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Penna. Child Support Law Not Pre-Empted by Social Security Act, Court Holds

by bvertz on Oct 11, 2009 • Comments Closed • , , , , ,

The Superior Court of Pennsylvania granted reargument en banc to the litigants in Silver v. Pinskey (2009), to consider whether Pennsylvania’s child support law might be pre-empted by the federal Social Security Act, precluding the trial court from ordering the parents to share the children’s derivative benefits. In this case, the mother initially had primary custody of two teenaged children following the parents’ separation. The mother was initially designated as the representative payee of the children’s Social Security benefits derived from their father’s retirement. Later, father won equally shared custody and was designated as the representative payee. The trial court ordered father to share half of the children’s Social Security derivative benefits with mother, noting that the Pennsylvania guidelines do not address the situation where an obligor is receiving such benefits. The Superior Court initially vacated the trial court’s order, prompting Father to request reargument, which was granted.

On reargument, Father argued that the Pennsylvania courts lacked subject matter jurisdiction to order him to share the Social Security derivative benefits with mother. He also argued that the trial court misapplied the criteria for granting a deviation from the support guidelines due to “other household income.” The Superior Court en banc held that it was not deprived of jurisdiction, as it had not altered the designation of the benefit payee. The Court also held that the Social Security benefit could be properly considered as grounds for a deviation from the child support guidelines. Yet, the Court held that the trial court had erred by ordering father to share the Social Security benefit while setting child support at $0. The Superior Court regarded this result, however well-intentioned, as “bordering” on violation of federal law. Consequently, the Court remanded to reconsider the child support guidelines.

Several other issues raised by Father were dismissed by the Superior Court. Specifically, Father argued that the trial court had no authority to order him to pay his proportionate share of medical insurance provided by the mother’s spouse or extracurricular activities including gymastics, softball, baseball, basketball, summer camp, and piano lessons. The Superior Court saw no merit in these arguments.

Child Support Modification: Lay Your Cards on the Table?

by bvertz on Sep 21, 2009 • Comments Closed • , , , , ,

This week I reviewed a recent decision by one of our Allegheny County judges, regarding modification of child support. Kozel v. Kozel, No. FD98-00761 (Allegheny Co., June 30, 2008).

After a decade of litigation following a four year marriage, the Supreme Court of Pennsylvania denied Wife’s petition for allowance of appeal seeking a review of the child support award and alimony pendente lite, as well as equitable distribution of marital property. Five months later, Mother filed a Petition for Modification of Child Support, alleging “the children’s monthly expenses have increased.” Father moved to dismiss the petition, arguing that it was not legally sufficient to state a claim warranting a hearing. The trial court agreed and dismissed the Petition for Modification. Mother filed a Petition for Reconsideration, alleging “the children’s monthly expenses have increased, including all expenses listed on Mother’s budget from the last support proceeding.” Mother attached the budget from the previous support proceeding without modification. The trial court denied reconsideration.

In her Opinion, Judge Kathryn Hens-Greco cited Rule 1910.19, which requires petitioners to “specifically aver the material and substantial change in circumstances upon which the petition is based.” Mother argued that the pleading rules do not require parties to present their evidence before trial and allow discovery to build a claim based upon information and belief.

In this author’s opinion, the decision reflects a reasonable concern on the part of the trial judge that she could not measure the materiality of the alleged change in circumstances. As she noted, many of the expenses on Mother’s budget were disallowed in the prior proceedings. If the increase in Mother’s expenses were solely or primarily due to the disallowed expenses, then perhaps no modification would be warranted and the petition might be viewed as an attempt to relitigate the appeals. Perhaps Mother’s request for modification would have been permitted had she alleged increases in the expenses that were not disallowed. On the other hand, how much should petitioners be required to plead? Will factfinders restrict petitioners to the specific grounds they plead?

