781.708.4445

wmlevine@levinedisputeresolution.com

Divorce Mediation Blog

The Defense of Marriage Act: Defending the Indefensible

Thursday, July 05, 2012

Since 2004, gays and lesbians have been legally free to marry in Massachusetts. That is now the law in six (6) states and the District of Columbia. Yet, by congressional action, signed into law by President Clinton, legally married couples here are not legally married for any federal purpose, nor is their status respected in most other states.

The Defense of Marriage Act (DOMA) (declaring a marriage as only between one man and one woman for all federal law purposes and relieving other states of any obligation to recognize a same sex marriage permissibly created in another state) denies same sex spouses more than a thousand benefits, including the right to file joint tax returns, to have tax privileged spousal medical benefits and access to many social security and veterans survivors benefits. In divorce, gays and lesbians may not transfer property without taxation at the time of divorce, cannot claim alimony tax deductions and are prohibited from transferring pension assets without triggering tax consequences, which can be sometimes catastrophic; rights that all hetero-sexual married couples take for granted.

A group of plaintiffs sued in the United States District Court for the District of Massachusetts in the case of Gill v. O.P.M. and 2 companion cases, seeking to have DOMA declared unconstitutional. After defending DOMA and losing in the trial court, the Obama Administration declined to defend it again in the appeal of Judge Joseph Tauro’s judgment wherein he declared DOMA to be unconstitutional. The Department of Justice declared the statute indefensible. The United States Court of Appeals for the First Circuit, agreed with Judge Tauro and upheld his judgment.

The next stop for this controversy is the United States Supreme Court, where others will stand in as surrogates for the federal government in seeking to reverse the First Circuit’s decision, doing what the current government refuses to do: defend the indefensible.

 

Marital Mediation: Where Does It Hurt?

Thursday, June 28, 2012

We recently talked about university-based programs that promote the health of family-owned businesses. In that blog entry, we cited Ira Bryck, the executive director of the UMass Family Business Center, and his method for determining how his program may help a business family in need: find out first, “where does it hurt?” Mr. Bryck’s methodology is a useful way to conceptualize our role in small and family business mediation. This family doctor-like gateway to diagnosis reminded us of our job in marital mediation.

Marital mediation occurs when clients come to us, not to facilitate a divorce agreement, but to make structural changes in their marriage that will promote continuing their union. It can include a formal agreement to avoid or minimize contention if the marriage, despite the parties’ mutual efforts, ultimately does fail (often called a “post-nuptial” or more recently, a “martial agreement”); but often it does not. And, marital mediation clients would not be in our office unless something hurt!

Sometimes the hurt is painfully obvious but sometimes it is subtler: not necessarily fully or openly known to one or both of the spouses. The knowledge, and hopefully, the mutual acknowledgement of the symptoms of the marital troubles can lead to greater understanding. In turn, this can lead to corrective action that may save a marriage. Like a family business, or the human body, without knowing where pain is, the cure will be equally elusive.

Through “active listening” and facilitated conversation, we aspire to help people become more aware, and more open to deciding for themselves, just what might help.

 

Wisconsin Law Journal Posts Putting the 'alternative' into 'dispute resolution'

Saturday, June 23, 2012

POSTED: Friday, June 1st, 2012, by the Wisconsin Law Journal

By William Levine and E. Chouteau Levine

Dolan Media Newswires

When lawyers think about how to resolve disputes, they usually first consider traditional modes such as lawyer-to-lawyer negotiation or litigation. Other processes — such as mediation, collaborative law or even arbitration — often are considered marginal “alternatives.”

Together, the traditional and alternative approaches comprise what Cleveland family law attorney James Cahn calls the dispute resolution “food court.” Cahn’s analogy aptly conjures an image of an easily accessed array of process options. But it also conveys a secondary principle worth considering: that, as with food court offerings, legal consumers can mix and match dispute resolution methods fluidly to address changing needs.

Parties have the ability to take control of their legal process, to change course if necessary, and to use a variety of approaches when appropriate and beneficial.

We all know the many advantages and limitations of dispute resolution options. We also are used to considering some or all of them with our clients.

One suspects, though, that many of those discussions are perfunctory. Yet we still too often see each alternative course as linear, in isolation, and not as complementary parts of what can be an eclectic process.

As a result, we risk missing the opportunity for a more efficient and client-friendly experience.

Take the example of traditional negotiation, in which a divorcing couple cannot agree on interim arrangements for the payment of bills, the use of assets or the sharing of parenting responsibilities. Lawyers need to attend to those matters, if only to “put out the fire” before addressing the larger, long-term issues of the case.

Sometimes, the firefighter’s water turns out to be gasoline, in the form of inflammatory letters, motions and affidavits. Goodwill is undermined, and the clients and their lawyers can get burned in the process.

Retainers are consumed before their time, but the damage is by no means financial only. Clients may become disillusioned with their newly formed attorney relationships that did not yield immediate, positive and cost-effective results. Sometimes the result is an expensive stalemate.

When early impasse does occur, the case-in-chief is at least delayed, while the parties posture about going to court and preparing motions. Then, they wait (sometimes for a long period) for counsel and court availability.

When the appointed date arrives, the parties and counsel often spend a long day in court for a contrastingly short argument. The parties then wait again, this time for temporary orders from a judge who does the best he can with minimal, overheated and frequently distorted exposure to the important “facts” in play. Usually, the decision is reasoned; sometimes it is not.

What divorce lawyer has not experienced the exhaustion, runaway costs and client-lawyer alienation of such early infighting and spiraling of an out-of-control case?

Think about a different kind of case, one in which the parties are not plagued by preliminary feuding. They are equipped to handle interest-based negotiation without mutual destruction, but they just cannot get past significant property valuation issues.

