Pennsylvania Law Monitor : Pennsylvania Lawyer & Attorney : Stark & Stark Law Firm : Yardley, Philadelphia, New York, New Jersey

An Owner's Manual For Your Divorce is a 10 part podcast series presented by Joseph D. Visco, member of Stark & Stark's Divorce group. The series is intended to assist you in understanding the general process of a divorce from the initial discussions with your spouse to the post divorce follow-up.

The third installment will focus on the importance of gathering all of the necessary data and information before your divorce proceedings begin. This includes copies of documents shared between you and your spouse over the past three years such as tax returns, bank statements, mortgage records, insurance policies, retirement and savings account information and credit card statements. You can download a copy of the installment notes here. (PDF)

You can download the third installment here. (2 MB)

• Email This
• Print
• Share Link

This is part two of a three-part series introducing different stock plans one should consider for their business. This is only meant to be an introduction; a trusted professional should be contacted to discuss what stock plan is right for your business. This second installment  focuses on employee stock ownership plans.

An employee stock ownership plan (“ESOP”) is an employee benefit plan similar, in some ways, to a profit sharing plan.  In an ESOP, the employer sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares of its stock.  Alternatively, the ESOP can borrow money to buy new or existing shares, with the employer making cash contributions to the plan to enable it to repay the loan.  Regardless of how the plan acquires stock, employer contributions to the trust are tax deductible, within certain limits.

Shares are allocated to individual employee accounts.  Although there are some exceptions, generally all full-time employees over the age of twenty one (21) participate in the plan.  Allocations are made either on the basis of pay or some other formula. Once an employee leaves the employer, assuming they are vested in the stock, the employee receives the stock, which the employer must buy back from the employee at its then fair market value (unless the stock is publically traded).  Private companies must have an annual outside valuation to determine the price of their shares, a valuation that can be very costly.

There are drawbacks to the use of an ESOP.  Private companies must repurchase shares of departing employees, which can be a major expense.  In addition, any time new shares of stock are issued, the stock of existing owners is diluted.

• Email This
• Print
• Share Link

The easiest way to apply for Social Security Disability Benefits, if you are an adult (over 18 years of age) is on-line.  Social Security maintains an excellent website at www.ssa.gov.  This website is extremely comprehensive.  Your first step is to review the Adult Disability Starter Kit.  The Kit answers common questions about applying for benefits and includes a worksheet which tells you what information you will need to start the application.

Once you have gathered the necessary information, you can fill-out an application on-line.  The website will walk you through the application process step-by-step.  You must also fill out an on-line disability report which seeks information about the nature of your disability, your treatment, health care providers and medications. 

If you cannot finish your application or the disability report in one-sitting, you have the opportunity to return to these forms to complete them at a later time. 

If you do not know how to use a computer or do not have access to a computer, you can call social security at 1-800-772 -1213 and a social security employee will assist you, over the telephone,  with your application and disability report.

• Email This
• Print
• Share Link

Bucks County courts, and all courts in Pennsylvania, are required to use child support guidelines in determining a parent’s child support obligation.

Bucks County, pursuant to Pennsylvania law, applies the guidelines based upon the following:

First, the support obligation itself is based upon the reasonable needs of a dependent child and the reasonable ability of an obligor to pay. The guidelines assume that parents with similar net incomes will have similar reasonable and necessary expenses such as mortgage, dwelling maintenance, insurance and automobile expenses.  After the basic needs of the parents have been met, the child’s needs shall receive priority. 

The guidelines incorporate basic expenses which are necessary for the support of the child and which are part of the necessary cost of maintaining a household and providing a sufficiently safe home and transportation for the child.  Therefore, in most cases, a party’s reasonable living expenses are not relevant in determining his or her support obligation since the guidelines have already taken those into consideration.  For example, in setting the amount of child support it should be of no concern to the court that a parent chooses to live in a one-room apartment and rely solely on public transportation while another parent earning the same salary chooses to live in a five bedroom apartment and drive a new car.  Both are obligated to give priority to the needs of their children.  What they choose to do with their remaining income is not relevant to a support claim.  However, the guidelines do assume that if an obligor’s net income is at poverty level than he or she is barely able to take care of his or her own basic needs and a minimal order may be appropriate.  In the most extreme cases it may not even be appropriate to order support at all.

