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Women Unchained: the Struggle to Secure a Jewish Get

by bvertz on Feb 19, 2012 • No Comments • , ,

Jewish women of the Orthodox faith may encounter obstacles unknown to most women when divorcing. A new documentary film, Women Unchained (2011), explores the plight of Jewish women to obtain a religious divorce, or “get.” Women whose husbands refuse to grant them a divorce,  known as “agunot” (from the Hebrew word meaning “chained”), cannot remarry in their faith and may be ostracized from their religious communities. Their husbands have learned to exploit their advantage for financial gain or simply vengeance. This problem faces Jewish women not only in Israel, where divorces may be governed by conservative rabbinical courts, but also in the United States and elsewhere. Even husbands who have committed adultery or domestic violence hold the keys to a Jewish religious divorce.

Women Unchained reveals the struggle of Jewish women who exist in limbo after civil divorce, and suggests strategies for overcoming their dilemmas. The film was one of the most-discussed features of last year’s J-Film, the Pittsburgh Jewish Film Festival. Now it’s available for sale from the National Jewish Film Institute (click here). Shot in New York, New Jersey, Chicago, Miami, Los Angeles and Israel, Women Unchained includes illuminating interviews with leading women’s rights advocates, rabbis and experts. The film provides helpful historical background on the state of women’s rights in Judaism and details of “get-o-nomics” and the outlandish extortion schemes levied against some women.

What is 2-2-5-5 Shared Custody?

by bvertz on Jan 26, 2012 • Comments Closed •

There are many ways to describe a custody arrangement. The new Pennsylvania custody law, enacted in 2011, defines the terms we frequently use in describing custody:

  • “Legal custody.” The right to make major decisions on behalf of the child, including, but not limited to, medical, religious and educational decisions.
  • “Partial physical custody.” The right to assume physical custody of the child for less than a majority of the time.
  • “Physical custody.” The actual physical possession and control of a child.
  • “Primary physical custody.” The right to assume physical custody of the child for the majority of time.
  • “Shared legal custody.” The right of more than one individual to legal custody of the child.
  • “Shared physical custody.” The right of more than one individual to assume physical custody of the child, each having significant periods of physical custodial time with the child.
  • “Sole legal custody.” The right of one individual to exclusive legal custody of the child.
  • “Sole physical custody.” The right of one individual to exclusive physical custody of the child.
  • “Supervised physical custody.” Custodial time during which an agency or an adult designated by the court or agreed upon by the parties monitors the interaction between the child and the individual with those rights.

Some parents ask me about “shared custody” of their children. What they mean varies from parent to parent. In the past, a custody arrangement was typically characterized by the children living with one parent during the workweek and spending weekends, vacations and holidays with the other parent. The law defined that arrangement as “primary physical custody” for the weekday parent, “partial custody” for the weekend parent, and usually, “shared legal custody” (the right to make major decisions concerning the child’s education, medical treatment, religious training, and other major issues). Some parents called that arrangement “shared custody” because both parents have physical custody from time to time. I call that a traditional custody arrangement. “Shared” can also refer to the right to participate in child-related decisions. Historically, the law referred to that right as “joint legal custody.” Now it is “shared legal custody.”

Over my twenty years in family law, I have witnessed a growing trend toward shared physical custody, meaning that the children spend part of every week with each parent. One form of “shared physical custody” is a 2-2-5-5 schedule. Using a calendar helps to understand this arrangement. For instance, the children might spend every Monday overnight and Tuesday overnight with Dad, every Wednesday overnight and Thursday overnight with Mom, and alternate weekends with each parent. Two days with Dad, two days with Mom, weekend with Dad, and then the beginning of the next week with Dad (5 days total); then two weekdays and the weekend with Mom (5 days total). This pattern repeats over and over throughout the year (except for holidays and vacations).

A 2-2-5-5 arrangement is favored by some parents because it creates a predictable routine for the kids. Kids will know where to be every Monday, Tuesday, Wednesday and Thursday. They only have to remember which parent’s weekend it is. This schedule also allows frequent contact with both parents. On the other hand, it does require more transitions than a “week-on, week-off” schedule.

No one can say for sure that 2-2-5-5 is better than week-on, week-off; or that shared physical custody is better than a traditional custody arrangement. That depends upon the best interests of the children and the specific circumstances of each family. But it helps to understand the terms.

