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The Divorce Process: What to Expect When You’re Expecting to Divorce

If you are thinking about going through a divorce but don’t know how to begin or what to expect, then you have come to the right place. Before you start reading, you may be feeling overwhelmed and under-educated about the entire process. The intention of this section of our blog is to de-mystify the divorce process for you. By the end of this section, you will have a good idea of what lies ahead of you. Remember that every case is unique, while what follows is generic.

A divorce can begin in one of several ways. It can begin with your attorney writing a letter to your spouse indicating that he or she has been retained and your spouse should retain his or her own attorney. These letters typically contain standard language to the effect that you and your attorney are hopeful that the case can be amicably resolved. We then wait and usually do hear from an attorney within a couple of weeks. In these cases, we often don’t file the Complaint right away; instead, we begin working on case issues just between the attorneys. We can always file the Complaint as we go along, or after an Agreement has been signed.

Alternatively, we can go ahead and file the divorce complaint early in the case.

Filing the complaint at the very beginning of the case may be either voluntary (you just want to get it started) or necessary (your spouse is racking up charge cards, money is disappearing, your spouse stopped paying bills he or she normally pays, or similar instances which might require the Court’s intervention early in the case). Once the divorce complaint is filed with the Court, it is assigned an “FM” docket number and a judge. It is then returned to the filing attorney, who serves either the opposing party or the opposing attorney if there is one in the case. Service is usually by mail in the first instance. If service by mail is unsuccessful, only then do we typically serve the opposing party by personal service.

Either way you get started, the next steps are fairly predictable. Although they may not all apply to your case, most of them will; also please note that although we are referring to these as “Step One,” “Step Two,” etc., they may occur in a different order in your particular case or two or more “steps” may occur simultaneously.

Step One: The Case Information Statements. One of the first steps taken at the beginning of a divorce case is the completion of a Case Information Statement by both parties.

This form is often referred to as the “CIS,” a term you will hear often throughout your case.

The CIS is a long, tedious but necessary financial form. You should be given a blank CIS at your first meeting with your attorney so that you can begin working on it right away. When completed, the CIS provides a snapshot of your income, expenses, assets and liabilities. In some cases, forensic accountants may prepare the CIS for the parties. This form is heavily relied upon by the attorneys and the Judges (this point cannot be emphasized enough) throughout the case to make the key decisions such as alimony, child support, asset identification and equitable distribution, so it is important that you fill it out accurately and completely.

Step Two: The Pendente Lite Motion. In some cases although not all, you or your spouse may file what is called a Pendente Lite Motion. These Motions can be filed only after the divorce complaint is filed. A “Motion” is an application filed with the Court requesting specified items of relief. It is supported by each party’s Certification (much the same as an affidavit) and other exhibits. The filing spouse files the first Certification, the other spouse then files a Responsive Certification and often a Cross Motion, and the filing spouse then files a Reply Certification. There are time limits and page limits for Motions. There is a minimum four to six week wait between the filing of the Motion and when it is heard by the Court. “Pendente Lite” literally means “pending the litigation.” A “Pendente Lite Motion” may be filed for one of many reasons but the goal is always the same: to preserve to the greatest extent possible the marital status quo during the divorce process.

A completed CIS almost always accompanies the Pendente Lite motion. Additional Pendente Lite motions may be filed throughout the case, often if a spouse is not complying with discovery, not complying with Court Orders or other problems arise which require a Judge to intervene. Unfortunately, the more Motions that are filed Pendente Lite, the higher your litigation fees will be so, where appropriate, reasonable efforts should be made to resolve these problems without going to Court.

Step Three: Custody Mediation and Parenting Time Programs: Assuming that a divorce complaint is filed and children are involved, both parties will be directed into their county’s Custody Mediation arid Parenting Time program. This happens very early in the process in the hopes that the parties can resolve these issues right away. Each program is comprised of two parts: an educational seminar and mediation between the parents. These programs are actually quite successful and very often result in a signed agreement designating which parent is the “Parent of Primary Residence,” and which parent is the “Parent of Alternate Residence,” and what the parenting times will be. While the attorneys are always hopeful that these issues can be worked out through the county program, it is very important that you talk to your attorney either before or immediately after you attend mediation so that you don’t end up signing an agreement you might later regret. If there has been a domestic violence Order entered between you and your spouse, if your children are too old to be the subject of a custody and parenting time Order, or if you have settled those issues without the need for the program, let your attorney know and they will take the necessary steps to opt you out of the program. But those are the only excuses; otherwise, these programs are mandatory.

