.  If you google PA Child Support Home Page or go to www.childsupport.state.pa.us you will travel to a website that allows you to calculate the amount of support due using Pennsylvania’s guidelines. You must agree to the disclaimer on the site but once there, the site’s left side column has a category called “General Information” and three up from the bottom of the menu is a “Support Estimator”.

We have not tested the site and there are many factors to be considered beyond what the calculator shows as reflected in the disclaimer.  But it is a good place to rough out how much you owe or should collect under the guideline system in Pennsylvania.

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We have had support guidelines in Pennsylvania since 1984.  The effort was part of a federal initiative to see that all families with similar levels of income paid comparable child support. A few years ago the Supreme Court of Pennsylvania modified the rules to give recognition to the fact that home mortgages represented a disproportionate amount of household expenses by creating what is called a high mortgage adjustment. If the mortgage including taxes and insurance exceeds 25% of household income after spousal and child support are included, the Courts have discretion to take the “excess” and add 50% of that excess onto the support order. Here’s how it works:

Husband and wife separate.  Husband has net income of $15,000 a month.  Wife has net income of $5,000 a month. Under the guidelines 2 children are entitled to $2,877 per month.  If they live with Wife, Husband pays 75% of the $2,877.  If they live with Husband, Wife will pay 25% of the $2,877.  Either way, wife is also entitled to support.  To calculate that one takes Husband’s net, subtracts Wife’s net AND the child support.  The difference is them multiplied by .3 to calculate the spousal support component.  Arithmetically, if the children live primarily with their mother, the calculation is expressed;

{15,000 – (($5,000 + (2877 x .75))} x .3 = $2,353 in spousal support.

With the high mortgage adjustment one next looks to the total household income of the spouse in the marital home and multiplies it by 0.25 to determine what mortgage is reasonable. So Wife’s income is her own net of $5,000 is added to child support of $2,158 and spousal support of $2,353 to equal $9,511.  By definition a reasonable mortgage is 25% of that amount or $2,378.  Any excess over that amount may be divided equally with the spouse out of the house paying that amount as the high mortgage adjustment.  So if the mortgage with taxes and insurance is $3,378 per month, the $1,000 excess would result in an additional $500 in support contributions.

A good idea on its face.  But, alas, the mortgage world we live in today is a different place. Folks who net $20,000 when living in the same household usually make gross income of $25,000 or more.  Even before the mortgage crisis of the past two years, a family which when residing together had $25,000 of gross monthly income could qualify for a mortgage of $7,500 a month.  Under the current rule, a $7,500 mortgage would warrant an excess mortgage payment of $2,561. The “excess” contribution would actually be greater than the child or the spousal support.  The combined obligation on the payor would be $7,072.

This is not itself a horrendous burden but it ignores the difficulty of the situation. The adjustment does recognize how tenuous the situation is.  Wife will have net income of $12,572 before looking at the taxes due on her spousal support. But fully 60% of that income buys nothing more than the mortgage itself.  It leaves precious little to pay “all other” household expenses. 

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Today was a support trial.  We represented the regular wage earner.  The wife was the owner of a small business. She was suing for support. The business had seen a 40% growth in revenue but wife contended that she could not make more than a $1,000 a month, less than half of what she was paying her only full time employee after five years of operations.  So, the numbers did not make sense.

Sometimes the numbers don’t add up. Many people start small businesses without any clue about how to make a living from what they do.  Many others don’t hesitate to conflate business with pleasure by using the business to pay personal expenses.

Rare is the instance where attorneys get to advise the client about how to handle the business records before they are sealed into reality by submission to taxing authorities or lenders. If we could, we would tell clients to sit down with their accountants and clean the books to reflect the economic reality of what really occurred.  Nothing is more painful to a trial lawyer than to watch opposing counsel take their client apart, like removing the wings from a fly, as each bogus transaction and accounting game is exposed in excruciating detail before the Court.

Almost as bad is the client who has no understanding of how his or her business records work. A businessperson who does not understand how his or her records work looks stupid or dishonest or both. As attorneys we commonly make the mistake of assuming that clients understand accounting and tax law when they are not conversant with either.  As a client, take a look at your tax returns and your financial statements as well as your books of original entry.  If you don’t understand what you are looking at, it’s time to insist that your accountant step in.

If you enlist the services of an accountant, insist that the accountant play devil’s advocate.  How will the other side look at the books? Is it time to cleanse the books rather than allow the opposing side to pick your books apart on their terms?  Sadly, this may also mean that amended returns may need to be filed. But an amended return is better than a “tip” to the service from a presiding judge.