3 Point Action Plan for Divorce

by bvertz on Nov 29, 2011 • Comments Closed •

When I meet with new clients, I listen to their unique circumstances, inform them about the legal framework in which their case will be resolved, and develop an action plan that is focused on three points:

1. Progress. Let’s face it: the legal process can be slow and expensive. A long separation and protracted litigation are generally not beneficial to anyone, especially children. That’s why it is so important to plan measurable progress toward a satisfactory resolution of the divorce or custody dispute, or possibly a reconciliation of the marriage. Sales executives have taught me that a goal can be broken down into smaller, more achievable milestones. So, one of the first steps that I take during my initial consultation with clients is to identify the first two or three milestones that will advance the progress of their case toward settlement, litigation, or reconciliation. Once we agree on those steps, we are on the path to a better future.

2. Control. Marital separation is a legal limbo: you’re not really married but you can’t move on with your life. Your finances are tied up. You can’t concentrate on business or family because you’re distracted. When I meet with new clients, I discuss solutions that will restore a measure of control over their lives, whether it is obtaining exclusive possession of a residence, freezing joint credit cards, establishing control over investments or business operations, or settling the case.

3. Sanity. Stress can be destructive for those who don’t have healthy coping mechanisms. Exercise, family and friends, or counseling are some of the better options for coping with the stress associated with marital separation and divorce.  I want to be sure my clients have a support system in place to overcome the challenges of marital separation and divorce. Change can be difficult, but it can be transformative. When I meet with new clients, we try to focus on positive changes that may improve aspects of their lives.

Double Dip and Goodwill Considered by Wisconsin Supreme Court

by bvertz on Aug 15, 2011 • Comments Closed •

Last month the Wisconsin Supreme Court weighed in on two issues that are important to family lawyers and their clients who operate professional practices like physicians, lawyers, dentists and accountants. In Marriage of McReath, the Wisconsin Supreme Court ruled that “saleable” goodwill would be considered marital property, in a case where a dentist argued that “personal” goodwill should not be counted as part of the marital estate. The Court also held that it was not double dipping to include the dentist’s business earnings as part of his income for post-divorce alimony, after dividing the fair market value of the business based on capitalized earnings.

Lawyers, judges and valuation professionals use many different terms – often imprecisely – to describe goodwill, the intangible value of a business that exceeds the value of hard assets like inventory, equipment and receivables. Some courts distinguish between “enterprise” goodwill and “personal” goodwill; other refer to “professioinal” goodwill. As lawyers and judges have advanced along the learning curve, their usage of these terms has improved. Still, the historical record remains a fertile source of confusion.

Wisconsin’s highest court, and the advocate who must have guided the Court’s analysis, Richard J. Auerbach, Esq., of Madison, admirably honed in on the most important aspect of goodwill: whether it is transferable to a buyer. In this case, the husband had purchased two dental offices for a purchase price of more than $900,000. Thirteen years later, Wife’s expert opined that the practice was worth just under $1.1 million and testified that much of the value would be associated with a noncompete clause. While recognizing that some of the saleable goodwill might be fairly characterized as “personal” goodwill, the Supreme Court refused to assume that personal goodwill is necessarily nontransferable. The fact that Husband purchased his practice from another dentist, in a transaction where most of the purchase price was allocated to goodwill, was proof enough that personal goodwill may be transferable.

Unfortunately, the Wisconsin court’s analysis of double dipping was not especially well-reasoned. The Court made little effort to rebut Husband’s argument that it should not include earnings from the dental practice in his income when determining post-divorce alimony, after having divided up the fair market value of the business based on capitalized earnings. The Court cited its own precedent where it cautioned about an inflexible application of the prohibition against double dipping, given the “infinite range of factual situations facing circuit courts in dividing property.” The Supreme Court found that a business is more like an income-producing investment than a pension.

Actually, that analogy does not hold up upon close scrutiny. The value of an investment is equal to the account balance on a particular date, and any interest income generated after that date would be counted as income to the owner of the investment because it can be consumed without decreasing the principal of the investment. If the interest or dividends generated by an investment are counted as income, there is no double dip. On the other hand, a pension is valued by taking the net present value of the future annuity payments. Theoretically, the value of the pension is diminished as payments are received. Therefore, pension payments cannot be counted as income if the pension has been divided as property.

Generally, a business is valued in the same manner as a pension. The value of the business is equal to the net present value of the cash flow or profits that the business generates. A business valuation is a hypothetical sale of the businessin which  the owner sells the business to a hypothetical buyer, who might retain the owner as a employee (paying “reasonable market compensation”) or simply hire a new employee to do the owner’s job. If the business is sold, the owner is not entitled to receive profits, so counting those earnings as income for alimony purposes is clearly double dipping. The Wisconsin court got it wrong.