Step Four: Discovery. “Discovery” is an umbrella term which covers interrogatories, Notices to Produce documents, depositions, subpoenas and other methods of fact-finding in all kinds of litigation, including divorce litigation. The purpose of discovery is for you and your attorney to learn as many facts as possible about the facts of the case. “Interrogatories” are a seemingly endless series of questions which may or may not apply to your case. The attorneys will serve either generic or specialized (or sometimes both) interrogatories on you and your spouse, who will hate filling them out as much as you will. “Notices to Produce Documents” are a seemingly endless series of requests for documents, some of which may apply to your case and some of which may not. Like interrogatories, the attorneys will serve either generic or specialized (or sometimes both) Notices on you and your spouse, who once again will hate collecting and supplying all those documents as much as you will. “Depositions” are question-and-answer sessions during which one attorney asks the other party or a witness (expert or fact) a series of questions under oath. A Court Reporter is in the room taking down all of the questions and answers.

Step Five: Settlement: Trial or ADR. After discovery is completed, every effort will be made to settle your case just using the attorneys. If it cannot be settled between the attorneys, then it will proceed to either trial or, more likely because of the backlog in the Court system, to a form of Alternative Dispute Resolution (“ADR”) such as mediation or arbitration.

Step Six: The Marital Settlement Agreement or Final Judgment of Divorce: If your case is settled through the attorneys, mediation or some other form of consensual agreement, then the attorneys will draft a “Marital Settlement Agreement” (MSA) which will incorporate all of the settlement terms. The MSA is not intended to be a one-time document such as a contract to sell a house. Rather, you will most likely be referring back to it many times post-divorce; in some cases, a Judge may also have to review the MSA after the divorce. Therefore, the intentions of the parties at the time that the MSA is signed must be clear to anyone later reading and interpreting the document. Your attorney will want to make sure that the document is as clear as possible when it is signed so don’t be surprised if the drafting, review and revisions of this document take some time. At this point the light at the end of the tunnel is visible, so be patient! If your case is not settled, it will probably be diverted to arbitration, or it may go to trial. Either way, you don’t end up with an agreement but rather with a Final Judgment of Divorce, which incorporates the Judge’s or arbitrator’s rulings. You will have less flexibility with language in a Final Judgment of Divorce.

Step Seven: You’re Done! As difficult as it is to believe, people who intend to get divorced do actually get divorced sooner or later. Although the process may seem endless, it does eventually end. Check with your attorney to learn more about the outside time frame for finally obtaining your divorce, as it will differ greatly depending upon the county in which you live.

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Relocation of a Child Outside of the State of New Jersey

New Jersey Courts have always had broad powers to enforce alimony and child support obligations. Unfortunately, when arrearages accrue over time, many such Orders cannot be enforced because there are insufficient assets and/or income to pay those arrearages. On the other hand, if any assets and/or income can be located, then the Courts will use whatever authority is available to them to collect the unpaid support. Taking this concept one step further, in the first published case of its kind in the State of New Jersey, an Ocean County trial court recently granted a former wife priority status to collect unpaid child support and alimony arrearages from a minority interest held by her former husband in a limited liability company (LLC).

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Modifications or Termination of Alimony Obligations

One of the most common questions we have been asked since the start of the recession is whether and how an alimony obligation can be modified if one of the parties is making less money than they were making at the time of the divorce or dissolution or has lost his or her job. The answer is that under certain circumstances the alimony can be modified or even terminated.

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Grounds for Divorce: Why All The Confusion?

Much confusion has arisen surrounding the grounds for divorce. Lets clear up those confusions.

I. First of all, don’t confuse the grounds for divorce with the issues in your case.

The grounds for divorce are simply the basis for filing the first pleading called the divorce “complaint.” There are several “fault” grounds for divorce that are still on the books, but they are rarely if ever used. Those grounds are: desertion, deviant sexual conduct, drug addiction and drunkenness, institutionalization for mental illness, imprisonment and desertion.

By and large, most divorces complaints these days recite “no fault” grounds, also known as “irreconcilable differences.” This is because the grounds for divorce, whether fault grounds or no-fault grounds, don’t have any bearing upon the outcome of the case. This is not to say, however, that facts which characterize your marriage such as a drug addiction, alcoholism, or extreme cruelty won’t impact an issue in your case. For example, if a parent has a drug addiction it will most definitely impact which parent has Primary Residential Custody of the children and what the parenting time arrangements might be for the drug addicted parent. It’s just that you don’t have to plead those facts in the divorce complaint as the grounds for the divorce in order for the Court to consider them when making decisions. You may plead them if you wish, but you don’t have to plead them in order to introduce them into the case later for other reasons.