Unlike temporary support or custody matters, these litigants cannot even go to court to resolve these necessary questions that may alone stand as obstacles to a rational distributive negotiation.

Rather, the parties and counsel must complete discovery, prepare for and attend a pre-trial conference, await trial and finally try valuation.

Many thousands of dollars (the range is obviously great), and many months or even years later, a judge will finally (well, subject to appeal) settle the controverted value, but at the cost of time, money and the loss of autonomy in making both the valuation and the distributive decisions.

Enter single-issue mediation or “bullet” arbitration. Just as lawyers think of traditional representation and litigation in a linear fashion, so, too, do they tend to think of mediation or arbitration as a single means to the end of comprehensive resolution. Yet these alternatives can and do work in tandem with other processes.

Referring interim support, custody matters or a valuation question out to a brief and focused mediation can reduce the wear on the relationship among lawyers and clients at the early stages of divorce, allowing for interim resolutions at arm’s length.

For a more assured and prompt result, arbitration will put interim issues to rest and make resolution of the later, larger issue by other means less bruising for all concerned.

And costs are mitigated in the process.

Mediators themselves should take note as well. Consider the same scenarios as above, but in the context of an agreed mediation process. As hard as the mediator may try, he sometimes simply cannot get the parties on track to focus on substantial, longer-term matters because of the acute focus that an early crisis provokes.

That can doom a mediation that might otherwise empower the parties to control and shape their own outcome. Is there an alternative to abandoning the mediation, or letting it become bogged down in stalemate?

Rather than have the mediator spend all his goodwill on seemingly intractable preliminary matters, why not engage an arbitrator who will settle those early issues quickly, impartially and economically?

The parties may then return to focus on the larger issues in a renewed mediation that is less tainted by the previous impasse over which the mediator, and the parties, seemed to be powerless.

Similarly, in collaborative law, the parties may not focus on court outcomes, but the process may also never gain traction because of seemingly intractable preliminary disputes.

A mediator’s intervention or a quick and efficient arbitrator’s award may keep people out of court for good, as the collaborative practitioners keep themselves and their clients focused on the big picture.

We are not advocating for or against any one way of resolving disputes, traditional or alternative.

Rather, we suggest that counsel think about process in a more elastic way and consider interventions, perhaps cut outs, that may make the chosen primary process more efficient and less damaging for all.

The alternative in dispute resolution should not be lost to a rote adherence to one process alone when dynamic use of alternatives “as needed” just may help.

Remember the food court.

William Levine and retired Judge E. Chouteau Levine are the principals of Levine Dispute Resolution Center in Westwood and Northampton, Mass., where they mediate and arbitrate family law, probate and other matters.

Previously published in the June 1, 2012 issue of the Wisconsin Law Journal, reprinted here by permission of the author.

 

Family Business: Where Does It Hurt?

Tuesday, June 19, 2012

We recently attended a Family Firm Institute program that was presented by Ira Bryck of the University of Massachusetts (Amherst) Family Business Center, and Ted Clark of the Northeastern University Center for Family Business. University-based programs, such as these throughout the country, focus with differing emphases on promoting the health of family-owned businesses by providing education, peer support and guidance to families experiencing challenges to, and stresses within, this important way of life.

Family businesses have played an historic role in building the society in which we live and the economy that feeds us all. Keeping the culture of family businesses alive and vibrant is primarily up to the families themselves. The challenges of first, second and later generation family businesses can be enormous. In addition to facing the economics of the industry or profession in which the family business must compete, and those of the local, state, national, regional and world economies, these companies must also address the health and well-being of the family unit, or units, that make the enterprise run.

Mr. Clark and Mr. Bryck’s programs run on the premise that knowledge, the experience of others with a desire to share and learn and a “place to turn” when in need or even crisis, will benefit individual families, their companies, the economy (the UMass program is heavily focused on the needs of its immediate region – Western Massachusetts), and, in turn, the universities themselves in their connection to the business community and the world at large.

Sometimes, the services that these programs provide include access to private dispute resolution such as mediation and arbitration, to keep families together, or where necessary, separate them in ways that may maximize business viability, promote efficient wind-down and minimize family conflict – or at least reduce economic impact. When used, these processes promote privacy, fairness and cost-efficiency; and escape from the specter of public litigation.

Mr. Bryck, executive director of the UMass program for the last 19 years, analogized his role in learning how his program might help business family members in conflict, to that of a family doctor. In assessing a situation, he leads a conversation seeking to reveal “where does it hurt?” Like the body, the “hurt” is a symptom that can lead to a diagnosis, without which a cure is not possible.

The hurt may be strictly commercial, but often it is related to interpersonal conflict within or across generations. Family members may struggle for more influence, for less responsibility, for greater compensation, for an exit strategy or simply for an intangible sense of “fairness”. For some people, the family business is the best of life itself, while to others it is a seemingly inescapable trap.

The idea of a family business as a body is itself interesting - an organism made up of many parts, some functioning more efficiently than others, some stronger, others more vulnerable; at times ambitious, at others exhausted. Sometimes the body parts work at cross-purposes to each other and sometimes one part can bring the body, or the business, to its knees. To learn more how programs like those at UMass and Northeastern can help, you can check out www.umass.edu/fambiz/ and http://cba.neu.edu/cfb/.

 

Putting the Alternative into Dispute Resolution

Wednesday, May 30, 2012

By William M. Levine and E. Chouteau Levine Putting the Alternative into Dispute Resolution

When lawyers think about how to resolve disputes, they usually first consider traditional modes such as lawyer-to-lawyer negotiation or litigation. Other processes — such as mediation, collaborative law or even arbitration — often are considered marginal “alternatives.”