To get even more sophisticated, the courts might have examined what a dentist like this gentleman was capable of earning as an employee of someone else’s dental practice. Alimony based on earning capacity would not be a double dip. It may be reasonable to believe that a professional could sell his practice and go to work for someone else. The salary that the professional could earn elsewhere might be equal to the “reasonable compensation” that a hypothetical buyer would pay to a replacement employee, or it might be more or less (depending upon the hours, duties and skills that the owner would bring to his new job).

Furthermore, the court might consider the investment return that the owner, having sold his business for cash, would earn on the sales proceeds. That argument might have gotten more traction ten years ago than today (when CD’s pay less than 1%) but it is still worth considering.

Why Hire an Expert for Child Support or Divorce Litigation?

by bvertz on Jul 19, 2011 • Comments Closed •

From my experience as a matrimonial lawyer, I can easily understand my clients’ perspective on legal and professional fees.  They want to spend as little as possible, and that is what I want for them. The more efficiently we can settle or litigate their divorce, the more money they will have to support themselves and their families. Not surprisingly, some clients are reluctant to incur the expense of hiring expert witnesses, such as real estate appraisers, forensic accountants, vocational evaluators and valuation experts. Yet, hiring an expert makes good sense if it will increase the chances of obtaining a favorable settlement or judgment: a larger share of marital property, a more accurate valuation, or a better child support or alimony order. Working hand in hand with my clients, our shared goal is to preserve their net worth and cash flow. Hiring an expert can be a good investment that does, in many cases, justify the expense.

In court, expert witnesses have certain advantages over lawyers and their clients: (1) they have expertise in a field or specialty that the client, lawyers, and judge may not have; and more importantly, (2) they can express opinions and the foundation on which their opinions are based, including hearsay. Unlike other witnesses, who cannot repeat out of court statements made by others, expert opinions are permitted to discuss their investigation of facts (including hearsay) and the result of scientific or specialized analysis or testing. Their special status in court allows expert witnesses to “connect the dots” between information from different sources, and to guide the judge in understanding its meaning. For instance, a vocational expert can testify about the employee’s qualifications, the relevant employment statistics, and how the employee fits into the job market. Even though the expert is a paid witness, most experts are viewed by the courts as objective witnesses. Without an expert, most clients could not offer sufficient evidence about certain subjects, like valuation, because some of the testimony necessarily would be hearsay. Expert witnesses can synthesize information, form opinions, and testify about them. In divorce settlements and litigation, that is the value that expert witnesses bring.

 

5 Settlement Documents that Divorcing Business Owners Must Have

by bvertz on Jun 8, 2011 • Comments Closed • , , , , , , , , , , , ,

When business owners get divorced, their settlement may have profound consequences for the business and other owners. Often, one spouse “sells” or gives up a share of the business to the other spouse. Since most small business owners do not have enough cash to pay a lump sum for that share, they might have to make installment payments over months or years. It is critical to structure the divorce settlement properly with documents that will minimize tax consequences, quantify and secure the payments to be made to the spouse who is leaving the business, and preserve the company’s ability to operate and obtain financing. These are the top five documents that a business owner should have when finalizing a divorce where a spouse is “selling” his or her share of the business to the other spouse:

1. Marital Settlement Agreement. Divorce courts rarely issue orders containing sufficient detail to adequately protect business owners who are divorcing. Settlement provides the best opportunity to resolve important financial and tax issues that a divorce court might overlook. A settlement agreement should contain a clear description of the stock, partnership or LLC membership units, and other business interests being sold or waived, how much is being paid, when it is being paid, and what happens if the payments are not made in full and on time. Unincorporated associations are tricky because their assets and liabilities are often intertwined with the owners’ personal assets and liabilities, so be as clear as possible. When setting the price, the business owner must consider whether the price is consistent with the value reported to tax authorities for estate planning purposes. The spouse who is making payments might be required to maintain enough life insurance, retirement assets, or investments to pay off the obligation in full upon death or default. The other documents related to the sale of the business (installment note, security agreement, etc.) can be attached to the marital settlement agreement and signed at the same time.

