The Ins and Outs of Cohabitation & Divorce Law

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Breaking up is hard to do, whether from a marriage or a long-term relationship. The legal differences, however, can …

Breaking up is hard to do, whether from a marriage or a long-term relationship. The legal differences, however, can
be viewed as either a blessing or a curse. Ending a marriage, both parties are protected by the state’s legal rules.
When unmarried, issues are less clear and the responsibility of coming to an agreement primarily falls on individual couples’ shoulders.

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  • 1. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM The Ins and Outs of Cohabitation and Divorce Thomas J. Petrelli, Jr., Esq. Petrelli Law, P.C. www.petrellilaw.com Thomas J. Petrelli, Jr. presented the following presentation about PA law for unmarried couples April 2013 to the Philadelphia Legal Secretaries Association. Tom Petrelli’s goal is to help families overcome the difficult legal matters that arise with divorce, child custody, premarital agreements, and domestic violence. © 2013 | Petrelli Law, P.C. | 1845 Walnut Street, Suite 1600, Philadelphia, PA 19103 | (215) 523-6900
  • 2. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships Content What Unmarried Couples Need to Know About Ending Relationships .............. 4 What Will Happen to Your Pennsylvania Pet If You Divorce? .............................. 11 Why Prenups are Important Planning Tools for Many Couples ........................... 13 Retirement Plans and Divorce .............................................................................. 16 Marriage and Your Partner’s Debt: How to Protect Yourself ............................... 20 Adoption of Step-Children and Subsequent Divorce ........................................... 21 The Gray Areas of Family Law In this session, we will cover some of the less-common issues that present themselves in family law practice, including: What Unmarried Couples Need to Know About Ending Relationships What Will Happen to Your Pennsylvania Pet if You Divorce Why Prenups are Important Planning Tools for Many Couples Retirement Plans and Divorce Marriage and Your Partner’s Debt: How to Protect Yourself Adoption of Step-Children and Subsequent Divorce © 2013 | Petrelli Law, P.C.      
  • 3. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships What Unmarried Couples Need to Know About Ending Relationships Breaking up is hard to do, whether from a marriage or a long-term relationship. The legal differences, however, can be viewed as either a blessing or a curse. Ending a marriage, both parties are protected by the state’s legal rules. When unmarried, issues are less clear and the responsibility of coming to an agreement primarily falls on individual couples’ shoulders. © 2013 | Petrelli Law, P.C.
  • 4. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships If the couple co-owned property together, they will need to decide who gets what. © 2013 | Petrelli Law, P.C.
  • 5. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships Couples need to be more creative, and have to look at areas of the law such as contract law and property law. An example: John and Janet break up. They have lived together in John’s house for five years, But only John’s name is on the deed; However, Janet has been paying half the monthly mortgage payments. If John does not agree to reimburse Janet for her share of the mortgage payments, what are Janet’s options? © 2013 | Petrelli Law, P.C.      Janet’s options: Argue they had an implied contract that she would get something in return for her payments beyond the right to live in the house I.e. – her payments entitled her to an ownership interest in the equity in the house and were not just rent payments Seek a partition of the property to enforce her right to reimbursement for her payments   
  • 6. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships © 2013 | Petrelli Law, P.C. Regarding property, couples cohabitating in a shared home when breaking up will need to consider: House – transferring title via a new deed and refinancing the mortgage if both names are on it Transferring deed Taxes Real estate transfer taxes Gift tax if no consideration Taxes apply because the couple is not married (unmarried couples do not get the same tax benefits as married couples)       If the couple chooses to sell the co-owned home: If own as tenants in common, get share of proceeds proportionate to ownership interest If joint tenants with rights of survivorship, assume split 50/50 but want an agreement in writing Things to consider: Did the parties previously enter into an agreement as to who gets what share of proceeds in event of break-up? Credits to person who paid the down payment? How did they share the mortgage payments?     
  • 7. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships If the couple cannot reach an agreement regarding the sale of the house, they can resort to a partition proceeding. © 2013 | Petrelli Law, P.C.