Together, the traditional and alternative approaches comprise what Cleveland family law attorney James H. Cahn calls the dispute resolution “food court.” Cahn’s analogy aptly conjures an image of an easily accessed array of process options. But it also conveys a secondary principle worth considering: that, as with food court offerings, legal consumers can mix and match dispute resolution methods fluidly to address changing needs.

Parties have the ability to take control of their legal process, to change course if necessary, and to utilize a variety of approaches when appropriate and beneficial.

We all know the many advantages and limitations of dispute resolution options. We also are used to considering some or all of them with our clients.

One suspects, though, that many of those discussions are perfunctory. Yet we still too often see each alternative course as linear, in isolation, and not as complementary parts of what can be an eclectic process.

As a result, we risk missing the opportunity for a more efficient and client-friendly experience.

Take the example of traditional negotiation, in which a divorcing couple cannot agree on interim arrangements for the payment of bills, the use of assets or the sharing of parenting responsibilities. Lawyers need to attend to those matters, if only to “put out the fire” before addressing the larger, long-term issues of the case.

Sometimes, the firefighter’s water turns out to be gasoline, in the form of inflammatory letters, motions and affidavits. Goodwill is undermined, and the clients and their lawyers can get burned in the process.

Retainers are consumed before their time, but the damage is by no means financial only. Clients may become disillusioned with their newly formed attorney relationships that did not yield immediate, positive and cost-effective results. Sometimes the result is an expensive stalemate.

When early impasse does occur, the case-in-chief is at least delayed, while the parties posture about going to court and preparing motions. Then, they wait (sometimes for a long period) for counsel and court availability.

When the appointed date arrives, the parties and counsel often spend a long day in court for a contrastingly short argument. The parties then wait again, this time for temporary orders from a judge who does the best he can with minimal, overheated and frequently distorted exposure to the important “facts” in play. Usually, the decision is reasoned; sometimes it is not.

What divorce lawyer has not experienced the exhaustion, runaway costs and client-lawyer alienation of such early infighting and spiraling of an out-of-control case?

Think about a different kind of case, one in which the parties are not plagued by preliminary feuding. They are equipped to handle interest-based negotiation without mutual destruction, but they just cannot get past significant property valuation issues.

Unlike temporary support or custody matters, these litigants cannot even go to court to resolve these necessary questions that may alone stand as obstacles to a rational distributive negotiation.

Rather, the parties and counsel must complete discovery, prepare for and attend a pre-trial conference, await trial and finally try valuation.

Many thousands of dollars (the range is obviously great), and many months or even years later, a judge will finally (well, subject to appeal) settle the controverted value, but at the cost of time, money and the loss of autonomy in making both the valuation and the distributive decisions.

Enter single-issue mediation or “bullet”arbitration. Just as lawyers think of traditional representation and litigation in a linear fashion, so, too, do they tend to think of mediation or arbitration as a single means to the end of comprehensive resolution. Yet these alternatives can and do work in tandem with other processes.

Referring interim support, custody matters or a valuation question out to a brief and focused mediation can reduce the wear on the relationship among lawyers and clients at the early stages of divorce, allowing for interim resolutions at arm’s length.

For a more assured and prompt result, arbitration will put interim issues to rest and make resolution of the later, larger issue by other means less bruising for all concerned. And costs are mitigated in the process.

Mediators themselves should take note as well. Consider the same scenarios as above, but in the context of an agreed mediation process. As hard as the mediator may try, he sometimes simply cannot get the parties on track to focus on substantial, longer-term matters because of the acute focus that an early crisis provokes.

That can doom a mediation that might otherwise empower the parties to control and shape their own outcome.

Is there an alternative to abandoning the mediation, or letting it become bogged down in stalemate?

Rather than have the mediator spend all his goodwill on seemingly intractable preliminary matters, why not engage an arbitrator who will settle those early issues quickly, impartially and economically?

The parties may then return to focus on the larger issues in a renewed mediation that is less tainted by the previous impasse over which the mediator, and the parties, seemed to be powerless.

Similarly, in collaborative law, the parties may not focus on court outcomes, but the process may also never gain traction because of seemingly intractable preliminary disputes.

A mediator’s intervention or a quick and efficient arbitrator’s award may keep people out of court for good, as the collaborative practitioners keep themselves and their clients focused on the big picture.

We are not advocating for or against any one way of resolving disputes, traditional or alternative.

Rather, we suggest that counsel think about process in a more elastic way and consider interventions, perhaps cut outs, that may make the chosen primary process more efficient and less damaging for all.

The alternative in dispute resolution should not be lost to a rote adherence to one process alone when dynamic use of alternatives “as needed” just may help.

Remember the food court.

William M. Levine and retired Judge E. Chouteau Levine are the principals of Levine Dispute Resolution Center in Westwood and Northampton, Mass., where they mediate and arbitrate family law, probate and other matters..

Previously published in the May 21, 2012 issue of Massachusetts Lawyers Weekly, reprinted here by permission of the author.

 

“Non-compete” Orders in Massachusetts Divorce: Yes they can!

Wednesday, May 23, 2012

In recent case of Cesar v. Sundelin, the Massachusetts Appeals Court ruled that a Probate & Family Court judge has the power to order one spouse not to compete with the other spouse after a division of property that includes a business. This is new law here, though it had been addressed by a couple of other jurisdictions earlier.

The argument is: if a judge is going to force one person to buy out the interest of the other in a private business, what is the business owner buying if the other spouse can walk across the street (figuratively or literally), set up shop and compete for the same customers? The counter argument is: if the spouse who is being bought out made a living doing the same or similar work, how can that spouse be prevented from making a living, or without being compensated for the loss of an ability to make one?