Second, the guidelines assume a child’s reasonable needs increase as the combined net income of the child’s parents increases.  Each parent is required to contribute a share of the child’s reasonable needs proportional to that parent’s share of the combined net incomes.  The custodial parent makes these contributions entirely through direct expenditures for food, shelter, clothing, transportation and other reasonable needs.  In addition to any direct expenditures on the child’s behalf, the non-custodial parent makes contributions through periodic support payments.  Net income is defined by statute as gross income minus taxes and any other deductions mandated by the employer as a condition of employment.  As a party’s net income increases, so do their expenditures and consequently the child’s reasonable needs increase.  No adjustment will be considered for normal fluctuations in earnings.  However, there may be occasion where an appropriate adjustment will be made for substantial continuing involuntary decreases in income due to illness, layoff, termination, or job elimination over which the party has no control.

Third, there are allowable deviations.  The guidelines are designed to treat similarly situated parents, spouses and children in the same manner.  When there are unavoidable differences, deviations must be made from the guidelines.  Special needs and special circumstances require consideration of a party’s actual expenditures.  Failure to recognize such a situation is a misapplication of the guidelines.  An example would be the special needs of a disabled child. 

• Email This
• Print
• Share Link

This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics' Liens in Pennsylvania, click here.

Prior to the Amendments to the Pennsylvania Mechanics’ Lien Law of 1963 which became effective January 1, 2007, Mechanics’ Lien Claims were granted priority over Mortgages against the liened property that were recorded after the effective date of the Lien. Under the old law, a Mechanics’ Lien Claim representing amounts due to the Contractor for erection or construction “related back” to the start of work on the property, and Liens representing amounts due for alteration and repair dated from the filing of the Lien Claim.  Therefore, a Mechanics’ Lien Claim could have priority over a Mortgage recorded against the property, and a Foreclosure of a Mortgage or Mortgages against the property and resultant Sheriff’s Sale would not extinguish the prior Mechanics’ Lien Claims against the property.

When the General Assembly recently revisited the Pennsylvania Mechanics’ Lien Law – what one Pennsylvania Court called an “antiquated patchwork of statutory enactments” – it did so with the purpose of modernizing the Law and granting greater protection to Contractors and Subcontractors.  The General Assembly largely succeeded in doing this by severely restricting the ubiquitous Lien Waivers that had become so commonplace that effective Mechanics’ Lien Claims were often unavailable to the Contractor or Subcontractor left without payment.  In exchange for restricting Lien Waivers, however, and under pressure from lobbyists for Mortgage Lenders, the General Assembly changed the statutory framework of Lien priority, subordinating Mechanics’ Lien Claims (regardless of when the Claims are filed) to two common types of Mortgages.   Following the Amendments to the Law effective January 1, 2007, Mechanics’ Lien Claims are subordinated to Purchase Money Mortgages and Mortgages securing loans the proceeds of which are used to pay all or part of the cost of completing erection, construction, alteration, or repair.

This change, while seemingly hyper-technical, can have a real dollars and cents impact upon Contractors and Subcontractors in the current Foreclosure climate.  As is often the case, homeowners in financial difficulty simply ignore their mortgage payments, accruing interest at a penalty rate, fees, costs and a significant attorney’s commission due to the Mortgage Company in the several months before a Sheriff’s Sale.  This, along with falling residential real estate values can put a property “under water,” meaning that by the time of the Sheriff’s Sale, the Mortgage Company is owed more than what the property is worth, and likely owed more than will be bid at the sale.  When this happens, the Mechanics’ Lien Claim can be “wiped out” by a Mortgage Lien.  The modern Contractor or Subcontractor with a Lien Claim must be certain that a Sheriff’s Sale upon a Mortgage that proposes to extinguish a Lien Claim is of the narrow kind of Mortgages that have absolute priority over Mechanics Lien Claims.

