There are still things to discover about the 2017 Tax Reform passed by Congress late in that year.  The bar and the accounting community have spilled lots of ink over the changes to the law affecting alimony and many other lesser issues.  One of those issues is the temporary disappearance of the longstanding dependency deduction/exemption.  It still goes to the parent with primary custody unless there is an agreement otherwise.  Nevertheless, until 2025, the “deduction” has been effectively gutted.  In 2018, it was supposed to be $4,150 per dependent.

Therefore, the value of the “dependent” is now measured largely in the power it provides to move from a single taxpayer to a head of household.  This also used to mean a somewhat meaningful reduction in income tax rates.

We were recently asked to evaluate whether the “status” of household head was worth quarreling over.  We ran numbers at $160,000 in taxable income and at $518,000.  What we were surprised to learn was that the tax difference was largely inconsequential.  At the top bracket, the tax savings were $1,442.  At $160,000, it was $1,426.  Not nothing, but a far cry from olden days when three children brought $12,000 in taxable income reduction and $2,723 in tax savings at $160,000.  It is conceded that the standard deduction has increased.   However, the fight over who claims the kids just doesn’t have the same pizazz it did in 2017.  At least for now.

In a reported three judge panel decision issued on June 12, 2020, the Superior Court appears to have made it easier for parties to avoid a contractual agreement on the basis of duress.  The case, Lewis v. Lewis is reported as 2020 Pa. Super. 140.

The Pennsylvania standard for duress as a basis for voiding a contract has long been that set forth in Carrier v. William Penn Broadcasting, a 1967 decision by the Supreme Court. 233 A.2d 519.   To set aside an agreement a party needed to show restraint or threatened danger sufficient to overcome the mind of a person of “ordinary firmness.”  The seminal phrase in that decision was, “There can be no duress where the contracting party is free to consult with counsel.”

The decision in Lewis v. Lewis notes that no spouse has ever achieved that high bar.  William Penn was cited in upholding the prenuptials in Simeone v. Simeone, 581 A.2d 167 and in Hamilton v. Hamilton 591 A.2d 720,722 (Pa.S. 1991).  In Lugg v. Lugg, another panel held that daily badgering and pressure was insufficient. 64 A.3d 1109, 1113 (Pa.S. 2013).  Adams v. Adams, refused to employ a subjective standard that would consider a party’s low self-esteem, alcoholism and attention deficit disorder to set aside an agreement. 848 A.2d 991 (Pa. S. 2004).

Thus, the wall of duress stood fairly high.  However, in the Lewis case, here are some of the phrases employed to set aside a property settlement agreement:

  1. “Wife believed she had to sign the agreement, that she was afraid of husband and the punishments he doled out when she disobeyed him.” (Slip at 15). A common punishment was to force wife to sleep on the porch.  This occurred ten times that wife could recall.
  2. Husband had begun physically abusing [wife] prior to execution of the settlement agreement.
  3. Husband told Wife that if the agreement was not signed, he would “ensure that she never saw their daughter (roughly age 4) again.” He also threatened to call the police if Wife took their child to a park.
  4. Husband “exploited” the judicial system by securing a Protection from Abuse Order against her, only to invite her to return and then threaten her with contempt of the PFA Order because she continued to reside with him.
  5. Husband drained the bank account so Wife had no access to money. While acknowledging that this is not a “danger,” the Court suggests that this financial duress prevented her from escaping to secure legal counsel.

The opinion refers to husband’s “intense and sustained domestic abuse,” although the record indicates that husband had secured an abuse order against wife in 2016.  Unfortunately we do not know whether this came through agreement or hearing.

The case indicates that in the weeks preceding the agreement wife was taking medication, which made her nauseous and apathetic.  She was under the care of a psychiatrist, but curiously, husband insisted that he attend each appointment.  The opinion says wife was  “prescribed unnecessary medications,” although there is no reference to what those medications were or how they impacted her aside from nausea and apathy.

Wife claimed she did not know what the medications were because husband kept them under lock and key.  At one point, husband suggested wife commit suicide and it appears she made an attempt that resulted in her involuntary commitment.  Upon her release, husband presented an agreement and badgered her to sign it.  At approximately the same time, wife went back to her psychiatrist, who changed her medications, although wife does not know how because husband dispensed the pills.  Following the appointment on January 13, 2017, they drove to a notary where the agreement husband had drafted was acknowledged.  They resumed living together until July 2018, a period of 18 months.  In July 2018, Wife filed her own abuse case and secured an Order.  Then she found an attorney who moved to set the agreement aside.