2. Installment Note. The installment note states the price that a business owner must pay for a spouse’s share of the business, the timing and amount of each installment payment, and the consequences for late payments or default. If the payments will be made over a period of years, the note might include interest (particularly for late payments). An acceleration clause might make the entire balance due immediately upon sale of the business, death, bankruptcy, or other major events. In some jurisdictions, a confession of judgment clause might avoid the delay and expense of a collection lawsuit if there is a default. The majority owner might be required to provide a personal guarantee. The note can also be secured by a mortgage against real estate or lien on business assets, such as equipment and receivables.

3. Mortgage/Security Agreement. An installment note can be secured by a mortgage against real estate or lien on business assets, such as equipment and receivables. The lien against business assets can be recorded publicly by filing a UCC-1. In some cases, the business might want to subordinate the mortgage or security agreement so that trade creditors and lenders who demand higher priority will not withdraw their credit.

4. Pledge of Stock. A pledge agreement creates a lien on the stock of the business. The pledge agreement might contain representations and warranties about the financial condition of the business or give the selling spouse a right to vote the pledged stock or inspect the books until paid off. If dividends or distributions are paid, the pledge agreement might direct the proceeds to be paid toward the loan. The pledge can also restrict the sale, gifting or dilution of the stock.

5. Consent and Waiver. If the business owners have previously signed a buy-sell agreement or right of first refusal, giving the company or other owners a right to buy their shares, then they should probably obtain the consent of those other owners before transferring stock between themselves. A consent and waiver confirms that the company and other owners will not exercise their rights when divorcing spouses transfer their stock.

Homeschooling Children Does Not Justify Alimony, says Superior Court

by bvertz on Mar 19, 2011 • Comments Closed • , , , , ,

In Kent v. Kent (March 18, 2011), the Superior Court of Pennsylvania rejected a parent’s argument that she should be entitled to collect alimony for a period of eleven years so that she could continue to homeschool the parties’ minor children. It was undisputed in this case that the mother had withdrawn from the workforce five years earlier in order to home-school the parties’ children, which she continued to do up to the date of trial. The wife had resigned her position as a teacher and began to collect a reduced public pension in order to supplement the family’s finances. The husband argued that homeschooling was not a joint decision and did not require so much of wife’s time as to prevent her from working. The trial court awarded alimony to wife for a period of three years rather than the requested eleven years.

On appeal, the Superior Court cited the paucity of controlling case law. The Court observed that a body of law concerning the payment of private school tuition (Fitzgerald, Gibbons, et al) did not control, since those cases were governed by the child support guidelines, not the statutory alimony criteria (where a spouse’s ability to become self-supporting through appropriate employment is paramount). Instead, the Court relied upon a decision of the Arkansas Supreme Court, holding that alimony was appropriate where the homeschooling parent had no employable skills, education or experience.

Examining the wife’s work history in this case, the Superior Court affirmed the trial court’s finding that the homeschooling wife was capable of returning to work within three years. The Court also endorsed the husband’s reasoning that economic decisions made during coverture might no longer be viable when an intact family breaks into two separate households. The Court emphasized that its decision was not motivated by a policy against homeschooling, but a simple affirmance of the trial court’s application of statutory criteria.

Divorce – Your First Legal Strategy Decisions

by bvertz on Feb 17, 2011 • Comments Closed • , , , , , , ,

The initial weeks of a marital separation are probably the most turbulent, uncertain part of the divorce process. The first few choices that spouses must make when they are contemplating divorce are important legal strategy decisions that require thoughtful consideration. Your divorce lawyer can help to assess the risks and possible consequences of those initial decisions.

1.   Move out or stay put? Pennsylvania doesn’t recognize a legal separation as some states do. Still, it is possible to be separated in the eyes of the law while living together under the same roof. A spouse who moves out must decide where to move, whether to take the children or property, and how the move might affect finances and custody arrangements. Spouses who stay put must be prepared to pay expenses for the marital residence during the separation period, as well as the possibility that the other spouse might refuse to move away, creating an uncomfortable standstill.

2.  File divorce or wait? Filing a divorce action is important in some cases where there is a need for the court’s assistance in freezing bank accounts or credit cards, obtaining financial records, or seeking exclusive possession of the marital residence. On the other hand, there may be a financial advantage in simply collecting support during the separation period without starting a divorce battle.

3.  Attempt reconciliation or stay apart? Repairing a broken marriage isn’t easy, but some have done it. Still, attempting to reconcile may have unintended legal consequences that must be considered. Reconciliation might delay the official separation date, which affects the value of marital property and the ability to finalize a divorce. The law generally does not permit spouses to have it both ways by preserving a separation date while attempting to reconcile. Some couples sign post-nuptial agreements to settle their financial disputes in case their reconciliation does not work out.

