Without a doubt, the financial issues arising from the Coronavirus Pandemic and the resulting shutdown of businesses and “stay-at-home” order issued in Pennsylvania by Governor Wolf have had a major impact for many, including those with Support obligations, as well as those who rely on those payments.
In the course of the past few days, we have all been presented with unforeseen challenges as a result of the COVID-19 virus. If you currently have a custody order in place or are going through a custody battle, you might be experiencing parenting issues stemming from the coronavirus outbreak, the recent school closures and work from home mandates.
When a business owner gets divorced, the business is often the major asset subject to distribution. Accordingly, the business and its’ ongoing operations are almost always implicated in the divorce. In most cases that I see, the business is a small business with one owner or a few owners. In the best case scenario, the business owners have planned in advance for situations that arise in a divorce through a Shareholders Agreement, Prenuptial Agreements and/or Postnuptial Agreements. Hopefully, the parties’ respective family law and business law attorneys can work together to best protect the business owner to ensure as smooth a transition as possible. Hopefully, the relevant agreements have set forth a valuation formula which can be upheld at law for purposes of the divorce. Counsel can also work together to insure that income is clearly defined and reported so that support is less contentious. Additionally, advance planning can be used to address the below issues so that a divorce does not mean the end to the business. While advance planning is not a guarantee, it will provide additional protections to the business owner.
A divorce can impact internal and external business relationships, support (between spouses and child support), equitable distribution (division of marital property) and business control. In terms of business relationships, banking relationships can come into play, especially if the spouse is a personal guarantee of the loan. It is often not easy or possible to have the spouse removed from the guarantee. The spouse may also have a role in the business and it may not be feasible for them to remain involved. For example, in cases where the spouse is client facing, a delicate balance will be necessary to transition the spouse out of the business without negatively impacting the business. This can be a challenge if the divorce is acrimonious. Finally, the roles of the parties within the business may create sustainability issues going forward. In some cases, one spouse has a particular talent (i.e. software development, marketing creativity or scientific knowledge) which cannot be easily replaced and without which the business may not be able to survive. Such issues impact valuation but also succession and strategy on distribution of assets.
As for support, when a business owner is a party to a support action, whether for support for a spouse or for a child, calculating income can be challenging. The definition of income for purposes of determining support is very broad and is not the same as taxable income. There can be practical issues in obtaining information and documents which reflect the income. Legal issues can also arise, such as whether income is being reported or if the court can compel income or retained earnings to be distributed from the business to the owner to pay support.
In equitable distribution, the business must be valued so that division of the assets can occur. Business control also comes into play. It is unusual for parties to retain joint ownership or for the non-business owner spouse to receive shares of the business so creativity and/or structured payments are often necessary unless there is enough cash reserved for an outright payment. The payout can cause a financial strain for the business.
To best protect a business in the event of a divorce of the business owner, it is advisable for business owners to have advance planning through the mechanisms listed above. While not a guarantee, it will place the business owner spouse in a much better position than ignoring these issues all together.
In Pennsylvania, the paramount concern in a child custody proceeding is the best interest of the child. In determining the best interest of the child, courts engage in a comprehensive analysis of the factors outlined in 23 Pa.C.S.A. § 5328. Pennsylvania Health and Safety Statute §10231.2013 states that the use of medical marijuana in accordance with state laws is not a consideration by itself in a custody case. The custody laws have not been amended to address the issue or make similar limitations regarding the use of medical marijuana by a parent.
On December 18, 2019, however, the Superior Court of Pennsylvania issued an opinion affirming an April 5, 2019 Schuylkill County Court of Common Pleas decision limiting self-represented Father’s contact with son, age 10, to periods of supervised physical custody. The case involves a child born in May of 2009 to Mother and Father, both who have struggled with substance abuse. The court noted that Father’s recreational use of marijuana has been a recurring issue throughout the custody litigation. Father obtained a medical marijuana license when the parties were living in Georgia. At the time of the hearing, the child’s maternal grandparents had primary physical custody of the child. The trial court had awarded maternal grandparents primary physical custody of the child adding a provision that conditionally extinguished Father’s supervised custodial time “upon Father’s willingness to demonstrate sobriety and continued abstinence.”