On the day she signed the agreement husband is quoted as having said, “ If you dare get a lawyer, I’m divorcing you and you will never see your daughter again.”  Wife testified that she believed this threat.

The appellate decision opines that wife signed the agreement while facing “impending physical danger” and an explicit threat that she would never see her child again.  The Court notes that duress will not lie if one has the opportunity to confer with counsel.  It also finds that the impending threat of bodily harm prevented wife from seeking counsel, while acknowledging that the threat “was not explicitly verbalized.”

This is a troubling case in many, many aspects.  As you wade through the litany of threats and intimidation, every practitioner can click off cases we have had where these kinds of threats have been employed.  This writer can probably recount hundreds of cases where a spouse threatens that the child will never be seen again.  But, if those kinds of threats are to become a basis to void agreements, we are going to have an explosion of cases to set aside all kinds of agreements.

At the time this agreement was signed wife was 24.  The opinion tells us that the medications her psychiatrist prescribed and her husband administered to her were unnecessary.  Wife professes that she never read the agreement and that she was told it was a document related to husband’s employment.  Meanwhile, when she expressed reluctance to sign this “employment” document, husband purportedly threatened to divorce her and take their child.  Really?  The record indicates that the threat of divorce had been in the air for at least five months before the agreement was presented for her signature.

It is also troubling that we have claims that husband did not give her a copy of the agreement until the divorce was filed later in 2017.  This writer is troubled by wife’s claim that, despite a relationship, which was abusive from the beginning, she had no “ability” to seek a lawyer’s advice either before or up to eighteen (18) months after signing the agreement.

The delay may be explained by the assertion that the contract wife signed was hidden from her. . But in Sixsmith v. Martsolf, the Supreme Court held that a claim for rescission based on fraud was lost when the victim of fraud did not act to set aside the agreement promptly. 196 A.2d 662 (Pa. 1964).  A contract secured by fraud is voidable only at the option of the injured party who must act promptly on the discovery of the fraud, or the right to rescind is waived: Hilliard v. Wood Carving Co., 34 A. 231 (Pa. 1896); Kinter v. Commonwealth Tr. Co., 118 A. 392 (Pa. 1922); McEvoy v. M. Samuels and Sons, Inc.,  121 A. 189 ( Pa.1923); and, Peoples Pittsburgh Tr. Co. v. Com.,  60 A.2d 53 (Pa. 1948).

Again, hard facts can make for bad law, but a decision that wife was not competent to form a contract immediately after her involuntary commitment would have been a more narrow holding.  Here we have a sweeping attack on the psychiatric community for drugging wife at husband’s request, and a declaration, without supporting facts, that husband had “exploited” the judicial system.  Pray, what is a common pleas judge to say in response to a litigant who attacks prior judicial orders on the basis that what they represent is not res judicata, but “judicial exploitation?”  The judicial dockets are crammed with thousands of cases each year where a party “loses” a child based on abuse or neglect.  Does the common but empty threat that a person won’t see their child again vitiate the consent necessary to form an agreement?  In this case, the author found no direct threat of immediate bodily harm proximate to the execution of the agreement.  That’s been the standard.  Unfortunately, the Lewis case opens the door to a dark basement of empty and idle threats and suggests that judges go down there and evaluate all of the events that culminated in the challenged agreement.  A lot of agreements are going to be challenged based on this case, and trial courts are going to be looking back to the days when there were firm standards of duress to grab hold of when deciding them.

I attended a seminar offered by accountant, Mitchell E. Benson, CPA, MT, CFF (Savran Benson LLP), Brian C. Vertz, Esquire (Pollock Begg) and Aliah Molczan (Savran Benson LLP) on July 9, 2020.  One of the topics discussed was the Payroll Protection Plan (PPP) loans, which were distributed in the second quarter of 2020 to allow employers to keep staff on payroll through June 30, 2020. The tax aspects of this plan are still in a state of flux, and there are conflicting IRS and Congressional interpretation of what it means.

These funds were technically a “loan” issued with the intention that repayment will be forgiven or discharged if the funds were demonstrably employed to pay wages and other classified expenses.  Much of that money is already spent by those who received the loans.  For accounting purposes, the cash is gone, but as of June 30, 2020, the loan remains a debt of the business until the discharge is granted.