4.  Withdraw funds or leave them? Joint bank accounts and credit cards are common battlegrounds in the initial phase of divorce. Making withdrawals from joint accounts or charges on joint credit cards might be viewed as a hostile tactic, but a spouse who would otherwise be penniless might have no other choice. Conversely, raiding a joint account might deplete the good will needed to work out a settlement.

5.  Who to trust? Trust is one of the first casualties of divorce, so you need to find reliable allies. Consider supportive friends and family members who are able to keep your confidences and empathize with your feelings. Physical activities like exercise can reduce stress more effectively than alcohol or junk food. Hire a family lawyer that you feel comfortable with. It is important to understand what your lawyer is saying and to be heard when you speak to your lawyer. Consider lawyers who concentrate their practice in divorce and know the nuances of this complex area of legal practice.

Iowa Rejects Rule of Thumb Business Valuation in Divorce

by bvertz on Feb 11, 2011 • Comments Closed • , , , , , , ,

A recent decision of the Iowa Court of Appeals illustrates the perils of reliance upon industry rules of thumb to value a business in matrimonial litigation. In Marriage of Hagar (11/24/2010), husband and wife purchased a dry cleaning business from a trust established by husband’s parents as part of a business succession plan. Husband and wife agreed to a $300,000 purchase price that was determined by the companies’ accountant. The trust took a promissory note for the purchase price. The opinion does not describe the technique by which the accountant estimated the company’s value, but there were adjustments to normalize the excess rent and excess interest paid by the dry cleaning business to the real estate company (which the parents’ trust continued to own).

Over the years, the dry cleaning business struggled. The payment terms were modified to maximize the seller/parents’ tax benefit and to accommodate the buyers’ inability to pay the notes. For instance, the dry cleaning business began to make quarterly distributions to pay the notes in lieu of salaries for husband and wife. When husband and wife separated, the distributions ceased entirely. The promissory note from husband and wife to the trust was reduced from $300,000 to $160,000 over the course of the marriage.

In the equitable distribution trial, the company’s accountant estimated the current value of the operating company based on industry rules of thumb. He testified that the range of values was between $71,000 and (-$120,000). He further testified that his range of values was not based upon his professional judgment, but simply an application of industry rules of thumb.

The trial court misconstrued the accountant’s testimony, finding that the business was worth the mid-point between $120,000 and $71,000. On appeal, the Court of Appeals held that a better measure of value was the equity created by the buyers’ paydown of the note: $140,000. The appellate court held that rules of thumb are too unreliable in cases where insider/family transactions might skew the data used in the calculation. An actual transaction, such as the husband and wife’s purchase of the business less than ten years prior to the trial, was deemed more reliable.

Divorce and Guns – Can They Backfire?

by bvertz on Jan 28, 2011 • Comments Closed • , , , , , ,

A recent decision by the Superior Court of Pennsylvania, Smith v. Yusavage (unpublished), got me thinking about the problems surrounding gun ownership for spouses facing marital separation or divorce.

In Smith, one of the unmarried partners filed a Petition for Protection from Abuse (PFA) seeking a restraining order and eviction from their shared residence. Most of the allegations of abuse sound like the kind of shouting matches that might occur from time to time in many relationships. One striking feature of the testimony, however, was that one of the partners applied for a concealed weapons permit, and the other partner would not support the application because of safety concerns. This evidence, in my mind, seemed to convince the judge to issue the restraining order. The Superior Court affirmed.

(In an interesting side note, the Superior Court refused to consider the arguments made in pages 71-122 of the defendant’s brief because they exceeded the 70 page limit imposed by appellate procedural rules.)

I have seen cases where firearms mysteriously disappear after a marital separation, probably because they have been disposed by a spouse who is fearful. More than once I have heard of valuable guns being thrown into the trunk of a car without proper care and handling, diminishing their value. And Smith demonstrates that judges might be cautious about guns and their owners in the context of heated marital disputes.

My advice: if you are facing marital separation or divorce, consider whether to store the guns in a locker at a sporting club or a gun dealer, away from the marital residence. At the very least, if you keep them in your home, be sure they are properly stored under lock and key, away from children, where they do not present a threat to anyone. Your guns can be used against you, even if they are never fired. If the guns are registered in your name, and your spouse disposes of them improperly, could you be connected with their misuse in someone else’s hands? Will improper gun storage have an impact on your custody request? Can you satisfy a judge that there is no chance that your guns could be used to harm anyone? These questions are worth considering.