Above all, if you own your own small business or have an investment in one, don’t just let matters rest.  Look at your books, your tax returns and your financial statements.  Ideally, learn what they are about.  You are the best advocate of their accuracy.  But, if accounting is not your game, let the professionals do it and let them tell you where questions will arise.

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During the last week of June, 2008 the Supreme Court’s Domestic Relations Procedural Rules Committee published for comment by the bar and the public at large new guidelines for support of children. The comment period is open until October 31, 2008 and comments are to be directed to the Committee’s counsel, Patricia Miles at 5035 Ritter Road, Suite 700, Mechanicsburg, PA or, via email to patricia.miles@pacourts.us.

The most significant change proposed is to take the guideline formula from a maximum of $20,000 a month net to $30,000. Even after that level the application of an expense based analysis under Melzer v. Witsberger, is avoided through application of a formula intended to yield consistent results.

Looking at the numbers, the most significant change is for families with more than one child. The proposed guidelines appear to conclude that the economies of scale from having multiple children was overstated in past revisions. Thus, while support for one child seems to scarcely change at most income levels, there are changes upward where 2-4 children are involved. We have not analyzed these changes for families with 5 or more children because we see very few cases of that kind in our practice.

We looked at the proposed guidelines and compared them with those adopted in the Fall, 2005. Our chart reflects the results

Children                1                2               3                4 

Income                 

$5,000                +1.7%        +7%       +11%       +11%

$10,000                 0%          +6.5%    +11%       +11%

$15,000              +2.5%        +11%     +15%       +15%

$20,000              (7.5%)       (4.0%)     +12%      +12%

[Editor's Note: Please excuse the form of the chart, as formatting is difficult in the blog.]

What makes these changes noteworthy is comparison with consumer price index data for urban consumers in the Northeast US (which includes PA). When the guidelines were last published in September, 2005 the CPI stood at 210.8. The CPI in May, 2008 is reported to be 230.1. This is an increase of 8.4% over 32 months or 3.15% per annum. What could be of especial concern is the fact that inflation in the past year rose 3.7% and thus far in 2008 it appears to be moving along at a 6% clip as energy and food prices gallop higher.

We must stress that these guideline are in circulation for comment only and are subject to revision by the Rules Committee and ultimately, the Pennsylvania Supreme Court. But the opportunity for public comment will end in October and we believe it provident to afford our friends and clients the opportunity to make their views known to Ms. Miles for circulation to the committee. Once adopted it can be expected that the ultimate product will presumptively govern child support decisions for the next four years.

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When parties separate, money inherently becomes a key issue because it is not possible to support two households at the same level with the same income that previously supported just one household.  And in most cases, one party files for child support. Practitioners must advise their clients that a child support obligation only begins on the date that the party files the complaint for child support, and not sooner.    

Once a complaint is filed, how do the courts determine each party’s income for child support purposes?  

The Pennsylvania Support Guidelines determine each party’s child support obligation based upon his or her net monthly income, and Pennsylvania law includes income from any source as income for child support purposes. 23 Pa.C.S.A. § 4302; Pa.R.C.P. 1910.16-2(a). 

To determine a party’s child support obligation, the court first calculates the party’s yearly gross income by totaling the person’s income from all sources without consideration of any deductions. The statute, (23 Pa.C.S.A. § 4302), lists many types of income including, but not limited to: 

1. wages, salaries, bonuses, fees and commissions;
2. net income from business or dealings in property;
3. interest, rents, royalties, and dividends;
4. pensions and all forms of retirement;
5. income from an interest in an estate or trust;
6. Social Security disability benefits, Social Security retirement benefits, temporary and permanent disability benefits, workers’ compensation and unemployment compensation;
7. alimony if, in the discretion of the trier of fact, inclusion of part or all of it is appropriate; and
8. other entitlements to money or lump sum awards, without regard to source, including lottery winnings, income tax refunds, insurance compensation or settlements; awards and verdicts; and any form of payment due to and collectible by an individual regardless of source. 

Then, the monthly gross income is determined based upon a six-month average of all the party’s income from any source. Pa.R.C.P. 1910.16-2(a). Finally, the court determines the party’s net monthly income pursuant to Pa.R.C.P. 1910.16-2(c)(1), which provides for only the following deductions: 

1. federal, state, and local income taxes;
2. F.I.C.A. payments and non-voluntary retirement payments;
3. union dues; and
4. alimony paid to the other party. 