While the precise terms and date of the discharge remain somewhat murky, almost everyone agrees that these loans will be discharged so long as the terms of use were followed.  From a tax viewpoint that brings in a question of whether the discharge will occur in the 2020 tax year or later.  Under federal law, the discharge of indebtedness is ordinarily income to the person who had the obligation discharged.  26 U.S.C. 61(a)(11).  The statute authorizing the PPP loans makes clear that is not the case.  BUT, let’s assume you have a small business and you had a $250,000 PPP loan.  You used it to pay payroll and other prescribed expenses between May 1, 2020 and June 30, 2020.  Your loan, which you employed to pay those expenses, is discharged. Can you deduct the expenses that were effectively paid by the loan you don’t have to repay?  As of today, the IRS says you cannot take those deductions against revenue.  Congress says that was not their intent.  More complicated is if you file your 2020 business return when due in March 2021.  Your loan is not actually forgiven yet.  So, you deduct the expense, as would ordinarily be the case.  Two months later, your discharge comes through.  Amend the return?  Keep the return but report the discharge as income?  Apparently, these questions remain unresolved and that may be the case for some time.  One thing is clear; discharge of debt is “income” for purposes of support under 23 Pa.C.S. 4302 and I have not heard anything about the Pennsylvania General Assembly amending that.

Also mentioned in this seminar were some other lingering issues:

  1. Many businesses will conclude 2020 with a whopping loss that may be an asset or an income tax offset in future years for purposes of equitable distribution.
  2. In divorce and support proceedings you should be inquiring what forms of loans and grants were applied for and what their status is. Many folks have loans and benefits stuck in an administrative pipeline that may not fully clear for months.  You should be tracking the status of these funds in a support context.
  3. We have previously written about the ability to use retirement as a hardship withdrawal without penalty and to either spread the income over three tax years, or repay the money to the retirement and reverse the tax event. Also, these transactions become pregnant with tax consequences and my affect support payments or asset distributions beyond 2020.  Lastly, if you are making these withdrawals, you had better keep some reliable evidence that your transaction has a relationship to the virus either directly, or because it caused your unemployment.  Otherwise, the tax benefit may be lost.

When couples decide to end a marriage, the process involves division of the good (the assets) the bad (the liabilities) and the ugly (liabilities that exceed assets).  Hearing officers whom we have spoken with report that they are seeing more cases where the controversies are ugly.  A decade ago, the battles were typically about overleveraged homes that were “upside down” (debt far exceeding market value).  The growing economy of the past decade has fixed many of those problems, but, for the past generation, we have seen a relentless growth in student debt.

Student loan debt presents its own special problems.  For the most part, like secured debt (e.g., mortgage debt) it really resists discharge in bankruptcy.  We have learned in recent years that some discharges have been obtained, however, the general rule seems to remain that this debt may be structured, but it does not go away.

Most students incurring these debts are not married.  But they have parents who are, and those parents often sign on either as primary borrowers (it’s the parents who took the loan), or as guarantors (the child is primarily liable but if the child doesn’t pay the lender has recourse against the parents who guaranteed the loan(s)).  We have found that most adults sign the loan documents without a clear understanding of who is obligated and how.  After all, education is a necessity, right?  So you do whatever it takes.

Once documents are signed, it is tough to emerge from the student debt swamp.  The three boats out are named: Restructure, Forbearance and Discharge, with the third boat being the most difficult to find.  Nevertheless, with 45 million Americans occupying parts of the student debt swamp, people are looking for a means out.  The smartest folks evaluate the swamp before going in.

Listed below are some resources that may help.  Realize that divorce courts don’t have jurisdiction to do much more than allocate the debt they are presented with.  In addition, if you are a co-borrower or co- guarantor of a debt, the fact that the divorce court assigned the debt to your spouse in equitable distribution does not affect whether the lender can come after you.  So navigate carefully if you are about to enter the swamp, and take a look at these resources.  is a creature of the US Dept. of Education.  It has both information and a guide for loan management, including a loan simulator that permits the borrower to “try on” different payment plans.

National Federation for Credit Counseling

Financial Counseling Association of America

The Institute of Student Loan Advisers or TISLA

Be cautious as you navigate through these sites.  Some are heavily oriented toward managing your money as a means to better allocating funds to reducing student debt.  That can be a useful tool but it does not change the payment plan.  Be aware as well that there are many sites devoted to Public Service Loan Forgiveness, which only applies to people in some form of public service, and even those candidates encounter some pretty rocky channels of forgiveness eligibility.