Father argued that in light of his license to use medical marijuana as a mechanism to manage his wrist pain, the trial court should not weigh the fact of his medical use against him. The trial court rejected Father’s argument and reinstated the prior custody arrangement and the hair-follicle-testing condition. The trial court reasoned that it is unknown to the Court what effect, if any, Father’s alleged medical condition and use of marijuana, whether prescribed or used recreationally, may have on his ability to care for a child. Father appealed, and the Pennsylvania Superior Court affirmed the trial court’s decision.
The Superior Court noted that the Medical Marijuana Act prohibits the fact-finder from penalizing a parent simply for using medical marijuana. However, in the instant case, the trial court concluded after a consideration of all of the best-interest factors and the evidence presented, that it was not in the child’s best interests to expand Father’s supervised partial custody to unsupervised overnight custody without requiring Father to continue to submit to the previously-ordered drug screening regimen. The Medical Marijuana Act does not preclude the court from making relevant findings concerning effective marijuana use, medical or recreational, on parent’s ability to care for a child. The Superior Court noted that the fact finder should consider not only the parent’s history of drug and alcohol use, but also the parent’s mental health and physical condition that might require the parent to rely on prescribed medication to subdue that pain. The Court concluded that a parent’s history of drug and alcohol abuse, including a parent’s legal use of any substance, should be considered in determining the child’s best interest.
The holiday season can be a stressful time of the year, especially for children whose parents have recently separated or have a tense custody arrangement. I often remind my clients to keep in mind that the children have not asked to be put in this position, and parents should do all they can to ensure a happy and stress-free holiday for their children. After all, the children should be the focus in the holiday season. Here are some tips to help reduce tensions for your children over the holiday season .
1. Make it clear to your children that you are genuinely happy for them to spend time with the other parent.
2. Help them make cards and gifts or take them out to buy something for the other parent. It doesn’t have to be extravagant, but this small gesture will go a long way in bringing happiness to your children, and hopefully foster more civility with their other parent. The children will be excited that they have a gift to give, and hopefully the other parent will reciprocate in the future.
3. If your children are having fun at the other parent’s house, spending time with family they haven’t seen in some time, and want extra time with that family, consider allowing them to spend a little extra time before you pick them up, especially if your plans are flexible.
4. Don’t cancel Christmas or Hanukkah. Some parents decide that because they are not going to have their children at a specific time on the holiday, they are not going to celebrate this year. The only ones hurt with this approach are your children, who – after all - did not ask to be subject to a custody order. Make it clear to your children that you were excited to celebrate with them, and that you will be celebrating when they are back at your house. That will also give them peace of mind to enjoy the holiday more when they are with the other parent free of guilt and worry that you are sitting home alone and sad since they are not there with you.
5. Make sure you look at the custody order in advance. If you have any questions make sure to have those questions answered by your attorney or resolved in a discussion with the other parent well in advance to avoid disputes on the eve of the holiday .
If your children see that you are happy to celebrate the holiday, no matter what the schedule is, that will allow them to more fully enjoy the holiday as well.
Wish you and your family a very happy holiday season.
The divorce is final. No more deadlines to meet, papers to file or waiting time for all of it to be over. Now that the hard part is behind you, it is time for a fresh start. However, there might be a few things remaining for you to do before you can officially move on to the next chapter.
The following is a checklist of things that you might still need to do after your divorce is finalized:
Getting these things done might seem a burden now, after all you have been through, but it is necessary to avoid trouble later on. It is better that you go through this checklist and handle these issues as soon as your divorce is finalized to prevent possible future complications.
Once these things are done, you get to close that chapter and enjoy your new life with no worries about unhandled matters left over from the divorce.
As family law attorneys and parties to custody orders can attest, shared custody and co-parenting arrangements are often fraught with ongoing tensions, stress and conflict. Using the court system to litigate smaller disagreements in the aftermath of a custody order is inefficient, costly and time-consuming. In addition to the burden it places on the Court system, it is a strain on not only the parents, but most importantly, the children who are subject to the order. Fortunately, a common sense alternative is soon returning which can mitigate some of the strife of custody disputes in the future.
