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Archive for the tag “distribution”

Money for Injuries During Marriage Are Divisible After Marriage

The recent Pennsylvania Supreme Court case of Focht v. Focht, 613 Pa. 48, has clarified Pennsylvania case law regarding the status of a court and/or litigation settlement and/or verdict in the context of equitable distribution in a divorce. The obvious question for divorce litigants is this: if one has a potential settlement/verdict, when, if at all, is it divisible in equitable distribution?

23 Pa.C.S.A. Section 3501(a)(8) specifically states that a “cause of action or claim which accrued prior to the marriage or after the date of final separation” is not divisible in equitable distribution. The courts, in the cases of Drake v. Drake, 555 Pa. 481, and Pudlish v. Pudlish, 2002 PA Super 95, made attempts to address actions and claims during the marriage (before separation), with the question at issue being “when does an action or claim accrue exactly?”

In Drake, one of the spouses had a worker´s compensation claim which included an injury and litigation settlement for the same, occurring during the marriage. The issue for the Drake Court was to determine whether the spouse´s claim for lost future wages, which extended to a time period beyond the dissolution of the marriage, would be subject to equitable distribution. The Court ruled that as the injury and its settlement both occurred during the marriage, any funds to be paid out in that settlement were to be included in equitable distribution. In other words, the entire settlement was considered to have accrued during the marriage.

In Pudlish, the Court ruled that a claim or action does not accrue until a verdict and/or settlement is entered. Practically speaking, then, an injury and its entire litigation could take place during a marriage, but if the verdict/settlement just happened to take place after marital separation, it would be considered separate property not subject to equitable distribution.

With the Drake and Pudlish cases in full view, the Supreme Court of Pennsylvania in Focht took the opportunity to clarify the issue of exactly when an action/claim accrues by laying out what is now the definitive rule in Pennsylvania. In Focht, the husband was injured during the marriage and brought an action for his injury which was not settled until after an action in divorce was filed.

The Pennsylvania Supreme Court extended Drake, and specifically overruled Pudlish, by ruling that a settlement and/or verdict and/or any proceeds from litigation accrues under 23 Pa.C.S.A. 3501(a)(8) as soon as the party has the right to file suit. Therefore, if an injury (or similar legally actionable issue) occurs during the marriage, regardless of when it settles or reaches a verdict, any funds flowing from any said action will be subject to equitable distribution.

Originally published on April 3, 2013 in Upon Further Review and can be seen here.

Divorce, Dead Men, and ERISA

Last month Upon Further Review published an article I submitted called “Till Death Does Your Stuff Part” (which can be found here) regarding the latest development in the law regarding the interaction between divorce litigation, estate litigation, and the death of a litigant. I am now following up that article with the instant one because within a few days of publication, I received some pretty interesting and clever responses to the aforesaid article, and I would like to address them here as I think the issues they raise are food for attorneys’ thought.

One of the responses inquired about the application of the Dead Man’s Act to a divorce matter where one party dies after divorce grounds have been established. The Dead Man’s Act (42 Pa.C.S.A. § 5930) deals with the admissibility of evidence against a decedent by the parties to a contract in which the decedent was also a party. The Act serves to restrict the surviving members of a contract from presenting testimonial evidence against the decedent, also a member of the same contract, of anything that occurred before his death. The precise interpretation of the Act by the Court is complex, storied, and beyond the scope of this article. Suffice it to say here, however, that the Act does pose an interesting question vis-à-vis divorce. Generally speaking, Pennsylvania views marriage as a contract and if marriage is a contract, and one of the spouses (i.e.: parties to the marriage contract) dies, can the other party to that contract (i.e.: the surviving spouse) present any evidence against the decedent spouse under the Act? The cases in Pennsylvania on the subject are rather unclear, generally very old, and largely irrelevant as they do not account for the change in Pennsylvania law (i.e.: 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2)) as described in my previous article mentioned above. The cases, for the most part, involve a spouse trying to provide testimony regarding the other spouse in an attempt to elect against the decedent spouse’s estate. The cases regarding a surviving spouse’s testimony provided to attempt to elect against a decedent’s estate are nearly universal in their opinions that the testimony is inadmissible under the Act (or something similar thereto). Despite this, the cases also seem to tend toward allowing a surviving spouse to provide testimony as the existence of the marriage relationship. Under 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. 2106(a)(2), if divorce grounds are established, the only avenue for the surviving spouse for a decedent’s spouse’s property is through equitable distribution, therefore there is a question as to whether these cases still apply.

At present, the cases do not shed light as to what sort of testimony will be permitted to be provided at an equitable distribution hearing involving a decedent spouse. A strict reading of the Dead Man’s Act would seem to imply that testimony regarding the decedent spouse by the surviving spouse is inadmissible; however, logically speaking, this seems to be obviously contrary to what would appear to be the intent of the legislature in passing 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2). Further, pursuant to 42 Pa.C.S.A. § 5927, in actions brought by one spouse against another to recover separate property, the testimony of one spouse is deemed “fully competent.” As above, how this interplays with the Dead Man’s Act and equitable distribution is not clear, but it would seem to lean toward allowing the surviving spouse to provide testimony.