Budget is Battlefield in High-Income Child Support Cases

by bvertz on Sep 2, 2009 • Comments Closed • , , , , , , ,

The Superior Court of Pennsylvania held, once again, that the budget is the most important element of a Melzer child support case — that is, a high-income case where the guidelines do not apply. Under Pennsylvania law, the child support guidelines govern cases where the parents’ combined net incomes are $20,000 per month or less. Yet, in those high-income cases above $20,000 per month, the guidelines are irrelevant except to set the minimum level of child support. In high-income cases, the courts must analyze the parents’ budgetary expenditures to determine the proper amount of child support.

A recent case, Rich v. Rich (2009), demonstrates how important the budget can be in high-income cases.  The aptly-named patriarch of this family provided the standard of living that only a ten-figure salary can afford. Father earned $9 to $10 million per year as the CEO of a coal company. During the marriage, the family lived in a 10,000 square foot home on 150 acres with an indoor pool and amenities. The family traveled worldwide on vacations and spent summers at homes in Florida and the Jersey shore. After separation, Mother purchased a modest home and moderated her lifestyle. She did not submit a detailed budget when she applied for child support. Instead, she pointed to the Father’s affluent lifestyle as an indicator of how much she should receive.

When Mother was awarded an amount of child support equal to nearly 100% of her expenditures, she complained because it was just 2% of the Father’s income. She reasoned that she should receive more like 15%. The Superior Court disagreed, holding that Mother should have proven that she was actually spending that much.

Kurt Angle Case Illustrates Pros and Cons of PFA Law

by bvertz on Aug 26, 2009 • Comments Closed • , , , , , ,

Local professional wrestler and former Olympian Kurt Angle has been charged with violation of a Protection from Abuse (PFA) order. His lawyer says that the charges are completely unfounded. His lawyer also attacks the law that allowed Angle’s girlfriend to bring the charges:

Unfortunately, the PFA process allows women (and men on occasion) to fabricate a tale to intake individuals within the court system without any corroborating evidence whatsoever, and the result is that innocent people are served with PFAs that did not do anything.

In Kurt’s case, that is precisely what happened. The woman involved has no injuries, was not threatened, and absolutely no conflict occurred.

We are confident that once a court actually hears the evidence, the PFA will be dismissed. 

The Angle case illustrates why people who are involved in a marital separation or breakup need to understand the PFA law. Victims of domestic violence need to know that there is a law to protect them. The PFA law affords protection to people who suffer from threats, intimidation and stalking, as well as physical abuse.

On the other side of the coin, people who have anger issues need to know that they could become targets of the law and suffer criminal sanctions if they act out toward spouses, children or relatives. This is why it may be hazardous for someone with a foul temper or demonstrative personality to live in the same house with an estranged spouse during separation. You can be liable under the PFA law even if you do not intend to carry out your threats.

Perhaps the PFA law is suspectible to abuse by some who seek its protection. After all, the PFA law permits a victim (real or imagined) to obtain a court order secretly without giving notice to the perpetrator, who may be evicted from the home and banned from contacting the the victim for up to three years. But the law assumes that the protection afforded to real victims of domestic violence outweighs the potential for fraud, and eventually, everyone has his or her day in court.

Including Kurt Angle, I suppose.

Is Private School Better than Public, and Who Pays?

by bvertz on Aug 25, 2009 • Comments Closed • , , , , , ,

The Superior Court recently considered the case of Murphy v. McDermott (2009), in which the Court was asked to consider whether the unmarried father of a child should be required to pay parochial school tuition. Prior to the outbreak of child support litigation, Mother unilaterally enrolled the child in parochial pre-school, a decision that Father opposed but acquiesced in. When Mother enrolled the child in private kindergarten, Father was roused from complacency and refused to pay. Mother sued him for child support, including private school tuition, and won.

On appeal, the Superior Court considered the two-pronged test previously established by the Pennsylvania courts: (1) whether the child would benefit from private school; and (2) whether the expense was consistent with the standard of living established prior to separation. (Note that the parents never lived together.)  Father argued that the public school should not be presumed to be inferior, and that public school offered more programs than parochial school. The Superior Court held that it would not overrule the trial court’s finding that parochial school would benefit the child, nor its finding that Father could afford the expense. One of the Superior Court judges wrote a strong dissent, expressing his opinion that public schools should not be denigrated.  In fact, the dissenting judge would have created a presumption that public schools are adequate unless the parent seeking private or parochial school could prove a deficiency.