There are attorneys and fee based services that also provide guidance.  Just be certain whom you are dealing with.  This is not something the typical lawyer will know how to manage.  There is no harm in asking for references.  We have seen happy results in the area of forbearance (pay less now based on low income).  But, having sailed into the swamp, you want to make certain that you are not getting in deeper with a service or a lawyer who misdirects you.

As I write this, the Atlanta branch of the Federal Reserve System has just announced their forecast that second quarter gross domestic product is expected to plummet 53%; a harrowing statistic.  Meanwhile, the S&P 500 Index sits at 3,055.  That’s where it was on March 5 of this year, at which time, there were fewer than 50 coronavirus deaths in the entire country.  On March 5, unemployment in the United States was 3.5%.  At the end of April, it was 14.7% and Goldman Sachs just announced that they think we are currently over 21%.

So what gives?  The best answer I have heard is that stock markets are always forward thinking.  Investors seem optimistic that there will be a recovery, and a relatively strong one.  However, if you represent a client who owns a restaurant, a retail store or even a school bus company, that client is looking at the various stock indices and shaking their head.  The world has changed, and while we all hoped this would pass quickly, the coronavirus seems to be a guest who insists the visit must linger.  The good news is that we are down to roughly 500 deaths per day in the U.S..  The bad news is that we were there a week ago and then the numbers spiked.

For those in the “break-up” business who do business valuations, this is an especially harrowing time.  The 2019 year-end numbers are trickling in and for just about everyone except box retailers, 2019 was a fine year.  But as you dump your data into the valuation calculator, you know that someone is going to assert that those numbers are ancient history and have “no relevance” given what has happened since March 1, 2020.  Is that fair?

It isn’t, and for many different reasons.  We have been down this road before.  The stock market has seen us through banking crises in 1990 and 2008 as well as a tech bubble crash in 2000.  This market is quite different.  In 1990, 2000, and 2008 there were some real fundamental viruses in the economy.  In two of the three corrections, the lending system got itself into real trouble.  That required not just stimulus, but also some institutional correction.  It took time to recover and the stock market history shows that.  In February 2020, the S&P 500 was chugging toward 3,400, then utterly collapsed – falling by 1/3 in three weeks.  Since then, the market got up, dusted itself off in April, and rose more than 7% in May.  So we have a situation where the unemployment numbers and the gross domestic product numbers signal “depression,” while the stock market indices, (what people will pay to own shares in businesses) seems to think things are comparable to last November or early March (each with S&P at 3050).

I have read some articles and spoken with a colleague who values businesses for a living.  He characterized the market issues in two ways: (a) episodic; and (b) systemic.  If you owned a Wendy’s franchise and it was brought down by fire, flood or pestilence, there is no question that the flattening of the franchise affects its value.  But if you have insurance, you rebuild and resume operations.  Your problem was quite real but it was episodic.  The value is still there, because once you re-build, people will resume eating at your trough.  However, if the state highway department builds a spur that diverts traffic away from your franchise or the CDC announces that hamburgers cause COVID, you have a systemic problem.  You may be able to adjust to compensate by changing your product line or offering free oil changes for customers at the drive through, but that’s the result of your genius and not the value of the business to Mr. Willing-Buyer.  He might pay a healthy price for the business after you re-tool it for the new economic world and show him that sales and profits are back to the old days. But not now, thank you.

What this means for the domestic relations bar is that you have to pull your head out of the data and think about how COVID will affect the business you are valuing a year from now.  Understand we are not done with COVID.  Today it is like your crazy uncle who likes to roam around the house and cause destruction when visiting.  As I write this, Uncle COVID has wandered into North Carolina, but we don’t know how long he stays or where he wanders next.  Meanwhile, if you have a retail sit down food operation where you pay real rent expecting to seat 50 guests at a time, you may have a systemic problem; the kind where your genius is going to have to create value that otherwise has been crushed by six foot distancing.  If you own a dance club or a stadium you are in worse shape, although those patrons may be willing to assume the risk if the authorities will allow it.