This ruling is important for at least three reasons. First, it broadens the powers of Probate & Family Court judges to do something that at least one judge thought he could not do (in Cesar the trial judge had refused to enter a non-compete because he thought he lacked that power – and one suspects that others agreed); and it raises questions about how this should factor in to valuation questions, and with regard to alimony based on the “needs” of the spouse who is restrained from competing. Arguably, this issue is limited to cases in which the spouse shared a business activity, but that makes the alimony question more acute.

Should judges have this breadth of power in divorce cases? The Appeals Court thought so, when it is necessary to protect the integrity of the property division order. We will all see how this plays out, over time.

 

Joint Retention of Financial Experts in Divorce

Wednesday, May 16, 2012

By Heidi Walker, CPA*ABV, ASA

“People, I just want to say, you know, can we all get along?” ~ Rodney King

Hiring a financial expert for a divorce engagement involves many decisions, one of which is determining whether the expert will be separately retained by each party, or whether the parties will jointly retain the expert. Utilizing a joint expert can have its rewards; however, it is not suitable for all cases. The success of using a jointly-retained expert depends on the relationship between the parties; the issues in the case and the attorneys’ strategies for dealing with them; and the skill of the expert to operate in this unique role.

In a divorce matter, generally, a single expert may be engaged by agreement of the parties; appointed by the court; or engaged as part of the collaborative process. We will begin by describing each of these options. Then, we’ll examine the economics of a joint engagement, as well as tips for making such an arrangement a success.

Circumstances of Joint Expert Retention

By Agreement of the Parties

When divorcing parties are involved in litigation, instinct may be for each to hire their own expert. In certain instances, this may be the appropriate course of action. In others, however, the parties may be on good enough terms and the attorneys’ strategies both suitable to jointly retain the expert via a joint engagement letter with the expert. This is usually done in hopes of saving time, fees, and the emotional drain that can result from dueling experts. Choosing this course does not preclude the parties from later hiring their own expert if they are unhappy with the joint expert’s results.

Court-Appointed

A joint expert may be appointed by the court. The parties may request the court to do so, or the court may appoint one on its own. From the court’s perspective, a jointly retained expert can enhance settlement opportunities, as well as avoid the contradictory evidence often submitted by dueling experts. However, some judges may not be in favor of a neutral expert, out of concern that it interferes with the adversarial process. The scope of work may be determined by the court or stipulated by the parties. As outlined in the Family Law Services Handbook, the order or engagement letter typically includes:

  • Specifying the expert’s tasks
  • Stating basic facts (e.g., marriage and separation dates)
  • Defining compensation parameters
  • Identifying financially responsible parties and funding source
  • Addressing discovery protocol
  • Detailing communication and reporting protocols
  • Planning for possible expert withdrawal
  • Clarifying case-specific items and terminology. 

Likely, the most significant downside of a court-appointed expert is that the parties may not be vested in the joint process As such, these engagements can be as contentious (or more so) as if the parties had each hired their own expert. Further, while each party has the opportunity for cross-examination, there is no rebuttal expert to respond if one or both parties take issue with the jointly-retained expert’s conclusions.

Collaborative Process

Use of the collaborative process, whereby a “participation agreement” commits the parties to settle their issues without recourse to litigation, is rising in popularity in family law. This multidisciplinary approach often involves a financial professional, whose role is to gather all of the necessary financial information and synthesize it in such a way that it is useful to educate the parties about their options relating to settlement of their finances. For less complex cases, use of a single financial professional may be appropriate, while more complex cases may require multiple financial professionals, such as a business valuation professional, a Certified Divorce Financial Analyst, a tax professional, a real estate appraiser, a retirement specialist, or others.

In the collaborative process, if agreement cannot be reached, or if one or both parties elect litigation, the professionals on the team may not participate in the ensuing litigation. Each party must retain new counsel and other experts before having recourse in the courts. Thus, much of the effort put into the process must be redone, which can be a significant motivator for settlement, but is a risk not everyone is willing to take.

Does Jointly Retaining a Financial Expert Save Money?

Jointly retaining a financial expert can save time and fees over the traditional dueling expert approach, primarily by avoiding duplicative work, and also potentially by replacing a difficult discovery process with one that is more informal and harmonious. Obtaining information through a formal discovery process where experts have been separately retained can be extremely expensive. When the parties are at such odds that each and every document, question, and follow up question must be obtained via requests for production of documents, interrogatories, and depositions, professional fees can skyrocket. In one case, the in-spouse’s refusal to provide information requested for the business valuation was one factor which led to years of litigation involving several changes in the valuation date (fees), countless stops and starts on the project (fees), and significant time spent with discovery (and more fees). Expenses can potentially be contained with a jointly retained expert, as the parties may be more cooperative for an expert they believe to be genuinely neutral.

Another opportunity to save fees is upon completion of the analysis. The parties may agree that instead of the expert communicating their results via a full-length written report, the results may be expressed with schedules and/or a brief presentation by the expert. As an example, the expert may request the parties and counsel attend a meeting wherein the expert presents her work and requires the parties to provide comments within 10 days. This attempt to make sure everyone understands the expert’s analysis, and the inputs, can be very helpful in settling cases.

However, as much as both parties may be committed to using a single expert up front, one or both may disagree with that expert’s conclusions. Typically the joint engagement agreement will provide that one or both parties may retain their own, separate expert. When this happens, it can obviously wipe out any savings that may have been gained from using one expert.