On March 1, 2019, the Parenting Coordination program, which was terminated in May 2013, is being reinstated by the Pennsylvania Supreme Court. The rule allows the Court to appoint a parenting coordinator to resolve parenting issues arising from the final custody order issued in the case. The rule clearly establishes that parenting coordination is not intended for every case. Coordinators will not be appointed where there is a protection from abuse order in effect between the parties to the custody action, a finding by the Court that a party has been a victim of domestic violence by a party to the custody action during the case or within 36 months of the filing of the custody action or where a party has been the victim of a personal injury crime.
A parenting coordinator will be appointed for a period not to exceed 12 months; however, this may be extended. The rule also sets certain qualifications that must be met prior to the coordinator’s appointment. Once appointed, the parenting coordinator will have the authority to recommend resolutions to the court on specific custody related issues including, but not limited to: deciding on locations and conditions for custody exchanges; temporary variations of the custody schedule due to special or unique events and circumstances; and any school-related issues.
There are, however, specific areas into which the coordinator is explicitly prohibited from making any decisions such as: changing legal or primary physical custody; changing the custody schedule (a permanent change, rather than a “temporary” one); changing the child’s residence or their relocation; financial issues; major decisions affecting the health, education or religion of the child; and any issues limited by the appointing judge.
Under the new rule, after giving the parties or their counsel the appropriate notice and the opportunity to be heard on the issue(s), the coordinator submits to the court, and serves copies on the parties or their counsel, a written summary and recommendation within two days after hearing from the parties on the issues. An objecting party has five days from the service of the summary and recommendation to file a petition appealing the coordinator’s recommendations on all or specific issues. If neither party appeals the recommendation, the court undertakes one of the following options: approve the recommendation and make it an order of court; approve the recommendation in part and hold a hearing on the remaining issue(s); remand the recommendation back to the coordinator for more specific information; decline to enter the recommendation as an order and conduct a hearing on the issues. If a timely objection is made and a hearing is required, the recommendation will become an interim order pending the hearing and issuance of a further order by the court.
Custody matters are typically the most high-conflict and costly type of family law cases. By reintroducing the amended parenting coordination rule, the Supreme Court has returned a functional tool to the courts, attorneys and litigants to expedite custody disputes and reduce stress and costs for all parties involved. The hope is that this additional tool will assist all parties involved in achieving the best interests of the children in custody cases.
It seems that Labor Day has just come and gone, but the snow is already moving in and the holiday season will be here before we know it. You have already transitioned the children from summer vacation into another school year, hopefully without too much stress. While it can be hard to focus on the details of the season, if you have minor children and a custody agreement or order, it is time to take a look at your custody documents and give some thought to what lies ahead in the next month and a half. Prior to scheduling family dinners, holiday celebrations and travel, it is important to see what the holiday schedule is for this year. Which days of the holidays are your children with you, what times are they with you, and who is responsible for transporting the children? It is important that you know the answers to all of these questions. Take out your custody agreement or order now and look through the schedule for Thanksgiving through New Year’s. If you have questions, now is the time to ask your attorney, not on Thanksgiving morning. We all know that a lot of advance planning occurs for the holidays, and family gatherings are scheduled. If it is important to you that your children celebrate with you and your extended family, you want to be sure to make your plans around when you have physical custody of the children. The last thing that you want to do is put your children in the middle of a dispute and have them miss plans with either parent that they were looking forward to. Knowing the details of the holiday schedule now will enable you to make plans based upon the custody schedule and keep everyone happy, which should result in a more peaceful holiday for you.
On July 4, 2018, recent changes to the Pennsylvania custody law will go into effect. These laws take into account changes in the family structure and the expansion of classes of individuals who may qualify to file for physical or legal custody of minor children.
The new class of individuals (third parties) who will have standing to file for custody must meet all of the following criteria as set forth in 23 Pa. C.S. 5324: 1. The individual has assumed or is willing to assume responsibility for the child; 2. The individual has a sustained, substantial and sincere interest in the welfare of the child; and, 3. Neither parent has any form of care and control of the child.