The stock market may actually be an indicator of what investor’s think of the business you are valuing.  In the last recession I was involved in valuing a luxury goods wholesaler/retailer.  So I watched Tiffany (TIF) and LVMH (LVMUY) to see what investors thought of the 2008 crash.  They were slow to bounce and to some degree buoyed by a growing Chinese market that my client could not access.  Today, you can see that any kind of box retailer is headed toward bankruptcy.  The virus only hastened that process along.  The cruise ship business has taken a slight bounce back, but if your client owns hotels in Port Miami, he has a systemic problem.  Hotel operators in Cooperstown or Williamsport are in a different place.  Sports will come back and so will the demand of parents to revel on the fields of dreams.  Many businesses are cutting back and that may last a while.  But, again, this is a physical virus and not an economic one.  In addition, the market is telegraphing that most businesses will survive and thrive again.  The second quarter does not decide the game.

It is said that desperate times call for desperate measures.  Many people out there today are facing some financial headwinds that were not reasonably foreseeable a few months ago.  Today they have businesses to operate or even daily bills to pay while afflicted with cash shortages.

The reverse mortgage or more properly the Home Equity Conversion Mortgage (HECM) has been around for a while.  In an age of low interest rates it has seemed like a device which merited attention.  Many of today’s divorces involve folks who qualify by age (you must be 62) and have significant equity trapped in a home, which is not appreciating as it did in the past.  As we have noted, the current financial crisis has caused increased interest in this product.

The problem has always been that most conventional mortgage brokers stay away from reverse mortgage products.  If you search for a reverse mortgage on the internet you will be scooped up by dozens of websites that instantly want your name, address, home value and current mortgage information.  That is concerning in its own right.  Then, over the weekend, I heard the inevitable horror story of a family that “lost the family home” to what seemed like a good way to supplement household income.  If you want to hear the entire story it ran on May 16, 2020 and can be found at a Public Radio Exchange (PRX) website.

As an attorney, I found the PRX episode titled “Homewreckers” to be a pretty poorly executed and highly prejudiced piece of journalism with the current U.S. Treasury Secretary loudly depicted as the villain.  The point of this article is to talk about practical pitfalls rather than public policy.  Suffice to say that the lending industry is not always honorable.  But, I also have some problems with people who took things like no doc mortgages claiming to be the victims. Now, allow me to try to cast off my prejudices and stick to the facts I have researched.

There are a lot of different programs out there.  And, as noted, trusty human reverse mortgage lenders don’t seem to be widely available.  So, you may have to go fishing on the internet and risk being hounded by pop-up advertising each time you check messages or the news.  Once you find something that sounds like a plan, the key is to ask to see what the loan documents look like and insist that a copy be made available for you to print. DO NOT let these people come to your house.  Yes, the lender is going to need someone to appraise your home’s value after you understand the transaction from top to bottom.  The only other reason you need to be visited is to hotbox you into signing a deal you may soon wish you had not. The PRX story, although highly prejudiced, does identify in explicit detail some things that can go wrong.

Let’s say you see a reverse mortgage you like in terms of what the loan will amount to and how it operates.  My general impression is that some of these lenders are interested in getting title to your house rather than making a simple loan against the equity you have in it.  That’s why you need to see the actual documents you will sign and take them to a real estate lawyer who will represent you and not the lender.  Never, ever, ever, sign a loan of this kind without a lawyer or relying upon a lawyer you are not paying.  This is not a friendly business.  Some people see that programs are FHA approved and believe that protects them.  It may or may no,t but it is your job to protect your home equity not a government agency.

Among the games I have read and heard about in the PRX story are the following:

  1. Appraisal games. It would appear you can be “low balled” on the appraisal for the loan so that you cannot borrow as much as you would like.  You can also be “high balled”, to encourage you to borrow more than you really need to borrow.  Do some research on your own to see what your property is worth and it may be worthwhile to get your own appraisal.
  2. You need to be at least 62. You will need to pay your real estate taxes, condo assessments and/or repair bills on time.  Your failure to do that for any reason is a default of the mortgage and can produce foreclosure.  Most people are deathly frightened of foreclosure and with good reason, but there seems to be some evidence that aggressive lenders threaten foreclosure to intimidate the homeowner into doing what they want.  Most conventional mortgage lenders view these defaults as their headache.  It seems that some of the reverse mortgage lenders are more willing to get in your face and threaten to take your property.
  3. Make certain the lawyer you confer with tells you in detail what happens if you don’t or can’t live in the house any longer. These loans appear to have covenants on your part that you will remain in the house.  That’s normal in conventional financing.  But realize that if you are 62 or older, age and infirmity may deprive you of your well thought-out plan to stay.  If you have to move out you may be forced to sell against your wishes.  If your plan was to give the house to your kids, be aware that this reverse mortgage gets in the way.  This may be a useful place to sit down with your children and have a frank conversation about the house.  In the story reported on PRX, a family member had been recruited to come live with Mom and Pop.  Pop died and Mom needed to move to assisted living.  The family member ended up homeless because she had no rights under the reverse mortgage.  Realize that in fairness to the lenders, they need to see the house sold to get back the money they lent you on this mortgage.  Understand as well that sometimes life insurance or other assets the borrower owns may be used to pay off the debt due the lender on the reverse mortgage.  You should have a clear understanding of what occurs if you die before the house is sold.  You might have a $300,000 house but owe the reverse mortgage lender $150,000.  Can the lender insist you sell to anyone offering more than the amount you owe?  Do you have the right to make the lender wait for years and mess with your now empty house while your heirs unreasonably insist the house is worth $300,000?  The person who will be your executor needs to know how the estate’s right to sell at the highest price corresponds with the lender’s right to get his loan money back.
  4. The fees associated with doing this financing appear to be higher than conventional financing. So, get that in writing.  Your $150,000 loan from home equity may be only $125,000 depending on the fees, usually charged up front.  Realize that many of these fees may be negotiated or waived if the lender wants to close the loan.  On the other hand, no one is lending to you for free.  These deals also involve your having to purchase private mortgage insurance.  You should find out the annual percentage rate (APR) on any financing because the stated interest may look low, but the “fees” paid at closing drive it much higher.
  5. Don’t outsmart yourself. This is what happened to all of those folks who took out home equity loans (HELOC) in 2005-2007 to dump money into the stock market.  It worked well until it didn’t.  Borrowing money to gamble is never a sound plan.

In short, proceed cautiously and lawyer up.  Yes, every lender uses standard forms.  They are written by the lender, for the lender.

It is always a good idea to keep an eye on other jurisdictions for how they deal with novel or emerging issues. One issue recently considered was the use of non-disparagement orders to prevent parties from criticizing each other in public, in front of their children, and to third parties. It is a fairly common tool for the courts to try to force a de-escalation of rhetoric and antagonism between parties without imposing fines or sanctions on them. These restrictions are not uncommon as a form of relief in Pennsylvania and have been found in the “rules of conduct” some courts append to their orders, though such “rules of conduct” have not always been easy to enforce and some courts have discarded them in favor of other language in their orders.

Recently, this issues was addressed by the Supreme Court of Massachusetts which deemed a non-disparagement order entered in a custody case as unconstitutional.  The ruling was fundamentally rooted in the concept of whether the non-disparagement order unconstitutionally restricted a party’s First Amendment rights to express their opinion. Even if those opinions are disparaging comments about their estranged spouse. In this case, the father was a voracious social media poster who made accusations against mother and provided updates and commentary on the custody case. Mother sought and secured a non-disparagement order to prevent father from litigating their case in the court of Facebook friend opinion. In overturning the order, the Court found that there was not a sufficient basis in the protection of the child from Father’s discourse on the case to justify preventing him from making public comments about it. There is also the consideration that mother has an avenue for relief available through a defamation action.

There are plenty of good, rational reasons for these orders ranging from preventing unnecessarily antagonistic behavior between the parties, to ensuring that when a child does an internet search of their parents at some point, they do not discover Facebook posts or a blog devoted their parents’ custody battle. Whether those rational reasons justifying a restriction is someone’s speech survives the scrutiny of a constitutional challenge is a different consideration altogether.

If this form of relief falls out of favor or is found to be unconstitutional in Pennsylvania, aside from increased antagonism in family law cases, there would like be an increase in defamation actions seeking financial damages. Those types of actions can have real economic consequences on parties since they may be subject to a judge or jury’s determination of what, if any, damages should be levied against the offender.

It is worth noting, however, that this case only deals with a judicially issued non-disparagement order.  Provisions in agreements and stipulations will be enforceable, particularly in Pennsylvania which applies a strong contract interpretation to family law agreements.

The ruling in Massachusetts is interesting. It will be worth seeing whether a legislative answer is created for the Massachusetts family law code that can survive a constitutional challenge.