Once the court has determined each party’s net monthly income, then the court uses a table to determine the support obligation. The basis support schedule can be found in the Pennsylvania Support Guidelines. The guidelines also provide the methodology for calculating support.

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The Pennsylvania Supreme court recently decided that under certain circumstances a sperm donor who is known to the mother may not have to provided child support for the child(ren) conceived through artificial insemination.

Although the facts of the case are fairly unique, the holding by the Court was written after looking at the increasingly-common area of assisted conception and the absence of PA laws on the topic.

In the Ferguson v. McKiernan case, sperm donor and mother had a past romantic relationship. However, mother promised sperm donor that he would never be responsible for any children if he donated his sperm through a fertility clinic. For 5 years mother kept this promise, but then sued him for child support for the twins born from this arrangement.

During the 5 years, father moved, married and had his own family. By agreement, his genetic link to the children was not revealed. Indeed , the Court found that Mother acted in numerous ways that were fraudulent, including, but not limited to, putting her estranged husband’s name on the birth certificate, telling the fertility doctor she was married, bringing along another man as her “husband” to circumvent the doctor’s refusal to implant single women, and misrepresenting her ability to conceive to the sperm donor.

The court looked at the spectrum of cases regarding child support obligations where the parties are not married. On one side, they affirmed that children born from a sexual relationship are always entitled to child support, and neither parent can give up the child’s right before or after birth. On the other side, anonymous sperm donors are absolved of child support obligations, because to do otherwise would mean that such arrangements would not occur. Here, the court found that the agreement between mother and sperm donor was enforceable because:

1. the existence of the agreement was what allowed the conception to occur; and
2. Mother’s fraudulent conduct, inconsistent testimony, and deliberate falsehoods were enough to show that sperm donor would not have donated his sperm without the agreement.

For practitioners or unmarried people contemplating assisted conception, it is important to have the circumstances of the arrangement carefully reviewed and to have an agreement in place which reflects the parties’ wishes before conception occurs.

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In Pennsylvania, parents have a duty to support their children until the children are emancipated.

Whether a child is emancipated depends on the facts of each particular case. In the vast majority of cases, once a child turns 18 and has graduated from high school, the child is emancipated. This is different from other states that require a parent to continue to pay support while a child is in college. 

Unlike other states, Pennsylvania’s law does not require that parents contribute toward college tuition or other higher education expenses after a child is emancipated.

In order to terminate a child support order,  a Petition to Vacate needs to be filed several weeks prior to the child’s eighteenth birthday or high school graduation, whichever event occurs later. The termination will not happen automatically.

The Pennsylvania Superior Court recently addressed a situation where a child did not become emancipated after she turned eighteen and graduated from high school.  In that case, the daughter suffered from epilepsy and debilitating headaches. The daughter is 19, enrolled in college full-time, dances in a theater group, and works a part-time job twenty hours per week. The father attempted to terminate his child support obligation for the daughter; however, the Superior Court found that the daughter’s migraines and the medication that she must take for them reduce her ability to support herself. As a result, the Superior Court determined that the daughter was not emancipated and the father was required to continue his support payments to the mother.

The Kotzbauer v. Kotzbauer case does not address how long the father’s support obligation will continue. Several factors would have an impact on this issue, including the child's marriage, moving away from home, a change in her employment, or her cohabiting.  These factor and others would likely impact how the court would decide the case in the future.

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Generally, Pennsylvania law provides that the parent who has primary physical custody of the child is entitled to claim the dependency exemption, and the child tax credit, on his or her income tax return.  If the parents share physical custody, the parent who earns more income is entitled to claim these tax benefits. However, this is negotiable in divorce and child support actions.

The ability to claim the child on your income tax return can benefit a parent by changing the filing status from “single” or “married filing separately” to “head of household”, a more beneficial filing status under the tax code.  This may decrease the amount of tax you owe.  However, the dependency exemption may be a greater benefit to the non-custodial parent and, therefore, may be worth negotiating in a divorce or support action.

For example, if claiming the child as a dependent will save the non-custodial parent $5,000.00 in tax, but will only save the custodial parent $1,000.00 in tax, then the non-custodial parent should claim the child as a dependent and pay the custodial parent the $1,000.00 she would otherwise would have saved.  The net savings to the non-custodial parent is $4,000.00. (And, a good lawyer could even negotiate sharing this $4,000.00 tax savings between the parties!)

