Archive for June, 2010

Gifts: Not a problem during the happier times

Tuesday, June 29th, 2010

Presents and gifts between spouses are interspousal gifts, and during the unhappy times of divorce, courts struggle to determine whether the conveyance happened as a contract or a gift, and if it is a gift, whether it is marital (a “gift to the marriage”) or separate property.

Sometimes assets are conveyed when spouses enter into what are termed midnuptial or postnuptial agreements, either implied or written. Contract law generally governs these agreements, and they happen for a number of reasons, including tax and estate planning.

If the conveyance is not a contract, then the courts consider it a gift under the common-law definition of a gift, which means there must be intent on the part of the donor, delivery and acceptance by the recipient. When the property is transferred into one name alone, the burden of proof is on the person who claims that the intent is present — the recipient.

When property is transferred into joint names (as it often does in real estate and accounts for its acquisition and improvement), the joint title gift presumption very often comes to the fore. This places the burden of proof on the party who claims the transfer was not a gift. Disposition of interspousal gifts turns on whether a gift is a gift to the marriage or a gift to a spouse. Gifts to the marriage are marital property; gifts from one spouse to the other are generally separate property. If John gave Ginny a five-caret diamond as a present during happier times of the marriage, he may argue that the ring is an investment, and therefore, marital property; Ginny may contend that the gift is her separate property.

Gifts between spouses are subject to distribution in divorce, and they can become problematic depending upon the jurisdiction of the action. States are either community property or equitable distribution jurisdictions, and this can affect the way gifts between spouses are treated.

Generally gifts between spouses made during the marriage are subject to distribution because they come to be seen a marital property. When couples marry very often separate property becomes marital property. If one spouse owns a home before he marries and adds his wife to the deed after they married by selling her the house for a dollar, he made what is termed a “presumptive gift” to the marriage, turning the homestead into marital property. This means that the ownership is 100 percent marital property, not 50 percent each spouse.

In most jurisdictions, that symbol of hope and dreams — the wife’s engagement ring, sometimes the first “large” purchase a couple make together — remains the separate property of the wife.

A Key Step in Divorce

Wednesday, June 23rd, 2010

In a divorce, classification of assets is a preliminary to distribution of property. Everything a couple owns and owes is classified into one of two categories — marital or separate property. In twelve states — the so-called all property or kitchen sink states — both kinds of property are subject to distribution. In most states, however, only the marital property is divided.

After the assets are classified, they can be divided and distributed based on the applicable law in the jurisdiction where the couples divorce. Twelve states are all property; nine states are community property; and the rest are equitable distribution states.

Couples who want to avoid making lawyers rich should remind themselves that courts approve any reasonable division of property that the divorcing spouses fashion.

Generally, marital property is everything a couple earned or acquired during the marriage; generally, separate property is property that belongs only to one party, such as property owned before the marriage, gifts and inheritances, property acquired using separate assets.

That sounds easy but, needless to say, deciding what is marital property and what is separate property often becomes contentious. Problems arise when one party places separate property in joint names, when a spouse commingles separate property in an account that contains marital property, or in the case of a business, when one spouse made active contributions to the growth of a business the other owned before the marriage.

In general, however, when separate and marital funds are commingled, regardless of which came first, the resulting mixture is presumptively marital. The spouse who made the separate contributions can establish a claim to it by proving the nature and amount of the separate contribution.

Much, if not even most, separate property becomes commingled to one degree or another during the life of a marriage. Moreover, states treat the appreciation of assets, separate and marital, in different ways. Some states make a distinction between active and passive increases in income from separate property and active and passive appreciation in the value of separate property.

A Key Date to Remember - Separation

Friday, June 18th, 2010

One of the most important dates for a divorcing couple is the date they separate. Almost all couples separate for a period of time before they start the mechanics of getting a divorce, which happens when one spouse serves legal notice on the other that he or she wants a divorce.

The period between the time the couple can be considered intact, living together as man and wife, and the time the decree is handled down is called a separation. The date of separation — called the DOS — can be very important in the distribution of their assets and liabilities.

The jurisdictions use different ways of setting the DOS. In some jurisdictions, it is the date one spouse tells another that he or she wants a divorce; in others, it’s the date a spouse departs; in some, it is the date the couple agrees the marriage is over. In some jurisdictions, it is possible to legally separate and continue to live together under one roof as housemates. What is salient about the date, however, is that as of the DOS, the assets and liabilities of the spouses — what they own and what they owe — are seen in a different light and subject to distribution if they decide to divorce. This can become even more complicated because some states treat the date of separation as the classification date, after which newly earned assets cease being marital or community property and become instead separate property. The date of a permanent separation draws a line in the sand relative to property, income and debts, and the DOS can have an impact on the active and passive appreciation of assets subject to distribution.

A permanent separation happens then the couple lives apart with the intention of divorcing later. In this case, physical separation must be joined with an independent intent by at least one of the parties to divorce.

In most jurisdictions, in order to obtain a no-fault divorce a couple must live “separate and apart” for a specified period. However, some jurisdiction have held that couples can separate “under the same roof”; that is, they have made the decision to end the marriage, gone separate ways but remained domiciled in the same house, usually for economic reasons.

Depending on the jurisdiction, a brief reconciliation or even a night together for “old times” may reset the date of separation. Good legal advice is very helpful.

The word separation is used in at least two other ways in the context of divorce. A separation may be called trial or legal. In a trial separation, couples live apart to “sort out their feelings,” and later divorce or reconcile. If they reconcile, however, the date they separated has no legal importance. A legal separation, which is available in some jurisdictions, confers a different legal status on the spouses. A legal separation divides the marital estate, and the spouses live separate and apart but are still married.

A Pro Se Divorce Via Computer

Tuesday, June 15th, 2010

Many divorcing couples now avail themselves of a software and/or a web-based (on-line) service that helps them complete and prepare divorce papers, forms, and/or documents for filing with the court.

On-line divorce, designed for spouses who are in agreement with one another about an uncontested divorce, is a form of pro se litigation that costs less because they can prepare their paperwork and file for divorce without a lawyer.

An on-line divorce is not designed or sold to replace the services of a lawyer.

Some spouses use on-line divorce but also hire a lawyer to review the documentation before filing it. No matter what, an on-line divorce reduces legal costs.

Many couples using on-line divorce feel comfortable without hiring a lawyer. Since all issues regarding property, debt, alimony/spousal support, custody, child support, and visitation are settled, so legal advice is not required. On-line companies can direct a party in the right direction, but legal help is rarely, if ever, included.

One of the most attractive features on an on-line divorce is the ease of paperwork preparation.

Care must be taken, however. The buyer must beware and choose a reputable company with a history. In recent years, there have been several start-ups that provide very generic, non-state specific forms with little or no support and no filing instructions. Some on-line divorce companies provide an on-line solution that instantly delivers the completed forms by utilizing a web-based software application; thus the papers are available immediately for printing when an on-line questionnaire has been completed. This type of on-line divorce gives a couple the most control over their divorce, and it is recognized as the fastest way to complete the paperwork.

Other more primitive on-line divorce companies collect customer information through the Internet, process the papers in-house, and then mail them to the customer. This is a more or less a traditional method of providing a divorce service, just without the office visits.