In order to have standing, the individual must prove all three criteria by clear and convincing evidence, which is a high burden of proof. Presumably, the burden is high to ensure that the child is protected and does not end up in the custody of someone unsuitable. This opens up the possibility for neighbors, family friends, aunts and uncles or even sports coaches being awarded custody of children. The law also has a further limitation in that, if there is a dependency proceeding, meaning that there is a pending dependency petition alleging that the child(ren) is without proper parental care and should be supervised by the court, then the above criteria will not apply.
It should be noted that grandparents could have standing under two sections of the Custody Code. While grandparents and great-grandparents may have standing under 23 Pa. C.S. Section 5324, above, they may also have standing to seek partial physical custody or supervised physical custody of their grandchildren or great-grandchildren under 23 Pa. C.S. 5329. There have been changes to this section that will be effective July 4, 2018 as well. Case law previously struck the sections that allowed for grandparents’ standing if the parents of the child(ren) were separated for at least six months or were getting divorced. This is because it is unconstitutional for intact families and families that are not intact to be treated differently. The new revisions reflect that case law, and also strike those sections, but also added an additional section to allow for grandparent standing: 1. Where the relationship with the child began either with the consent of a parent of the child or under a court order and where the parents of the child: A. Have commenced a proceeding for custody; and, B. Do not agree as to whether the grandparents or great-grandparents should have custody under this section.
Essentially this change allows a grandparent or great-grandparent who has an existing relationship with the grandchildren or great-grandchildren to be added as a party to a custody proceeding when the parents of the child cannot agree if the grandparent or great-grandparent should have any custody.
The final change to 23 Pa. C.S. 5329 changes the word parent to party in the section for consideration of criminal conviction. The court must consider criminal convictions and make sure that there is no threat to the child(ren) before entering a custody order. This consideration relates to entering an order of custody to a party (not just a parent) who does have certain criminal convictions.
The timing of these changes to the custody law coincides with the rise of the opioid epidemic both nationwide and in the local area specifically. Sadly, there has been a rise in the past few years of parents battling drug addiction and unable to care for their children, to the extent that Pennsylvania legislators have felt compelled to address the impact of this crisis on minor children. These changes to the custody law increase the potential third parties who could seek to assume custody of the children in these situations. The changes in the law reflect the reality that some of these third parties may already be caring for the child, but did not have standing to file for physical and/or legal custody previously. As of July 4, 2018, they will be able to do so.
Prior to the tax act, taxpayers who required additional cash for a variety of reasons, including buying our their spouse’s interest in the residence, would regularly refinance the mortgages on their residence for a larger amount. The benefit was that the mortgage interest on the refinanced mortgage could be deducted up to a $1,000,000 cap.
The passage of the Tax Cuts and Jobs Act has effected a huge change limiting the mortgage deduction in this scenario, which may have a significant impact on parties going through a divorce. The new law limits the amount of the mortgage to funds needed to acquire a residence, construct a residence or substantially improve a residence. So, if you are refinancing for one of these allowable expenses, and stay below the $1,000,000 cap, the interest would still be deductible. However, in a divorce that is often not the case.
In a divorce, the party retaining the residence will have to refinance the loans related to the residence to remove the other party’s name. Often, this will be both a mortgage and a home equity line of credit. Moreover, the party retaining the residence often has to refinance for a larger amount to make a cash payment to the other party to “buy out their interest” in the house. With the new law, the parties refinancing the marital residence to take cash out to pay off the other spouse will be limited to the principal balance prior to the cash out refinance in terms of the interest that can be deducted. For example, if the principal mortgage balance is $300,000 and the party retaining the residence is refinancing for $500,000 to pay off the other spouse, they will be limited for purposes of the deduction to the interest on the $300,000. Interest on the additional $200,000 cannot be deducted. In addition, there will be no deduction when the mortgage is refinanced to now include the home equity line of credit. Parties are going to have to give more consideration to the tax consequences and resulting true cost of retaining the residence.