Further, when the parties, or their attorneys, have substantive disagreements throughout the process and the financial expert is caught in the middle, it can be as expensive as hiring two experts. The expert’s role is to be sure that all parties are treated equally and that both sides are heard during the process. Just because everyone agrees to willingly share information does not mean they will agree on the foundation of that information, or on how much of it should be shared with the expert. We have seen cases where arguments about the correct underlying facts, or the two sides’ interpretation of them, volley back and forth between the attorneys and the parties, each rebutting the facts put forth by the other. In some cases, we have been left wondering if the parties are even talking about the same business! The expert handles this is by doing their own thorough investigation to determine the correct facts, but the more starkly different a picture eac side presents, the more time the expert has to take to determine the “truth”—a job that might be better left in the hands of the trier of fact.

Careful planning of a joint retention can help avoid the case potential pitfalls. With that, we turn to our observations about what has helped make them successful.

Tips for Making Joint Engagements a Success

Using a single expert can be an efficient way to gather facts, assess information, and obtain a financial analysis of the business, which both sides can use to evaluate the financial impact of their legal perspectives before trial. While this is an excellent concept in theory, without careful planning, these engagements can be more difficult to execute successfully. Here are a few tips on how to make joint engagements work.

Lay the ground rules up front

The most important factor for a successful joint engagement is laying the ground rules at the outset. Discovery, communication protocols, fees, timing and deadlines, and report delivery format should all be clarified up front in the engagement agreement to the extent possible to avoid missteps later in the process. It is helpful if the appraiser and both attorneys conference at the outset to iron out the details of the engagement. A clear discovery agreement that is then abided by is critical. Just as we have experienced cases where not being able to get enough information was problematic, there have been others where too much information was the problem.

Communication requires full disclosure

A joint retention involves continuing open communication between the expert and their clients (which may be the attorneys or the parties or the court). This is done with the intention of allowing all of the parties to feel included in the process and that they have “had their say”. Any verbal or written correspondence or documents should be shared with all parties, to address up front any issues the parties have with the information being provided.

A jointly retained expert considers the input of both parties throughout the engagement. They attempt to garner consensus during the process, and document it. There are cases where this works exactly as intended and others where it feels like a firestorm of discovery disputes. Thorough upfront planning, a very clear discovery agreement, and careful navigating on the part of the expert can guide even contentious parties through a joint retention in a relatively civil manner.

Attorneys and experts should be a team

Ideally, attorneys and experts will work as a team to guide the parties to successful completion of a joint engagement, setting clear expectations about how the process works. Some points to remember here are:

  • If contrary legal positions are present, the expert may need to quantify multiple interpretations of the same facts.
  • Keeping relevant facts from an expert is never a good idea, but it is an especially bad idea in joint retention, as it creates suspicion when the facts eventually come out (and they do come out).
  • Experts will ideally obtain consensus regarding their inputs along the way.

If settlement is the end game, attorneys and experts who work as a team have the best chance at achieving that result. Enhance fee collection

The engagement letters of many experts contain clauses for withdrawal for non-payment, or at the very least, a stop-work clause if fees are not up-to-date. In addition, many experts will not deliver the results of their analyses until all fees have been paid. If possible, establish a joint, community account, such as an attorney trust account, as a single payment source. This will increase the likelihood of the expert being paid in a timely manner, and allow the case to move forward as anticipated. It can also remove a potential source of future disagreement among the parties.

Recognize that some cases are not suited to a jointly retained expert

There are some cases that are simply not well-suited to the use of a single expert. As experts, we will recommend against joint retention if it appears from our initial conversations about the case that:

  • Either of the attorneys seems unsupportive of a joint engagement.
  • Excessive conflict between the parties and their attorneys is evident from the outset.
  • One or both parties are representing themselves.

Conclusion

Use of a jointly retained financial expert can be an excellent tool for settling issues in a divorce case. They can save on expert and attorney time and fees, and provide the parties a less contentious environment in which to deal with often complex and difficult financial matters. However, carefully establishing expectations and rules of engagement upfront and then adhering to those throughout the process, as well as managing the parties’ emotions and expectations, are critical aspects of the success of these engagements.

Heidi Walker is a Senior Valuation Analyst at Fannon Valuation Group in Portland, Maine. She focuses on valuation in the context of divorce and shareholder disputes.

Posted with permission of the author.

 

Pitfalls of the New Massachusetts Alimony Law - Recomputation and Alimony Fixed as Child Support

Friday, May 11, 2012

By David H. Lee

March 1,2012 was the effective date of the Act Reforming Alimony in the Commonwealth. The provisions are contained in Sections 48 through 55 of Chapter 208 of the General Laws of Massachusetts.

Four different types of alimony are identified under the new law: General Term Alimony. which may be terminated based on durational limitations relating to the length of the marriage, suspended, terminated or reduced based on recipient's cohabitation, and terminated when the payor reaches full retirement age; Rehabilitative Alimony, which may be terminated based on a durational limitation within five years; Reimbursement Alimony. which is intended for short marriages and may be terminated after either short term periodic payments or a one-time payment; and Transitional Alimony, which is also intended for short marriages and which may be terminated after either a one-time payment or short tern1 periodic payments lasting for no longer than three years.

All four types of alimony terminate under the statute upon the death of the recipient spouse. The significance of this is that all cash or cash equivalent payments in satisfaction of these obligations will likely qualify as alimony payments under section 71 of the Internal Revenue Code and be includable in the income of the recipient and deductible by the payor.

However, one needs to beware of two provisions of the Code which can impact that assumed income tax treatment: Recomputation and Alimony Being Fixed as Child Support.

Excess alimony payments

Recomputation rules address the issue of excess front-loading of alimony payments. These rules call for the inclusion in the payor's income in the third year post separation of any amount of "excess alimony payments" over the prior three years and for the allowance of a deduction from gross income for the recipient in the third post separation year for that same amount.