• Email This
• Print
• Share Link

On June 22, 2009, Kate filed for divorce.  We can assume she filed largely because Jon was (allegedly) having an affair with a 23 year old elementary school teacher.  Jon apparently has traded the 23 year old in and upgraded for newer model - a 22 year old pampered daughter of a New York plastic surgeon.  The very surgeon who performed Kate’s tummy-tuck.  To add even more excitement to the mix, the 22 year old allegedly was arrested for Marijuana possession during her “girls-gone-wild” co-ed days. (which was just a few years ago)

And, of course, Jon sees no problem parading around the French Riviera with his new girl.  Regarding this past weekend’s romp, he states:  “I know that my decision to appear publicly with [insert “Muffy”, “Bambi”, “Barbi” etc...] this weekend will be scrutinized, but I hope that people can see I’m a regular guy who is going through a very difficult time in [my] life and wants to move forward.”

Most of us all probably agree (as much as we may despise Kate) Jon’s actions are immature, inappropriate and just plain stupid.  But our social and moral opinions  have no effect on the case.  It is the Judge’s opinion that matters.  So, from a legal perspective, how will Jon’s actions affect his divorce?

Probably not at all.

Unless Jon is paying for his trip to the Riviera from a marital bank account, Jon’s post separation “flings” will have no bearing on the divorce or the distribution of the parties’ assets.

His actions could, however, have some significance in a custody dispute.         

Under Pennsylvania law, when a custodial parent is living in a meretricious relationship (not sure Jon is at that point yet), or when a third party may exert a substantial influence over a child, the law requires the court to view the third party and subject them to cross-examination as to their supervision, values, and relationship with the children and all other quasi-parental actions they may undertake.  John’s girlfriend, should she be involved in the rearing of the children, will be subject to close scrutiny from both a child custody expert as well as the judge.  Her judgment, maturity, emotional stability (and college indiscretions) will be questioned and exposed.  If Jon insists on her being part of his new life, and the court determines she is not a good influence on the children, then Jon may see a reduction in his custody time with the children or restrictions limiting his friend’s involvement.

Although there is no indication that the parties will fight over custody, in fact it appears as though they may have already reached an agreement as to custody, Jon’s introduction of this third party to the family could upend any agreement that was in place and ignite a very public custody dispute.  Bear in mind the Montgomery County Court does not have jurisdiction in custody; Jon & Kate would have to file in Berks County where the children reside and where the public has access to all court documents.

Next week’s headline: Kate caught in Motel 6 with Jon’s pilates instructor...

The high profile of Jon and Kate provides the public with a unique opportunity to explore issues that arise in contested divorce cases. Through this ongoing series I will offer comments and analysis of the proceedings and provide insight on how developments in Jon and Kate's case may occur in other divorces.  I am a Pennsylvania divorce attorney who is not involved in the Jon and Kate matter and the comments I present in this blog series are not case specific but rather intended to provide the public with helpful information on Pennsylvania divorce law.

Follow me on Twitter @jdvisco.

• Email This
• Print
• Share Link

This is part one of a three-part series introducing different stock plans one should consider for their business. This is only meant to be an introduction; a trusted professional should be contacted to discuss what stock plan is right for your business. This first installment  focuses on phantom stock plans.

A phantom stock plan is a plan whereby an employee is awarded units whose value is related to the value of the employer’s common stock; however, the units do not represent actual stock of the employer and distributions under the plan may be in cash.  Phantom stock plans (often also called stock appreciation rights) are often used when the employer, for various reasons, does not desire to give its employees shareholder status and, thus, seeks an arrangement that does not result in the actual issuance of its stock to employees.  This is often true with respect to privately-held companies.  The issuance of common stock to employees of privately-held companies will create additional shareholders with voting and other rights of minority shareholders under state law.  In addition, the issuance of common stock to employees creates problems when the employee leaves the employer due to termination, retirement or death. If the employee owns employer stock at that time, arrangements must be made, generally through a stock restriction agreement, to obligate the employee and his family to sell the stock to the employer or the majority shareholder following termination of employment. Such an arrangement may impose difficult cash burdens upon the employer or the majority shareholders at the time of the purchase under the stock restriction agreement.