Aaron Weems is a partner in Fox Rothschild’s Blue Bell, Montgomery County, Pennsylvania office and practices throughout the greater Philadelphia region. Aaron can be reached at 610-397-7989; and found on Twitter @AaronWeemsAtty.

On March 27, 2020, we wrote about provisions in the 2020 CARES Act, which expanded 401(k) loan eligibility and permitted funds to be drawn from IRAs without tax consequence, so long as the withdrawal was repaid by 2023.  As we wrote this, there seemed to be some “too good to be true elements” to the package.  As one might suspect, we now have additional “guidance” from the Joint Committee on Taxation.  For those bypassed or still awaiting federally backed loans, the IRA strategy may be the only practical option, but here is what “MarketWatch” and the “Wall Street Journal” reported on May 4.

If you go the IRA route, you do actually report the withdrawal as income (the 10% penalty appears to be waived).  It is reported over three years in equal tranches.  Therefore, that does mean tax on $33,333 per year in 2020, 2021 and 2022. However, if you repay in 2023 you can get your tax payments credited or refunded by filing amended returns for the prior years in which you reported the withdrawal as income.  In practical cash flow terms, this appears to signal that if you take the full $100,000, you need to remit $6,600 to $10,000 to Uncle Sam immediately and “reserve” an equal amount to pay similar payments in 2021 and 2022.  Of course, you could “invest” the float money in your business or the stock market until the tax is due, but that wouldn’t be a prudent thing to do.  The amount you need to set aside for taxes depends, of course, on your income in those years when it will have to be reported.  This is why our estimated tax payments range from $6,600 to $10,000.  Your accountant will benefit from having to prepare three amended returns.  You can avoid that by repaying the entire distribution before your 2020 return is due, but what fun is that?  The Journal also notes that once you take the distribution you need to develop a payback plan.  That money is not going to fall from the sky in 2023.

On the 401(k) loan side, your plan is going to set a repayment amount and it will come out of your paycheck.  The author of the Wall Street Journal article suggests you borrow half of what you think you will need.  His reasoning is that we tend to overstate crises and he reminds us that money that is “out on loan,” is not invested and earning returns.  The other risk is that you lose your job.  That triggers a call of the loan and unless you can instantly repay.  The amount you don’t tender back is treated as a distribution of income.  I have not seen guidance on whether that involuntary distribution gets the same three-year look back treatment you can get from an IRA withdrawal.  The loan maximum has doubled to $100,000 or 100% of the account balance.  The loan repayment terms are the province of the retirement plan itself.  Understand that you are not borrowing from your employer.  You are borrowing your own money.

In the end, the CARES Act remedies given in March have been somewhat “taken” in May.  However, the list of alternate resources to keep a business afloat or just put food on the table is not changing soon.  If you were considering a loan or withdrawal, it would be wise to ring up your friendly accountant first, to explore which options makes the most sense for your situation.

First, a confession. I watch very few moves and when I do, I frequently feel stupid because I don’t see all the nuances others do.  So, don’t see this move on my say so.  Truth is that since it was premiered in 2017, the movie won a number of awards in Europe.  It was produced in France but was very highly reviewed here in the states was well.  Rotten Tomatoes scored it 95%.

The movie is Jusqu’à la garde or simply “Custody”.  Yes it is en francais so be prepared for subtitles.  Actually, you won’t need to read subtitles to absorb the import of the film.  It is told through the face of Thomas Gioria, an actor who plays the role of 11-year-old Julien.  The movie opens in the office of the French equivalent of the custody conciliator; a person who decides how physical custody will be allocated.  You hear the lawyers for both sides pitch their case as to how Mother and Father should be involved with Julien.  You see a skeptical hearing officer who is not afraid to challenge, and, at times, deprecate both clients and counsel.  As one who has done this for almost four decades, the scene rings as very real for those who want to see what a custody conciliation is like.

In that first scene, Mother portrays Father as explosively violent.  Father seems stoic and yet not.  The conciliator takes it all in and announces a decision will be made.  The bulk of the film is a montage of scenes where the custody order as issued, and as negotiated by the parties afterwards, is played out in real time.  As a lawyer, what makes this film so important is how adult decisions, whether judicial or parental, play out in the facial expressions of Julien. At 11, he is that age where he is growing more and more cagey about managing his parents with each day. Nevertheless, he is still a child and his efforts to change the subject, dissemble or cover for a parent are unmistakable.  Meanwhile, his parents, in their unbridled quest to “win,” pay no heed to his suffering.  I have never been a parent although I have represented hundreds.  You cannot watch this film without observing and recoiling at what Julien’s loving parents are putting him through.