A second benefit for the parent claiming the child is the Child Tax Credit.  The Child Tax Credit allows you to claim $1,000.00 for each qualifying child. So, in a family with three children, the credit is worth $3,000.00.  This credit also reduces the tax you owe.  However, the Child Tax Credit is phased out for certain higher income tax payers.  Specifically, the amount of the credit allowable is reduced by $50.00 for each $1,000.00 of modified adjusted gross income above a threshold amount.  That threshold amount is $110,00.00 on a joint return, $75,000.00 for single and head of household filers, and $55,000.00 for married individuals who file separate returns.  This means, for example, that a married couple filing jointly who have one qualifying child would be entitled to a credit of $950.00 if their modified adjusted gross income is more than $110,000.00, but not more than $111,000.00.  They lose the credit completely if their modified adjusted gross income is more than $129,000.00.

It is important to understand how the Filing Status, Dependency Exemption and Child Tax Credit can affect your personal income tax return.  It also is important to understand how they can affect the other parent’s income tax return. Your accountant and attorney should discuss these tax benefits and how they will affect your tax returns before you file your 2007 taxes, and in the foreseeable future.  There are very specific financial benefits that could be negotiated in your divorce and support actions, in a way that positively affects both you and your spouse or former spouse.  It always feels good to find a way to pay less taxes, even if it saves your "ex" some money too.

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For the first time, the Pennsylvania Supreme Court considered whether a sperm donor has to pay child support payments for the children resulting from his donation.  The case is Ferguson v. McKiernan, and the Court ruled that no child support is due.

Ordinarily, in Pennsylvania, parents have a duty to support their children until the children become emancipated.  A parent cannot contract to give up the right to receive child support because it is not the parent’s right to give away; it is the child’s.  Any contract attempted to waive the right to child support is void.

In Ferguson, the mother and the sperm donor orally agreed that the sperm donor would give up any custody rights and that he would not owe child support for any children.  The mother later conceived twins through in vitro fertilization and sued the sperm donor for child support.

The Supreme Court found that the oral contract was valid and that this sperm donor did not have to pay child support for the twins.  The Supreme Court found that this is different from a contract between two people who conceived the children through intercourse.  The contract was also different because it was entered into before conception.

In reaching its decision, the Court recognized the growing field of reproduction assistance for mothers.  Anonymous sperm donors do not pay child support.  If a mother selects a donor that she knows and respects, the donor is more likely to participate if he knows that he will not be required to support any resulting children.  Any other decision would subject sperm donors to liability for child support which could ultimately force all mothers to use anonymous donors.

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Most child support cases in Pennsylvania are decided based upon the Pennsylvania Support Guidelines ("Guidelines") found at Pa.R.C.P. 1910.16-3.  The Guidelines are utilized for any case in which the parents’ combined net monthly income is $20,000 or less.  The amount of support dictated by the Guidelines is subject to reduction if the parties have shared (50/50) physical custody or if the payor has substantial physical custody (at least 40% of overnights).  The reduction in the child support payments for shared or substantial physical custody ranges from 10% to 20% of the payor’s proportionate share of the total support obligation. See Pa.R.C.P. 1910.16-4.

Cases in which the parties’ combined net monthly income exceeds $20,000 are decided outside the Guidelines, based upon a formula set forth in the case of Melzer v. Witsberger, 480 A.2d 991 (Pa. 1984).  In these high income cases, a presumptive minimum amount of support is established based upon the Guidelines.  However, the actual support award may be higher, based, in large party, upon children’s reasonable expenses.

Although an automatic reduction in support is made in Guidelines cases based upon shared or substantial physical custody, the same reduction does not apply in high income support cases.  The Pennsylvania Superior Court recently held that shared physical custody does not affect a Melzer calculation.  

This recent Superior Court decision highlights the expense driven nature of cases decided under Melzer. Although case law instructs courts to be flexible in considering other factors in addition to expenses, under the shared physical custody arrangement in Bulgarelli, the court declined to deviate from the standard Melzer calculation.  The parties’ and children’s expenses are the paramount focus of any Melzer analysis, not the custody schedule. 

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How much support is enough when a child theoretically has everything?

An example would be the obligation of rap star, 50 cent.  According to articles in New York and Chicago newspapers, the rapper presently pays $25,000 per month for the support of his 10 year old son.  Now that he hit the jackpot as an investor in Coke's buy-out of the parent company of Vitamin Water (to the tune of $100 million dollars), the mother of the child wants more.  Could it be possible that $25,000 per month is not enough to raise the child????