A word about adultery: while adultery is probably one of the most difficult, if not the most difficult, of marital offenses to deal with emotionally as a spouse, it rarely if ever impacts anything in the outcome of a divorce case. Therefore, the only reason to file a complaint based upon grounds of adultery is if you, the client, want to do so for personal reasons. While we don’t discourage this, we also don’t encourage it. We leave it up to you to decide after we discuss it.

II. Don’t confuse the old law with the new law.

Second of all, don’t confuse the old law with the new law. Prior to January, 2007, spouses had to live separate and apart in different residences for eighteen months in order to qualify for a no-fault divorce. In January, 2007, New Jersey passed a statute that permitted no-fault divorces even if spouses are living together, so long as irreconcilable differences caused the breakdown of the marriage for a period of six months and there is no reasonable prospect of a reconciliation. This changed the prior law that the parties had to live separate and apart for a period of eighteen months in order to obtain a no fault divorce.

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Federal Court Holds That Carpal Tunnel Syndrome May Constitute A Disability Under The ADA

More and more ADA cases stem from garden variety workers’ compensation claims, and disability discrimination claims now make up one quarter of all EEOC charges.

The case of Gibbs v. ADS Alliance Data Systems, Inc., 2011 U.S. Dist LEXIS 82540 (D. Kansas) drives home the point that many claimants with work-related injuries will now find coverage under the ADA following the passage of the ADA Amendments Act.

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Toyota Motor Manufacturing V. Williams

A beacon or mirage for New Jersey Employers?

On January 8, 2002, the United States Supreme Court issued its decision in Toyota Motor Manufacturing v. Williams. In reversing an opinion by the Sixth Circuit Court of Appeals, a unanimous Court determined that the plaintiff, Ella Williams, had not shown under the Americans with Disabilities Act (“ADA”) that she was substantially limited in the major life activity of manual tasks. This decision was widely reported in the local press and unwary New Jersey employers might be inclined to place reliance on this decision in making employment related decisions regarding their employees who suffer some form of physical or mental impairment. At least in New Jersey, such reliance is a risky proposition.

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Reimbursement to Parents for Personally Providing Therapies to Their Children

by Robert A. Muccilli, Esq.

The Third Circuit Court of Appeals recently upheld an administrative hearing officer’s decision awarding reimbursement to a parent who herself provided Lovaas therapies to her child. Bucks County v. Commonwealth of Pennsylvania, et.al, 379 F.3d 61 (3d Cir. 2004). Lovaas’ therapy is a highly structured behavior methodology used to teach some children with autism disorders.

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President Bush Signs the Economic Growth and Tax Relief Reconciliation Act of 2001

This is a brief summary of the recent changes to estate and gift tax law. The most striking feature is the “sunset” provision which repeals most of these changes on 1/1/11 unless Congress takes further action. That makes planning difficult, but here are some practical suggestions:

  • Hang in there. The “exemption equivalent” is rising, to $1 million on 1/1/02 and eventually to $3.5 million on 1/1/09, so live longer and save taxes by doing so. The maximum tax rate is also coming down a bit.
  • Start keeping better records, and go back to determine your tax basis for those assets that you aren’t sure about. We have big doubts that “carryover basis” will ever take effect, but if it does, how will your children determine your basis for gain or loss if you have not gathered that information for them?
  • The “exemption equivalent” is more valuable, so don’t waste it. If you are married and have more than the “exemption equivalent,” review the way that your assets are titled and review your beneficiary designations. The goal is to have things set up so that, no matter who dies first, the first estate can obtain the benefit of the exemption equivalent. Generally that means dividing assets half and half, if possible. Also, your will should contain provision for a “by-pass” trust, which benefits the surviving spouse while at the same time keeping the trust assets from being taxed in the estate of the surviving spouse. Your will (if things are properly titled) will direct your assets to the by-pass trust.
  • The “exemption equivalent” is rising, so some married persons will no longer need a “by-pass” trust because their combined estates will no longer exceed the “exemption equivalent.” All assets passing through one estate to the children will not produce any estate tax if the estate does not exceed the exemption equivalent.
  • Be careful not to shortchange your spouse. Because the “exemption equivalent” is rising, more dollars are allocated to the by-pass trust and fewer dollars to the surviving spouse. Under the typical will, the first dollars are allocated to the by-pass trust until it is filled, and the excess, if any, goes to spouse. If the surviving spouse has half of the married couple’s assets, perhaps it will not be a hardship if all of the decedent’s funds go into trust. But if the decedent held more than half, or the surviving spouse’s assets are illiquid, or if a full by-pass trust is not necessary to avoid estate taxes, some adjustment may be in order. In some cases it will be appropriate to direct the assets first to spouse, relying upon spouse to “disclaim” the appropriate amount to the by-pass trust. (On the other hand, it is difficult to disclaim anything after losing your spouse.)
  • For the few persons able to make “taxable” gifts (more than $10,000 per person in one year), it will probably be best to limit such gifts to the $1 million or less. The “exemption equivalent” increases 1/1/02 to $1 million for the “unified” gift and estate tax. However, this unity later dissolves as the estate tax exemption equivalent rises to $3.5 million while it remains stuck at $1 million for gift tax. And in 2010, the estate tax is “repealed” while the gift tax is not. So, in a reversal from current law, taxable gifts may become less desirable for persons of substantial wealth. You still can’t take it with you, but you may wish to hang on to it until the bitter end.
  • Review your charitable provisions. Higher exemption equivalents and lower estate tax rates make charitable bequests somewhat more costly and therefore less attractive. The slightly lower income tax rates may also result in slightly smaller lifetime gifts to charity. Assuming that most charitable gifts and bequests are primarily motivated by charity, and only secondarily by taxes, few changes are expected.

A “flat tax” is on its way. The rising exemption equivalent and declining maximum estate tax rate will eventually converge to produce a rate of 45% on all dollars in excess of the exemption equivalent. But that does not take into account possible changes in state death taxes. And if repeal does occur, the flat tax circumstance will be temporary. A 45% initial rate is eye-catching, but the political protest may be muted by the higher exemption equivalent, which leaves fewer estates subject to the tax.

Keep alert for increases in state death taxes. It will be tempting for each state to (1) attempt to replace revenue lost to reduction of the federal credit for death taxes, and (2) to take advantage of the 1/1/05 deduction for state death taxes, and (3) to capture revenue which the federal government has given up.


President Bush Signs The Economic Growth And Tax Relief Reconciliation Act Of 2001

by Richard T. DeCou, Esq. and Tara H. Zane, Esq.

The Economic Growth and Tax Relief Reconciliation Act of 2001 was signed into law by President Bush on June 7, 2001. The new law supposedly repeals the estate tax. However, the new law repeals the estate tax for one year only – 2010. Pursuant to its sunset provisions (and as a result of budgetary restrictions), the new law allows the current estate tax rules, rates and exemptions to come back in force in 2011. The estate tax does continue, with an increasing exemption from $1 million to $3.5 million through 2009 (see chart below), until 2010 when it is repealed only for that year. Further legislation will be required to prevent a reversion back to current rates in 2011. Inevitable shifts in political power (ex: 2 presidential elections before full repeal) leave us in a state of uncertainty about the existence of an estate tax come 2011.

Although the repeal of the estate tax appears to be a political illusion – the gift tax is reduced to 35% in 2010, but not repealed, and carryover basis (see discussion below) has previously been tried and found wanting – there are some important changes to tax rates and to the exemption equivalent, which are summarized below. These changes are phased in over time.

Calendar
Year
Estate and GST tax
death time transfer
exemption
Highest estate
and gift tax rates
2002 $1 million 50%
2003 $1 million 49%
2004 $1.5 million 48%
2005 $1.5 million 47%
2006 $2 million 46%
2007 $2 million 45%
2008 $2 million 45%
2009 $3.5 million 45%
2010 N/A (taxes repealed) 35%

The increase in the exemption equivalent seems to be the most important change, as it will substantially reduce the number of estates which are of taxable size. Until “repeal,” the rate reductions are modest, from 55% to 45%, in steps.

Before the new law, the federal estate tax was reduced dollar for dollar by the actual amount of state death taxes paid or, if less, an amount determined by formula. The new law reduces this “credit” against federal estate tax, and in later years converts the credit to a deduction (see chart below). It is difficult to predict the effect of these changes. The reduction in the credit will reduce revenues in states such as New Jersey and Florida, which depend upon a credit-based estate tax. By reducing this credit, Congress shifted a greater portion of the cost of tax reduction to the states. This may cause the states to uncouple their death taxes from the federal estate tax, and to raise rates to make up revenue, or even to take revenue ceded by the federal government. The change to a deduction for state taxes paid will make it easier for states to raise their death taxes, as IRS will absorb up to 45% of the increase.