Phantom stock plans generally involve the granting of a stated number of stock units which are credited to the employee’s account.  Each unit has the equivalent value of an outstanding share of the employer’s common stock.  The benefit provided to the employee equals the appreciation in the value of the phantom stock between the date the employee is credited with the phantom shares and the date the benefit is paid.  Instead of merely paying a benefit equal to the appreciation in value of the phantom stock between the date the phantom shares are granted and the payment date, it is possible to structure the benefit so that it equals the entire value of the phantom shares as of the payment date.

Payment of the benefit generally occurs upon termination of employment as a result of retirement, death or disability, or at a specified future date.  The benefit can be paid out in installments over a period of years.

No tax is payable by the employee at the time the phantom stock is credited to the employee’s account.  The employee is taxed when the benefit is actually paid.  There is no deduction available to the employer upon the initial crediting of the phantom stock to the employee’s account under the phantom stock plan.  When the employee is paid the benefit, the employer is entitled to a compensation deduction for the same amount as the employee includes in income.

• Email This
• Print
• Share Link

As a general rule, property acquired before marriage is not subject to equitable distribution upon divorce.  So what about the engagement ring?  If you follow the rule of thumb recommended by the jewelry industry (the ring should represent two months of the buyer’s salary) it can be a significant asset.  Traditionally it is given by one party to the other before marriage occurs, so is it not subject to equitable distribution?

It depends.

First, the courts almost universally agree that an engagement ring is a conditional gift given by one party to the other in contemplation of marriage.  If the marriage never occurs then the ring (or its fair market value) is to be returned to whoever purchased it.  This is true regardless of who backed out of the marriage or whose fault caused the canceling of the marriage.

Courts, however, don’t agree on how to treat the ring after marriage occurs.

In Pennsylvania, property acquired by gift to either party is (generally) not considered marital property (and not subject to equitable distribution upon divorce) except when the gift is between spouses.  Further, Pennsylvania treats the giving of an engagement ring as a conditional gift with an implied condition that the marriage must occur in order to vest title in the recipient.  Thus, even though the ring is given to a party prior to the marriage, title does not vest in the recipient until the parties are married.  In other words, the value of the ring is considered part of the marital estate and it is subject to equitable distribution upon divorce. 

New Jersey, however, views the matter differently.  While acknowledging that an engagement ring is conditional in nature, New Jersey courts have ruled that the ring unconditionally becomes the property of the recipient upon marriage and retains its character as separate property intended for the sole use of the recipient after marriage and therefore not subject to equitable distribution; the recipient keeps it free and clear.

• Email This
• Print
• Share Link

Contractors must take notice of the new requirements regarding Home Improvement Contracts taking effect on July 1, 2009, which will most likely require significant changes, if not wholesale re-drafting of most Contractors’ written form of Contract.  Because the Act not only declares existing common practices “Prohibited Acts” and others criminal “Home Improvement Fraud,” a Contractor’s existing form Contract may guide an unwary or uninformed Contractor into a transaction voidable by the Owner at will, or a transaction that can form the basis of civil Consumer Protection liability, and even a third degree felony. 

The Act requires that, in order to be valid and enforceable, a Home Improvement Contract must be in writing.  Although this was always a good practice, the Act’s requirement means that even relatively modest Home Improvement work should be documented with a written contract. 

The regulatory reach of the Act is so broad that it prescribes classes or materials, defines “special order materials” for all Contractors, and limits the amount of an allowable deposit based on the total sale price of each individual Contract.  Common provisions in form contracts, such as hold harmless provisions and provisions awarding attorney’s fees to the Contractor will now make the Contract voidable by the Owner at will.  Additionally, a Contractor’s refusal to return pre-paid sums as liquidated damages – even when agreed by the Owner - when the Owner abruptly cancels a Contract may constitute criminal “Home Improvement Fraud.

• Email This
• Print
• Share Link

So what is the latest regarding Jon & Kate?