The three post separation years are not the 36 months from the commencement of alimony payments, but instead cover the three tax years that follow the commencement of alimony payments pursuant to a divorce judgment or separation agreement. This means that if alimony payments begin any time in 2012. the third post separation year would be 2014.

The effect of the recomputation formula is that while the alimony payments may be includable/deductible in the years paid, the excess alimony deduction for the recipient and inclusion for the payor will come in that third post separation year.

Under the new alimony law. a possible problem can arise when dealing with any type of alimony order of short duration. or where soon after the alimony order is entered there is a termination or suspension by reason of cohabitation or termination by reason of the payor reaching full retirement age.

The formula for calculating excess alimony in the third post separation year is A + B, where A = (year 2 payments) - (year 3 payments + $15,000) and B = (year 1 payments) - [(year 2 payments - A) + year 3 payments]/2 + $15,000. As an example. in a situation where 12 months of Reimbursement or Transitional Alimony is set at $4,000 per month starting in May 2012, then A = $16,000 - ($0 + $ 15,000), B = $32,000 - [($ 16,000 - $ 1,000) + ($0)/2 + $ 15,000] and A + B = $10,500 of excess alimony payments recomputed in 2014.

The recomputation rules do not come into play if payments end early because of the death of either party or the remarriage of the recipient. Recomputation is also not applicable in several other circumstances: Sec 71 (b )(2)( c) payments, which are temporary alimony order payments; alimony payments set as a fixed portion of income from business, property or compensation from employment that are to be paid over a 36 month period (rather than over 3 post separation years); and Sec. 682 alimony trust payments that are distinct from alimony payments between the parties.

If these exceptions do not apply, there are a few ways to deal with the issue of recomputation:

  • Adjust payments to lower amounts and make them nonincludable/nondeductible.
  • Factor in what the likely recomputation will be in the third post separation year and then make an equitable adjustment for the recomputation impact.
  • Spread the payments out in smaller amounts over a long enough period of time to avoid any excess alimony recomputation.
  • Provide that the recipient of a recomputation benefit has the obligation to reimburse the payor at the end of the recomputation period in the amount of the benefit to the recipient, loss to the payor or some amount in between with a payment designated as nonincludable/non-deductible.
  • Consider making additional 71 (b)(2)(c) payments and set later amounts which would not result in "excess alimony".

You should consider the recomputation issue in negotiating agreements, and if no agreement results present the issue to the court in your proposed judgment so the court can make adjustments to avoid recomputation.

If you receive a judgment and recognize that there is a recomputation problem, submit the tax issue to the court post-judgment within the time pennitted by the Rules of Domestic Relations Procedure as addressed in Fechlor v. Fechlor , 26 Mass. App. Ct. 859 (1989) for possible amendment. But you will need to bring these issues to the court's attention and ask for what you want. Do not expect the court to do your work for you.

You should also keep in mind that the recomputation issue may arise with requests for modification or termination by reason of cohabitation or otherwise within the three post separation year period.

Alimony fixed as child support

If all the requirements for alimony payments under Internal Revenue Code Sec 71 are met, then in most cases the income tax treatment will be includable/deductible. However, if the alimony is treated as fixed as child support, this is not the case and the payments from inception will not be includable/deductible.

Alimony will be treated as fixed as child support if by its terms it is reduced (a) upon the happening of a contingency relating to a child of the payor or (b) at a time which can clearly be associated with such a contingency.

The explanation for this can be found in Temporary Regulations 1.71-1T Questions and Answers 17 and 18. A contingency relating to a child means a specific identifiable circumstance such as a child's reaching a particular age, dying, marrying, leaving school etc. A time which can clearly be associated with such a contingency is defined as a reduction not more than six months before or after the date the child is to attain age 18, 21 or the local age of majority.

The Q&A goes on to state emphatically that "'ALL OTHER SITUATIONS OF REDUCTION WILL NOT BE TREATED AS CLEARLY ASSOCIATED WITH THE HAPPENING OF A CONTINGENCY RELATED TO A CHILD."

This consideration of alimony being fixed as child support applies to alimony orders where you can compute the reduction date at the time of entry of the order. Fortunately, the presumption of an alimony payment being fixed as child support by reason of its being reduced at a time which can clearly be associated with a contingency related to a child is capable of being rebutted:

  • The presumption may be rebutted if you can show that the time for reduction is determined independently of contingencies relating to a child.
  • The presumption can be conclusively rebutted if there is a complete cessation of alimony during the 6th post separation year or at the expiration of 72 months.
  • The presumption may be rebutted by showing that alimony is only for a period customarily provided for in the local jurisdiction (such as half the length of marriage).

While we do not presently have any history for the application of the new alimony laws nor do we have anything which could be clearly identified as custom in our jurisdiction with respect to its application, the alimony scheme of durational limits set forth in the statute suggests that the first and third examples are most likely to be used to rebut the presumption.

To make it easier to rebut the presumption, it is advisable that in separation agreements and judgments the statute be specifically referenced if the timing of termination or reduction would result in a presumption of an alimony payment being fixed as child support. Citing specific wording of the statute by section or circumstances which led to setting the time for alimony termination or reduction would also support rebuttal.

For example. if the parties had been married for a length of time whereby the durational limit would result in a date of termination within six months before or after a child turning 18, wording might be advisable such as "The alimony termination date set forth in this judgment (agreement) was determined by reference to MOL c. 208 sec. 49(b)(#) which provides in relevant part that' ............... ' and is not based on any contingency related to a child" might be advisable.

David H. Lee practices/family law as a partner at Lee, Rivers & Corr LLP in Boston.