In Pennsylvania, there is a 1993 Superior Court case out of Pittsburgh which addressed certain aspects of this issue, Branch v. Jackson, 629 A.2d 170 (1993).  In that case, the father of a child born out of wedlock, who was a professional football player, argued that since the child always had resided with Mother, in a modest lifestyle, her expenses should be the determining factor, not what he could afford.

The Superior Court did not agree, and held that where a father is wealthy, and although the mother may indirectly benefit, the child was entitled to support "commensurate with his Father's income and lifestyle".

That does not answer the original question of how much is enough, but the Branch case does offer guidance for lawyers and litigants in Pennsylvania courts.

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PASCES, the collection and enforcement agency for  support in Pennsylvania, has begun requiring that an obligor's first support payment be paid at the time of the initial conference if an interim or a final order is entered.  This applies to child support, spousal support and APL cases. 

Montgomery County instituted this requirement a few months ago.  Chester County recently has done so.  I'm sure others will be following suit.  If you are an attorney representing an obligor, make sure your client does not find out about this "surprise" at the end of the conference.

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The new client walks in the door, obviously nervous about his or her case being the subject of a public trial in the county courthouse.

The first thing I tell them is that most third parties are not interested in their divorce case.

The second thing I say is that most of the cases I handle resolve without the need for substantial litigation, although there may be a hearing or two along the way.

However, most recently I have found that I am trying a few more cases than usual, and I'm winning.  I'm not saying that so that readers will think: I've got to have Charlie Meyer as my lawyer.  My real point is that, while I have written in the past on the importance of professionalism and civility in the practice of law, especially in domestic relations practice, I now am finding that lawyers are taking positions they cannot possibly defend and upon which they cannot prevail.

I am reminded of the time when, as a young lawyer, I met with an "experienced" (read "older") lawyer in his storefront office to discuss a support matter.  It obviously was a case which would be decided under the Guidelines.  But to my surprise, his position was that "he didn't use 'those' guidelines".  Needless to say, we went to court, and the guidelines were applied.

This story is illustrative of what I am finding more and more in my practice.

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Pursuant to 23 Pa.C.S.A. Section 4308.1, proceeds from a "monetary reward", such as a Personal Injury Award, are subject to a lien for child support arrears.  Parties and their attorneys have obligations under the section of the Domestic Relations Code.  Basically, documentation must be provided by the party to the attorney, and the attorney must verify the information and then satisfy the lien before distributing any funds to the client.

In lieu of relying on information from the client, the attorney may utilize an approved judgment search company or an insurer which furnishes information and transmits funds under the child support enforcement lien program operated through a central reporting agency approved by the department.  By doing so, the attorney is immune civil, criminal and/or administrative penalties.

There is much more to the statute section, but attorneys certainly should be aware of their obligations in this regard.

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Here is a factual situation which is not atypical:

Mother pays child support to Father, based upon earnings of $100,000 per year.  Mother loses her job, and takes a lower paying job earning $50,000.   Then she files a Petition to Modify her Support Order.

What are the considerations in a case like this?  A recent Superior Court Opinion, Grigoruk v. Grigoruk, 912 A.2d 311(Pa. Super. 2006), sets forth a concise review of the considerations.  The Court's discussion includes the following queries which must be resolved:

• Under Pa.R.C.P. 1910.16-2(d), a party voluntarily accepting a lower paying job is not entitled to a reduction in support.  However, if a parent is fired for cause, the court should look to the party's attempt to mitigate the lost income in deciding if a reduction in support should be allowed.
• The court should look to the factual circumstances to determine if the subsequent job search was sufficient.
• The court should look at the party's employment immediately prior to the request for modification, and not the highest paying job the parent had 4 years ago.
• A higher earning capacity may be assigned if the court finds that the reduction in income was the result of a parent's misguided choice.
• A parent may accept a lower paying job where it was the only job offered after a reasonable search.
• A parent does not necessarily have an ongoing duty to mitigate the lost income by conducting an ongoing job search.  However, this also would be a determination based upon the facts.