So far, we know: 

• Jon & Kate agreed to file in Montgomery County (as opposed to Berks County where they live) to maintain confidentiality and have their records sealed;
• Kate filed the divorce complaint;
• Kate is only requesting a divorce based on No-Fault Grounds (and thus taking Jon’s alleged adultery out of the discussion);
• Kate is requesting the court to divide the parties' marital property if they cannot reach an agreement;
• Kate is requesting the court approve a settlement agreement between the parties (if they are able to reach one) regarding the division of marital property;
• Kate is not asking the court to decide custody of the children;
• Kate is not asking the court to award her spousal support;
• Kate is not asking the court to order Jon pay any child support;
• Jon’s attorney accepted service (on June 22nd, 2009) and did not raise any additional claims regarding custody or support of the children.

So far, what we can infer:

• Jon & Kate have worked out a custody arrangement (the kids live in the house; Jon has one week, Mom has one week?);
• Jon & Kate have reached an agreement on how to pay for any expenses they have for the children; Jon & Kate make enough money that neither needs any support from the other;

What remains:
Jon and Kate’s attorney are now in the process of accounting for the “marital estate” - the property that the parties acquired during marriage and which will now be divided between them.  They are gathering account statements, getting appraisals done on various properties, determining what property (if any) is not marital, determining what marital debt there may be, and generating a comprehensive accounting which the parties will then use to determine how to split it all up.  If the parties cannot agree regarding the value of certain property, or whether certain property is marital or non-marital, then the court will ultimately make those decisions.  I suspect any such disagreement may be decided via confidential mediation or binding arbitration and thus avoid any possible disclosure or leaks to the public.
   
The high profile of Jon and Kate provides the public with a unique opportunity to explore issues that arise in contested divorce cases. Through this ongoing series I will offer comments and analysis of the proceedings and provide insight on how developments in Jon and Kate's case may occur in other divorces.  I am a Pennsylvania divorce attorney who is not involved in the Jon and Kate matter and the comments I present in this blog series are not case specific but rather intended to provide the public with helpful information on Pennsylvania divorce law.

Follow me on Twitter @jdvisco.

• Email This
• Print
• Share Link

The date of final separation, when spouses begin living “separate and apart”, is crucial for deciding the grounds for divorce as well as determining what is or is not marital property subject to equitable distribution by the court.

This is essential for Jon & Kate and every couple seeking divorce in Pennsylvania.  It is also an issue frequently litigated, especially when big money is involved.

Pennsylvania law defines “separate and apart” as:
 

Cessation of cohabitation, whether living in the same residence or not.  In the event a complaint in divorce is filed and served, it shall be presumed that the parties commenced to live separate and apart not later than the date that the complaint was served.

In further defining “separate and apart” Courts have given additional guidance by requiring one of the parties to manifest the independent intent to dissolve the marital union and clearly manifest and communicate same to the other spouse.  Additionally, the notion of separate and apart is not defeated by isolated attempts at reconciliation or even sexual intercourse between the parties.  The gravamen of “separate and apart” is the existence of separate lives, not separate roofs.  It is when the parties stopped living as a married couple.  Determining the date of final separation requires a fact specific inquiry.  Considerable emphasis is placed on how the parties held themselves out to the public: did they go to social events as husband and wife?  Did they take family vacations together?  Did they change their financial arrangements from joint accounts to individual accounts?  Did they cancel joint credit cards?  Did they stop filing joint tax returns? Did the stop wearing their wedding bands?

Most of this information will never be revealed to the public.  But suffice to say the fact they continued to hold themselves out as a married couple to the public through their television program certainly supports the finding that Jon & Kate only recently began living “separate and apart”.
   
The high profile of Jon and Kate provides the public with a unique opportunity to explore issues that arise in contested divorce cases. Through this ongoing series I will offer comments and analysis of the proceedings and provide insight on how developments in Jon and Kate's case may occur in other divorces.  I am a Pennsylvania divorce attorney who is not involved in the Jon and Kate matter and the comments I present in this blog series are not case specific but rather intended to provide the public with helpful information on Pennsylvania divorce law.

Follow me on Twitter @jdvisco.

• Email This
• Print
• Share Link