Previously published in the March 8, 2012 issue of Massachusetts Lawyers Weekly, reprinted here by permission of the author.

 

Should People Pay Alimony and Child Support from Unearned (Capital Gains, Interest and Dividend) Income?

Wednesday, May 09, 2012

There is an interesting inconsistency between how income is defined in the Massachusetts Child Support Guidelines (CSG), and how the same kinds of income are treated in our new alimony statute. The question is: in applying support formulations to the income of the paying party, do interest, dividends and capital gains income from investment of property “count”? The Child Support Guidelines (CSG) say “yes” while the new (as of March 1, 2012) alimony statute says “no”.

The CSG definition of income is extremely comprehensive, and it includes interest and dividends, and capital gains received as a “regular source of income”. What makes capital gains a regular source of income? Is the key that there is some income every year? Most years? Does it matter if it varies greatly from year-to-year? Should it matter if the capital gains did not come from the paying party’s “business” trading, as opposed to “personal” investment? However determined, this income it “counts”.

The Massachusetts Appeals Court recently decided a case called Wosson v. Wosson, in which the trial judge included the capital gains income of the father in setting his child support payment, but then reversed herself by excluding it in response to the father’s motion after trial. The Appeals Court did not say that the trial judge could not do this, but it sent the case back to the trial judge because she is required to explain her reasoning under the CSG through “findings”, which she had not done. (A judge may deviate from the CSG, but must explain her action by writing her factual reasons.)

Meanwhile, the new alimony law says that a judge should not take into consideration income that is gained by the investment of property that the paying party receives or keeps in a divorce judgment. We presume that the legislature’s reason for doing this is to avoid what is commonly called “double dipping”, something that happens when a spouse receives an asset in divorce, then has to pay support from the asset or its investment income/gains, after the divorce. (We will talk about “double dipping” more in a later entry.)

Whatever the reasoning of the legislature in making the new alimony laws, it did exclude income generated by divided assets from consideration in the alimony law, while CSG includes it in deriving support for children. Does this matter? It does, if for no other reason, that in some cases, the paying party pays both alimony and child support; and confusion can result in deciding how to define his or her income for calculation purposes.

Should the uses of income be different?

 

Impact of Cohabitation Under Alimony Reform Act

Wednesday, May 02, 2012

By Maureen McBrien

A marked change to the statutes that govern divorce in Massachusetts is the provision in the new Alimony Reform Act of 2011 that went into effect on March 1 of this year. The provision provides that an alimony recipient’s cohabitation with another person constitutes grounds for a termination, suspension or reduction in the payor’s alimony obligation.

What does that mean for the numerous alimony recipients who have been cohabiting for months, if not years, prior to the new law and for those who are contemplating cohabitation in the future?

This article will attempt to explain the nuances of the Alimony Reform Act of 2011 as it pertains to particular situations that involve an alimony recipient who has been cohabitating — or will be in the future.

Under the prior law, an alimony order was typically entered and continued indefinitely until — whichever occurred sooner — the death of either party, the remarriage of the recipient, or by order of the court upon a judgment following the filing of a complaint for modification alleging a material change in circumstances since the prior order issued.

What frustrated many payors was the continued obligation to pay alimony notwithstanding the recipient’s cohabitation with a romantic partner in a relationship akin to a marriage.

In some instances, recipients purposefully avoided marriage solely so they could continue receiving alimony. That prompted the movement to include a cohabitation provision in the new act to avoid such gamesmanship.

What is cohabitation?

Under the act, alimony “shall be suspended, reduced or terminated upon the cohabitation of the recipient spouse when the payor shows that the recipient has maintained a common household … with another person for a continuous period of at least three months.” G.L.c. 208, §49(d).

The act enumerates several factors to determine whether a recipient spouse maintains a common household with another person. While not explicitly so stating, the enumerated factors are reflective of a romantic relationship akin to a marriage, as opposed to simply sharing a primary residence with, for example, a sibling, roommate, nanny or temporary boarders.

The act will fuel the private investigation business, as investigators search for evidence as to whether alimony recipients are in fact cohabitating as defined in the act.

Financial contribution of cohabitating partner

Although alimony is still premised on the need of the recipient and the payor’s ability to pay, the act makes no explicit reference to the financial contribution of the recipient’s cohabitating partner.

While in most circumstances a cohabitating partner’s financial contribution would reduce an alimony recipient’s need for financial support from a prior spouse, in some circumstances the cohabitating partner could be a financial drain on the alimony recipient.

But under the act, financial inquiries are irrelevant, at least at the outset, and the only emphasis is on whether a recipient is cohabitating.

The theory behind that juxtaposition is that ex-spouses should not be obligated to support prior spouses who are in a committed relationship akin to a marriage. Once such a relationship exists, it is incumbent on the couple to support themselves, independent of an ex-spouse.

The reality, however, is that such financial independence will not be achieved by some cohabitating recipients simply by virtue of their cohabitation arrangement.

Nevertheless, the alimony payor may be entitled, at the very least, to a reduction in his alimony obligation in such a circumstance. Under what circumstances does cohabitation warrant a suspension, reduction or termination in alimony?

Once it is determined that an alimony recipient does qualify as one who is cohabitating under the act, the inquiry in a complaint for modification by the payor is whether such fact entitles the payor to a suspension, reduction or termination in alimony.

That is when finances will come into consideration, since even though the act is silent in that regard with respect to cohabitating recipients, the court will obviously need to look at finances to determine whether a reduction as opposed to a termination is warranted.

If the relationship is long-lasting and the cohabitating partner is, in fact, contributing financially and has some savings and/or assets, a termination likely would be warranted.

But if the cohabitating partner is unemployed or disabled, the payor may be entitled to a reduction only.