Calendar Year Maximum Credit against Estate Tax for State Death Tax Paid
2002 75% of current formula
2003 50% of current formula
2004 25% of current formula
2005 0% – instead the actual amount of state death tax paid will be deducted from the estate to determine the federal estate tax

Another matter of interest is that the estate tax and the gift tax are no longer very “unified.” The estate tax is to be repealed while the gift tax is to be retained. The exemption equivalent is to increase to $1 million on 1/1/02 for this unified tax, but on 1/1/04 the estate tax exemption equivalent increases, reaching $3.5 million by 1/1/09, while the gift tax exemption equivalent remains stuck at $1 million. This appears to raise a barrier to lifetime taxable gifts in excess of $1 million, because few taxpayers will choose to incur a lifetime tax on property which may pass free of tax on death (and with a stepped-up basis, until 2010).

It is difficult to take estate tax repeal seriously. Carryover basis, which is linked to repeal in this act, is an administrative nightmare (no one keeps such records) previously abandoned. More importantly, the IRS, the states, charities, banks, life insurance companies and lawyers all have a financial interest in the continuance of the estate tax. While exemptions may increase, and rates may change, wholesale repeal seems very unlikely.

Because we do not take repeal seriously, we will not go into the details of post-repeal taxation. The general framework would be that the current “step-up” in income tax basis to date of death value would be replaced by “carryover” basis (the lesser of the decedent’s basis for calculation of gain or loss for income tax or fair market value). In effect, the estate tax would be replaced by the capital gains tax on appreciated property if and when the property were sold. However, up to $1.3 million could be added to the basis of a decedent’s property, and a surviving spouse could add up to an additional $3 million to basis, but in each case basis could not be increased above fair market value at death (“modified carryover basis”). The obvious problems are (1) determining the basis of property acquired by the decedent years ago, and (2) allocating the additions to basis. The first problem alone was sufficient to cause the repeal of carryover basis prior to its effective date some years ago, but the availability of up to $4.3 million of additional basis would eliminate the record keeping requirements for those estates whose assets did not exceed in value the available additional basis. Perhaps the limited impact will make it politically palatable despite administrative impossibility.

What is certain is that estate planning is still needed, repeal or no repeal. The estate tax is still very important for estates which exceed the exemption equivalent.

Estate planning is also about more than taxes. At its core, estate planning allows people to ensure that their property will be distributed to the persons and institutions dear to them. That could be spouse, children, grandchildren, charity or others. Assets are distributed according to the titling of assets, beneficiary designations and wills. In the absence of these, state law controls the distribution of a decedent’s assets. A will designates how an estate is to be distributed. It also allows you to name a guardian for your minor children. However, certain assets are not controlled by your will. For example, joint property passes to the surviving joint owner, while life insurance and IRAs pass to the designated beneficiary. Review is required to make sure that your will, your beneficiary designations and the way your assets are titled are structured so as to distribute property to your intended heirs.

Trusts will continue to offer opportunities for planning. Incentive trusts can be used to encourage beneficiaries to take certain actions before distributions are made, such as: finishing college or earning a certain amount of money. A trust may be established to have a trustee manage assets on behalf of a minor child or other financially immature beneficiary. A trust can be used to protect assets from a beneficiary’s creditors. A special needs trust may be established for a beneficiary who also receives public benefits. In a second marriage situation, a trust can ensure that assets left to a second spouse end up in the hands of children from the first marriage (not the spouse’s new partner or children).

In addition, life insurance will remain important, especially for those with business interests. However, you may want to consider reducing life insurance to the extent it was bought to provide liquidity to pay death taxes. Charitable giving will still provide significant income tax benefits during life. However, bequests to charity may decline somewhat in view of the lessened tax advantages at death.

New Jersey inheritance tax still exists and care should be taken to plan your estate accordingly if you intend to leave property to persons other than your spouse and your descendants. The repeal of the federal estate tax does not repeal the New Jersey inheritance tax.

And finally, the repeal of the estate tax is to take place gradually over a number of years (and then be reinstated in 2011). Thus, you could still be vulnerable to a significant amount of estate taxes. Your estate plan should be tailored to you, depending primarily on the size of your estate and your age – but not neglected.

For further information regarding this publication or other matters concerning Business, Tax, Wills, Estates or Trusts, please contact Capehart & Scatchard, PA.

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