In this case, the Superior Court relied upon several other cases to support its position, or to distinguish its position, including:

Ewing v. Ewing, 843 A.2d 1282 (Pa. Super. 2004)

Novinger v. Smith, 880 A.2d 1255 (Pa. Super. 2005)

Woskub v. Woskub, 843 A.2d 1247 (Pa. Super. 2004)

Dennis v. Whitney, 844 A.2d 1267 (Pa. Super. 2004)

Baehr v. Baehr, 889 A.2d 1240 (Pa. Super. 2005)

Samii v. Samii, 847 A.2d 691 (Pa. Super. 2004)

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We all know that there is a dependency exemption available for children who live with us.  But in a divorce situation, who gets to take the deduction?

Pursuant to the Internal Revenue Code Section 152, if one party has primary physical custody of the child(ren), such that the child lives with that parent for more than one-half of the year, that party is entitled to claim the exemption. 

Pennsylvania Rule of Civil Procedure 1910.16-2(f) authorizes the court to award the dependency exemption to the non-custodial party as "justice and fairness require", in an effort to maximize the total available income for support.  The Rule also permits the court to decide which party gets the exemption in a situation where custody is equally shared.

However, most recently the IRS has issued Notice 2006-86, which is entitled "'Tie-braking' Rule for Two or More Taxpayers Claiming a Child as a Qualifying Child".  The Notice provides information regarding IRC Section 152(c)(4)(B), which states, in substance, that where the parents share custody equally, such that the exemption could be claimed by either party, "the taxpayer with the highest adjusted gross income for that taxable year" gets to claim the exemption. 

This new rule answers a question which used to create problems on April 15 of each year for divorced parties and their lawyers.  Now, whether you agree with it or not, there is a rule on the issue.

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Section 4308.1 of Title 23 of the Pennsylvania Consolidated Statutes went into effect in September 2006.  It refers to any settlement paid as a lump sum and negotiated in lieu of, or subsequent to, the filing of a lawsuit of any civil judgment or civil arbitration award that is paid as a third party claim for bodily injury or death under property and/or casualty insurance, or paid as a workers’ compensation or occupational disease award under a workers’ compensation policy (including Property and Casualty Compensation or Occupational Disease Act Policies), in excess of Five Thousand Dollars ($5,000). 

When such an award is made, it cannot be paid to the plaintiff until the attorney, insurer or other paying agent either uses a private judgment search company approved by the Department of Child Support Enforcement Lien Program or the prevailing party/beneficiary of the funds provides a statement and written documentation to show that no arrears from the Pennsylvania Child Support Enforcement System exists. 

In English, what this means is that if you owe support, you won't get the proceeds of your suit until your support arrears are paid.  And if you are a support recipient, if arrears exist on the account, and you find out that the person who is paying you support is going to get a settlement, you should be getting some money soon.

Obviously, this does not apply to support which is not being paid through the court.

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Think about these scenarios:

1.  Parties have an infant child and separate. Mom was not working at the time of separation, and does not want to go back to work. How is child support to be calculated?

2.  Mom has two children from a prior relationship, remarries and has a new baby. With respect to her older children, she pays child support. Can she stay home with her new infant and, if so, does she still have to pay child support?

Obviously, these two are not the only scenarios to which the issue might arise as to whether a parent can stay home to care for a young child. Under Pennsylvania Law, there is a “Nurturing Parent Doctrine”, pursuant to which the mother in these scenarios may not have to continue to pay child support. The issues are very fact specific, but focus on several factors, including, but not limited to:

• the age and maturity of the child;
• the availability and adequacy of others who might assist the custodian-parent;
• the adequacy of available financial resources if the custodian-parent does remain in the home. 
• the mother’s perception that the welfare of the child is served by having a parent at home is to be accorded significant weight in the court’s calculation of its support order.
• the prior practice of the mother, i.e. what did she do when her older children were born?

There are several appellate cases on this issue, including the following:

Commonwealth ex rel. Wasiolek v. Wasiolek, 380 A.2d 400, 403 (Pa. Super. 1977).

Bender v. Bender, 444 A.2d 124, 125-26 (Pa. Super. 1982).

Atkinson v. Atkinson, 616 A.2d 22 (Pa. Super. 1992).

Kelly v. Kelly, 633 A.2d 218 (Pa. Super. 1993).

Depp v. Holland, 636 A.2d 204 (Pa. Super. 1994).

Frankenfield v. Feeser, 672 A.2d 1347 (Pa. Super. 1996).

McClain v. McClain, 872 A.2d 856 (Pa. Super. 2005).

Obviously, a parent looking at this issue should seek the advice of competent counsel since the issue is so fact specific.  

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