  • 8. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships © 2013 | Petrelli Law, P.C. Additional items to consider when splitting up as an unmarried couple: Jointly-held bank accounts Shared apartment: A couple can agree to break their lease, or remove one party’s name from the lease   Splitting up possessions Courts in Pennsylvania do not have power to divide the property of unmarried couples as they do for married couples Big ticket items that both people paid for (i.e. electronics such as televisions and computers, furniture, artwork) must be agreed upon between the couple  
  • 9. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships © 2013 | Petrelli Law, P.C. Does the couple have children together? Informal custody arrangements can work, but it is highly advisable to get a written custody agreement If there is no written agreement, have to go through courts Is one party moving out of the area? Pennsylvania has a relatively new relocation statute that    requires notice of the move and allows the other parent to object – if there is a dispute, have to go before a judge – Judge considers many factors – safety and crime rates of the two areas, reasons for move, financial benefits to child, school systems, etc.
  • 10. PA & NJ MAT R IMONIAL T R IAL AT TORNE Y S * A Member of SWPDM What Unmarried Couples Need to Know About Ending Relationships 10 © 2013 | Petrelli Law, P.C. Life Insurance Beneficiary Designations – Retirement accounts, etc. – make sure to change your beneficiary designations – Wills – if your ex was a beneficiary in your will, and you want to remove him/her, make sure to do it promptly  Does Common Law Marriage still exist? Became invalid after January 1, 2005 Common law marriages that were contracted on or before January 1, 2005 were grandfathered in as marriages. 23 Pa. C.S. § 1103   Requisites for common law marriage: – Can only be created by an exchange of words in the present tense, to establish husband-wife relationship – Constant cohabitation – A “reputation of marriage” (i.e., other people think you’re married) Courts disfavored common law marriages, difficult to establish  
  • 11. What Will Happen to Your Pennsylvania Pet If You Divorce? 11 What Will Happen to Your Pennsylvania Pet If You Divorce? Many people consider their pets members of the family However, pets are treated as personal property by Pennsylvania courts – Resolve future pet ownership in divorce proceedings via a Property Settlement Agreement Cannot petition for “custody” of your pet Pets are not subject to custody or “visitation” agreements Best for parties to resolve the issue of who will keep the pet between themselves © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC     
  • 12. What Will Happen to Your Pennsylvania Pet If You Divorce? 12  A PA Court addressed a divorce © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC When negotiating an agreement, consider: – Who can better provide for the pet’s needs? Who has more time to care for the pet? More room available? – Are there children involved who have bonded with the pet? Reliance on the pet to accommodate special needs? – Who has primary custody of those children? settlement agreement that provided for shared possession of a family dog. DeSanctis v. Pritchard, 803 A.2d 230 (Pa 2002) Wife kept the dog, but husband was allowed to visit Husband petitioned the court to enforce the agreement when wife moved away Court determined dog was property. Explained that the parties’ visitation agreement for the dog was synonymous to a visitation agreement for a table or a lamp Court did not enforce the agreement pertaining to visitation of the dog    
  • 13. Why Prenups are Important Planning Tools for Many Couples 13 Why Prenups are Important Planning Tools for Many Couples Prenups, often referred to under the law as premarital agreements, make it possible for soon-to-be spouses to agree as to how they will split their assets should they divorce someday. Couples can thus contract around what a state court would otherwise determine in terms of how they should divide their property. © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC
  • 14. Why Prenups are Important Planning Tools for Many Couples 14 © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC There are some common situations when couples sign a prenup, such as: If one spouse is significantly wealthier than the other If both spouses have substantial income and assets at the time of marriage. This is especially true today, when couples are waiting longer to get married and are more likely to have a high paying job, own a house, or have received an inheritance. A prenup is a good way to organize a complex assortment of property and to keep assets earned prior to the marriage separate. If one spouse has helped the other earn an advanced degree which will contribute to significant earned income (i.e. legal or medical)    Another benefit to signing a prenup is that it forces newlyweds to disclose their full financial situations and discuss them with each other, disclosing possible surprises during marriage. A prenup is also a good idea if one spouse enters the marriage with large amounts of debt (from student loans, major credit card debt) or if one or both spouses have children from a prior marriage.  
  • 15. Why Prenups are Important Planning Tools for Many Couples 15  If you are planning a marriage, you © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC Couples can use prenups as an estate planning tool, whereby they agree to waive what is called an “elective share.” When one spouse dies, the elective share is the portion of the deceased spouse’s property to which the surviving spouse is entitled. Sometimes spouses agree to waive their right to the elective share, for example if one spouse already has enough wealth or if the spouses plan to provide for each other through other means such as life insurance. should discuss the possibility of a prenup with your fiancé and an attorney. You should have these conversations early, as courts are suspicious of prenups signed within a couple of months before the marriage date. 