For more than an hour in this 93-minute film, Julien is the pinball. Father’s composure is disintegrating. He has secured time with Julien but has never connected with him. He knows Mother is lying to him about her whereabouts and he does not hesitate to demonstrate to his son that he knows that Julien and his Mother are liars. On this subject, he is right. So he uses Julien to inflict pain on his Mother, and he feels justified in doing so because Julien is conspiring with his Mother. As lawyers, this is a common thing to see. With few exceptions children in the primary custody of one parent will inevitably tilt the scales toward the parent who has them 80% of the time. Kids may be uneducated and naïve. They are not stupid.

The closing scene is as dramatic as it is troubling. I actually don’t commend watching it because, in a sense, it is what you hope won’t happen.  To me, the scene in this movie that I found most compelling is one where Father brings Julien home to Mother.  It has been another bad weekend and it would appear that Father is gaining insight into the entire situation. He asks to speak with Mother in person. Julien is there watching this with eyes wide open. Father more or less confesses his frailties. He says he has changed. He never wanted to see things devolve to this point. He reaches out to embrace Mother and, for several moments, with Julien looking on, his parents hold each other. As you study Mother’s face, you cannot be clear whether this is an act to placate the man she has grown to revile or real melancholy over loss of what was once romance, and later family life.  As they part, the viewer hopes that Julien has a life ahead of him with parents who will at least begin to respect each other. Alas, it is not to be.

In custody world, the recurring theme is one of parents who profess to want to spare their children pain. Their sincerity is, in most cases, quite real. However, they cannot avoid their own urges to be the “equal” parent or the “better” parent. The movie notes how “friends and family” can often contribute to these innocent and yet, corrupt, urges. It is very difficult to see, when it is your child, who is in the middle. The merit of this film is that you can watch the conflict on screen as it appears on the face, in the words and the sad expressions of an eleven year old who wants only to be spared.

This is not a light film. It is not something I commend to watch at a time when there are so many other unpleasant things transpiring in our world. But, if you are parent and you find yourself in intense conflict with the Mother or Father of your child, the greatest gift you may give them is to spend an hour watching and feeling life through the eyes of a child whose greatest aspiration is not to be a Nobel laureate or even starting shortstop. A young child’s goal is to have two parents who love him or her enough, to leave their anger or quest for power at the door, when a custody transition or decision is underway.

As I write this, it is sunny and 55 degrees.  Realtors ordinarily would be calling back customers from the weekend open houses.  The market should be not just brisk but frothy.  In many markets, the inventory of housing has been relatively thin.  Thirty-year rates stand at 3.75%.

Unless you are going to bang on the door yourself and the seller wants to ignore the prevailing social distancing regulations, you cannot see a house except online.  That’s a problem.  Like many other things, the market is frozen.  People with jobs aren’t certain if they can keep them.  Lenders are busy disbursing money to businesses.  So good weather, thin inventory and low interest rates are not going to do sellers much good.  Established builders like Toll Brothers and NVR saw their stock decline by 70% between February 20 and March 23.  Most have recovered somewhat and are trading at about 50% of their February highs.  That tells us the investment community thinks there is life in the market.  However, as with so many issues related to the pandemic, the question is when will it release us from its grip and with what consequent damage to the economy.

Unfortunately, I don’t have an answer for that.  Nevertheless, what the real estate community is suggesting is that when the market resumes, there will be demand that is more cautious and there will be a lot of real estate on the market.  There will be the normal sales that are being held back because there really isn’t a functioning market out there today.  Then there will be the distressed sales caused by illness, job losses and other consequences of the pandemic.  It is also not clear what will come of interest rates.  So far, rates have declined, but borrowing pressure from federal, state and local governments as well as businesses would seem to create competition for lent dollars that was not there a few months ago.  Construction lenders are trapped if they have projects underway.  No one closes on half built property.  Meanwhile, the Wall Street Journal is reporting that virtually all commercial projects where there isn’t already a hole in the ground are being deferred while all of us evaluate how the economy will bounce.

To close with an optimistic reminder. The residential market was in the same place in 2008-09 and at that time, the banking industry was on the ventilator.  Leisure markets like Las Vegas and Florida were reeling as owners of a second home raced to dump their property.  Both of those markets recovered.  Then as now, the question becomes when.