Parent Who Concealed Income Increases Must Pay Legal Fees

by bvertz on Aug 18, 2009 • Comments Closed • , , , , , , , ,

In Krebs v. Krebs (“Krebs II”), 2009 WL 1759726 (Pa.Super. 2009), the Superior Court of Pennsylvania considered whether to award legal fees to a parent who won modification of child support from the other parent, who had concealed increases in his income. This recent decision arose from an earlier case (Krebs v. Krebs (“Krebs I”), 944 A.2d 487 (Pa.Super. 2008)), in which the Court granted retroactive modification for a period prior to the filing of a modification petition due to the payer’s misrepresentation.

Krebs II was a divided decision. The majority ordered Father to reimburse 100% of Mother’s legal fees, or $15,408, to recover $72,603 in child support. The Court remarked about the extensive legal research; drafting of stipulations, briefs and concise statements; court appearances; and negotiations conducted by the Mother’s legal counsel as a direct result of the Father’s fraudulent concealment of his income increases.

A dissenting opinion filed by Judge Klein, however, may have the effect of limiting the majority’s ruling to its facts. Judge Klein wrote that he would have remanded for a more careful examination of the Mother’s legal fees, noting that the trial court found them to be excessive.

Post-Mortem Child Support

by bvertz on Jul 1, 2009 • Comments Closed • , , , , , , , ,

For decades, the law of Pennsylvania has been clear: the estate of a deceased parent has no obligation to pay child support for minor children in the absence of an agreement. In re Fessman Estate, 386 Pa. 447, 126 A.2d 676 (1956); Garney v. Estate of Hain, 653 A.2d 21 (Pa.Super.1995). Efforts to pass legislation that would impose a support duty upon the estates of deceased parents have failed.

In cases where a child support order was entered prior to the death of a parent, our Courts have been unwilling to continue the obligation after the parent’s death. Benson ex rel. Patterson v. Patterson, 782 A.2d 553 (Pa.Super.2001). The Superior Court’s decision in Benson, as in many other states, held that it would be an impermissible interference with the deceased parent’s testamentary wishes to impose an obligation not specifically agreed during the parent’s lifetime.

In March, the Superior Court of Pennsylvania considered Estate of Johnson, 970 A.2d 433 (Pa.Super.2009), a case in which a parent agreed to pay child support as part of a marital settlement agreement. The agreement specified that child support would terminate when the children were 18 years old, but it was silent as to whether it would end upon the death of the parent who was paying. The agreement also contained a standard clause specifying that the agreement would bind the estates, heirs, successors and assigns of the spouses.

Perhaps surprisingly, the Superior Court held that the child support provisions of the marital settlement agreement were binding upon the deceased parent’s estate, since the agreement did not explicitly terminate the obligation upon the parent’s death. The estate of the deceased parent argued that the surviving parent could have received life insurance proceeds if she had complied with other provisions of the agreement, and waived child support by failing to comply with the life insurance provisions. The Superior Court was unpersuaded, holding that the estate was liable for child support until the minor child was 18 year old.

Divorce Planning: Time to Defer Bonuses?

by bvertz on Jun 11, 2009 • Comments Closed • , , , , , , ,

Columnist Amy Feldman wrote an interesting article in this week’s Business Week entitled, “When to Take the Money.” June 30 is the deadline for executives to decide whether to defer this year’s performance bonuses to qualified plans. Ms. Feldman’s column suggests how to decide.