  • 16. Retirement Plans and Divorce 16 Retirement Plans and Divorce A big part of the divorce process is dividing up the property the spouses had during the marriage - lawyers call this equitable distribution of marital property Along with houses and bank accounts, retirement accounts are another class of property that often gets divided during divorce Reasons why retirement accounts get divided during divorce: One spouse has significantly greater retirement savings than the other, either because one spouse didn’t work or one spouse had a job that provided them with better retirement benefits than the other – giving some of these savings to the other spouse guarantees that spouse some retirement proceeds to which he or she could have had access to had the parties remained married There are not enough liquid assets available to achieve a fair split of the parties’ wealth – For example, this may be if the only significant assets are a house and a © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC retirement account In some cases a retirement account is the biggest asset of the marriage      
  • 17. Retirement Plans and Divorce 17  A law firm prepares the QDRO, © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC Qualified Domestic Relations Orders (QDROs) – Normally if you take out funds from your retirement account prior to retirement, you are taxed on the withdrawals and owe penalties for premature withdrawals – You can avoid taxes and penalties if you have the funds distributed via a QDRO • Both the states and IRS have provisions for QDROs – in section of IRC explaining ERISA rules both spouses sign it, and it is then filed with the Court, Court issues it as a court order, enforceable through the courts 401(k)s and defined benefit plans must be transferred via QDRO IRAs do not have to be, but can be done via QDRO – if not, you must make sure to include specific language referencing section 408(d)(6) of the Internal Revenue Code   
  • 18. Retirement Plans and Divorce 18 © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC It is important to including the right language in your Property Settlement Agreement. Write out that funds will be transferred via a QDRO Include the cut-off date which will be used for calculating the amount subject to distribution – Date of separation? – Date of the property settlement agreement?   Beneficiary Designations Can change them via a QDRO If no QDRO, make sure to change the beneficiary(ies) – In a 2009 case (Kennedy v. Plan Administrator for Dupont Savings & Investment Plan), the U.S. Supreme Court held that a deceased man’s ex-wife, and not his current wife, was entitled to his retirement proceeds because he did not remove his first wife from the beneficiary designation  
  • 19. Retirement Plans and Divorce 19 © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC Ensuring the division of retirement assets happens according to plan: Problems can arise if the distribution of assets is not made promptly Often happens after the divorce decree is issued – this is fine   But, if wait too long, risk the chance that account holder removes retirement assets, for example due to unemployment, and not enough are left to distribute according to the agreement (this has happened to a client recently) 
  • 20. Marriage and Your Partner’s Debt: How to Protect Yourself 20 Marriage and Your Partner’s Debt: How to Protect Yourself Community Property v. Common Law States Pennsylvania is a Common Law State © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC Debts incurred prior to the marriage is separate debt Debts incurred during the marriage – If debt incurred by one spouse in their name only, it typically belongs to that spouse alone Who signed for the debt? – Is your name on the account? / Did you co-sign for the loan? – Caveat: Separate debt incurred for joint benefit    How to protect your credit – Credit reports Caution: A word about refinancing one spouse’s pre-marital debt Equitable distribution – What happens to the assets? The debt? – What is marital? What is separate?   
  • 21. Adoption of Step-Children and Subsequent Divorce 21 Adoption of Step-Children and Subsequent Divorce © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC Pennsylvania’s Adoption Act Effect of Adoption – Termination of parental rights • Voluntary / involuntary termination – Severs legal relationship with the entire biological family – Creates new legal relationships with adoptive family   Open Adoption vs. Closed Adoption States Post Adoption Contact Agreements – Voluntary agreements for continuing contact/ communication Now enforceable in PA (Act 101 of 2010)   
  • 22. Adoption of Step-Children and Subsequent Divorce 2  If you adopt your step-child © 2013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC Subsequent divorce has no effect on the adoption of step-child – Legally, the child remains the child of the adoptive step-parent – The relationship between child and step-parent is permanent after adoption and cannot be reversed by a subsequent divorce from the biological parent – You are assuming the legal responsibilities – You are assuming the financial responsibilities – Child will have the same rights & responsibilities as a biological child 