That inquiry would seemingly expose the cohabitating partner to discovery in the context of a litigated modification action, to determine what his or her income, assets and liabilities are. This may create a double standard as the act is clear that spouses of payors are insulated from such discovery when the tables are turned and the recipient files a complaint for modification seeking an increase or continuation in alimony.

An alimony recipient must accurately disclose on his or her financial statement exactly what expenses are paid for by a cohabitating partner to the household. Such a disclosure might suffice in lieu of extensive discovery in this regard, other than perhaps sending out a few subpoenas to banking institutions to verify the representations.

When is a modification warranted on cohabitation grounds?

Family lawyers in Massachusetts are being flooded with calls from alimony payors elated at the word of alimony reform in the commonwealth. They want to know what they can do to obtain relief and when.

The answer is complex and factually driven, and for purposes of this article will only focus on the issue of cohabitation. The act provides that alimony “shall be suspended, reduced or terminated upon the cohabitation of the recipient spouse when the payor shows that the recipient has maintained a common household … with another person for a continuous period of at least three months.”

The words “upon the cohabitation” suggest problems for payors in situations in which alimony recipients have already been cohabitating prior to the passage of the act, as the language is suggestive of future cohabitation.

If the recipients are already in a long-term cohabitating relationship, then what is the material and substantial change in circumstances warranting a modification of alimony, other than the passage of the act? There may be none.

With respect to relying simply on the passage of the act itself and its suggestion that alimony payors are entitled to a suspension, reduction or termination of alimony when the recipient is cohabitating, Section 4(b) of the act makes clear that Section 49, which governs cohabitation, shall not be deemed a material change of circumstances that warrants modification of the amount of existing alimony judgments.

Therefore, in instances in which a recipient was already cohabitating as of March 1, when the act went into effect, there is no change in circumstances for the alimony payor upon which to obtain relief.

The payor would need other more traditional reasons to warrant a modification, such as a reduction in income since the date the alimony issued or was last modified. And, in any event, an alimony payor’s relief may only be temporary, as the act provides for a reinstatement of alimony in instances in which the cohabitating relationship no longer exists. See G.L.c. 208, §49(d)(2). Since the act is prospective in its application per Section 4(a), the cohabitation inquiry for payors regarding their recipient ex-spouse began on March 1, 2012, and can only be satisfied if the cohabitating relationship still exists upon the expiration of 90 days, or by the end of May.

If the recipient is in a cohabitating relationship that began prior to March 1, and cohabitation is the only grounds upon which the payor seeks relief, then arguably there is no change in circumstances independent of the act (which cannot in and of itself constitute a change in circumstances of existing alimony judgments, except as to situations in which payors are paying beyond the new duration limits imposed by the act). See G.L.c. 208, §49(b).

Recipients under previously existing alimony orders who begin cohabitating for a period of 90 days or more post-March 1, however, will be subjected to a suspension, reduction or termination in their alimony obligation upon the filing of a complaint for modification by the payor, since such situation arose after the implementation of the act and thus constitutes a change in circumstances from the prior judgment independent of the passage of the act itself.

New alimony orders issued post-March 1 will be subject to modification if, as and when a recipient begins cohabitating, per the new law.

Conclusion

Under the act, cohabitation is clear grounds for modification of new orders and of existing orders when the cohabitation relationship began post-March 1.

In all other circumstances, the fact of cohabitation exposes the recipient to a potential reduction or termination, but it is not at all certain and is highly dependent on what other grounds for modification may exist.

Maureen McBrien practices family law at Todd & Weld in Boston and is an adjunct professor at Suffolk University Law School. She is currently co-authoring the Fourth Edition of “Massachusetts Practice, Family Law and Practice” with Charles P. Kindregan Jr. She can be contacted at mmcbrien@toddweld.com.

Previously published in April 30, 2012 edition of Massachusetts Lawyers Weekly. Posted with permission of the author.

 



Get e-mail notifications of new blog posts! Enter email address below.:



Delivered by FeedBurner

other articles


recent posts


tags

facilitated negotiations Boston divorce mediators fraud health insurance Same Sex Marriage Alimony Reform Act Major League Baseball Arbitration mediator divorce arbitration Defense of Marriage Act Cohabitation The Seven Sins of Alimony special master Massachusetts alimony health coverage Massachusetts alimony and child support pre-ARA alimony lawyer Self-adjusting alimony orders arbitrators Chouteau Levine General term alimony alimony law private dispute resolution divorced alimony statute family mediation divorce mediations divorce lawyers SJC dispute resolution MLB labor agreement Obamacare divorce mediation lawyers traditional negotiations Massachusetts lawyers Massachusetts how baseball arbitration works alimony reform legislation divorce arbitrators IRC §2704 arbitrator mediation Levine Dispute Resolution Center LLC Levine Dispute Resolutions arbitration Levine Dispute Resolution Center divorce agreement Baseball Arbitration family law Massachusetts Alimony Reform Act divorce judgment Uniform Arbitration Act med/arb medical benefits Child Support Guidelines Act Reforming Alimony in the Commonwealth divorce arbitrator Levine Dispute Resolution Divorce Agreements family law arbitrator family law arbitrators litigation family support self-adjusting alimony divorce and family law family law mediation Massachusetts divorce mediators Divorce conciliation Baseball support orders alimony orders DOMA family and probate law disputes separation Matrimonial Arbitration alimony Family Law Arbitration annulment child support COLA LDRC Baseball Players rehabilitative alimony divorce litigation divorce process Massachusetts Lawyers Weekly disputes divorce and family law mediators med-arb mediations divorce mediator resolve disputes mediators lawyer-attended mediation Massachusetts divorce lawyers high-risk methodology