Take-home Pay Is Not the Measure of Child Support

by bvertz on Jun 8, 2009 • Comments Closed • , , , ,

In Pennsylvania, child support is based on the net incomes of the parents, so it shouldn’t be difficult to figure, right? Um, wrong.  It might seem as simple as looking at a W-2 or pay stub, or perhaps a tax return, to figure each parent’s net income, but child support is not based on take-home pay. The definition of income under the child support law includes more and less than taxable income. Here are some (but not all) of the differences between take-home pay and net income:

1. 401(k) contributions – On a pay stub, 401(k) contributions are deductions that reduce an employee’s net income. In divorce court, however, 401(k) contributions are added back to a parent’s income in most instances. In fact, if an employer makes unmatched contributions to the parent’s 401(k) plan, those contributions might be added to the parent’s income even though it is not take-home pay.

2. Disability insurance, life insurance, savings bonds – Some employees elect to pay for group disability or life insurance policies through pretax deductions, or defer part of their income into savings bonds and credit unions. These elections reduce their take-home pay, but the divorce court generally adds it back to net income.

3. Restricted stock – When restricted stock vests, it is generally reported as income on a pay stub or W-2. If the restricted stock was issued prior to separation, however, it might be marital property. The restricted stock can be considered as income for support purposes, or property for equitable distribution purposes, but not both. Therefore, restricted stock is excluded from net income in some cases.

4. Pass-through income – An owner of a business organized as a partnership or  Subchapter “S” corporation receives an annual K-1 form which reports his or her share of the business income. In reality, the business might not distribute the partner’s entire share of profits. Some businesses distribute just enough to enable the partner to pay his or her taxes. In divorce court, the retained earnings of a business may be excluded from the owner’s income if they were not actually distributed and the owner does not own a controlling interest.

Basics of Pennsylvania Law: Double Dip, Part I

by bvertz on May 27, 2009 • Comments Closed • , , , ,

The concept of a “double dip” is logical and intuitive. If an income-producing asset has been awarded to a party in equitable distribution, the same asset cannot be counted as a source of income from which alimony may be paid. For instance, a pension in pay status cannot be counted as income for alimony purposes if it was also a marital asset that has been divided in equitable distribution. This concept has been recognized and adopted by the Pennsylvania courts at the trial and appellate levels. Butler v. Butler, 541 Pa. 364, 663 A.2d 148, 156 (1995)(professional goodwill); Diament v. Diament, 816 A.2d 256, 277 (Pa.Super.2003)(advance of marital assets); Miller v. Miller, 783 A.2d 832 (Pa.Super. 2001)(proceeds from sale of marital property); Rohrer v. Rohrer, 715 A.2d 463 (Pa.Super. 1998)(retained earnings of a business); Kokolis v. Kokolis, 83 Pa.D. & C.4th 214 (Ally. 2006)(pension in pay status), affirmed, 927 A.2d 663 (Pa.Super. 2007); cf. McFadden v. McFadden, 563 A.2d 180 (Pa.Super.1989)(pension in pay status).

This post is the first of a series describing Pennsylvania case law concerning the double dip.

Berry v. Berry, 898 A.2d 110 (Pa.Super.2006).

The husband in this case was terminated from his employment as a partner in an accounting firm just weeks after the commencement of a support claim within a divorce action. Upon his termination, the husband received a distribution of his partnership capital account plus a cash severance payment equal to seven months’ base salary. The wife argued at the trial court level that neither of these items should be included in the husband’s income when determining his child support obligation. (The husband had secured other employment paying a salary sufficient to justify a Melzer analysis.) The trial court held that the capital account distribution and cash severance were income for support purposes. The wife appealed, prompting the Superior Court to vacate and remand the case.

The Superior Court held that the partnership capital account was marital property which should not have been included in the husband’s income because doing so would constitute a double dip.  On the other hand, the Superior Court held that the cash severance payment was strictly income. In its decision, the Court distinguished between money earned prior to the marital separation (in this case, a partnership capital account) and money acquired after separation (in this case, a severance payment). Since the partnership capital account was acquired prior to separation, it fell within the statutory definition of marital property. The cash severance acquired after separation did not.  The Superior Court held that the capital account was marital property while the severance payment was income. In both of its findings, the Superior Court refused to double dip.