In my opinion, I do not think it makes much sense to specifically take a divorce matter involving a decedent spouse out of estate litigation (where testimony is specifically prohibited by case law) and place it into equitable distribution only to have the testimony of the surviving spouse deemed inadmissible under the Dead Man’s Act; indeed, cui bono? It seems logical to me to discern from the legislature’s decision regarding the placement of a case into equitable distribution that it also intended testimony regarding the decedent spouse and the marriage contract by the surviving spouse to be admissible and, perhaps, to expand 42 Pa.C.D.A. § 5927 to cover all property at issue in a divorce. Otherwise, 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2) are simply exercises in academic futility. Please note that what I have provided above is simply my opinion; I do not know exactly how this will all pan out. It will be interesting to see how the Court resolves this seeming conflict between the 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2) and the Dead Man’s Act.

Before I move to the next issue, I would note that despite the 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2), the Dead Man’s Act appears to remain applicable regarding testimony by a surviving spouse about a decedent spouse and a Pre and/or Post Nuptial Agreement.

The next issue presented to me by the readers of Upon Further Review is the application of ERISA to 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2). This matter seems much more straight forward than the Dead Man’s Act. ERISA, as a Federal law, preempts Pennsylvania divorce law; there is no dispute about that. Under ERISA, once a spouse dies the terms of the insurance policy and/or pension become “locked in” as it were. Therefore, even if a party is in the midst of a divorce and the decedent spouse intended to remove the surviving spouse as a beneficiary of his/her pension and/or insurance policy but does not due to his/her death, the surviving spouse remains as beneficiary regardless of the intent. At this point, of course, the surviving spouse can attempt to receive whatever survivor’s benefits s/he may be entitled to receive. Therefore, the appropriate response by the estate of the decedent spouse is to file for an injunction against the surviving spouse to prevent him/her from receiving the benefits. It should be remembered that the estate of the decedent spouse takes the place of the decedent spouse in the divorce litigation if divorce grounds are established (if no grounds are established, the divorce litigation may no longer proceed regardless). The estate, as a result, may proceed through equitable distribution as if the decedent spouse were so doing. Consequently, through equitable distribution it would seem that the estate of the decedent spouse may still secure a Qualified Domestic Relations Order regarding the insurance policy and/or pension covered by ERISA.

The final issue raised to me was the application of Pennsylvania’s hearsay rules to equitable distribution hearings regarding a decedent spouse. Under Pa.R.E. 804(a)(4), death, perhaps obviously, is considered one of the ways a witness can be “unavailable” for testimony. Under this Rule, if a witness is unavailable, hearsay testimony of the statements made by the unavailable witness may be admissible under certain circumstances. Under Pa.R.E. 804(b)(3), a statement made by a decedent against his/her own interest may be admissible as evidence. Further, under Pa.R.E. 804(b)(4), the testimony of a dead (i.e.: unavailable) witness is admissible with regard to various issues of his/her own family history. Of course, the weight and credibility of this testimony is still to be weighed by the fact finder, but it seems that the mere death of one of the divorcing spouses is insufficient on its face for an objection based on hearsay to be sustained. However, it does seem that eliciting such testimony may be problematic; it will be interesting to see how the Court elects to rule in these sorts of cases.

I hope the above sheds some additional light on the application of 23 Pa.C.S.A. § 3323(d.1) and 20 Pa.C.S.A. § 2106(a)(2). I greatly appreciate those readers who took the time to contact me regarding these issues and I hope, through our mutual efforts, we can make the practice of Pennsylvania law clearer and more effective.

This article also appeared in the Philadelphia Bar Association’s Upon Further Review on July 11, 2011 and can be found on my website here.  This article was reprinted in Volume 33 Issue No. 3 (September 2011) of Pennsylvania Family Lawyer.

Till Death Does Your Stuff Part

While the traditional marriage rite contains the words or variations of “till death do you part,” unfortunately sometimes marriages part in divorce instead. Sometimes, however, divorce and death nearly overlap; when that happens, how does your property part?

Although the focus of this article is the latest change in Pennsylvania Estate Law which took effect at the end of 2010, it is worth pointing out the change in PennsylvaniaDivorce Law that took effect in 2004. In 2004, Pennsylvania’s legislature passed 23 Pa.C.S.A. Section 3323(d.1) which, in pertinent part, says: “[I]n the event one party dies during the course of divorce proceedings, no decree of divorce has been entered and grounds have been established as provided in subsection (g), the parties’ economic rights and obligations arising under the marriage shall be determined under this part rather than under 20 Pa.C.S. (relating to decedents, estates and fiduciaries).” In essence, if divorce grounds are established, the marital property will be divided through equitable distribution as opposed to passing through the decedent spouse’s estate as if no divorce had been filed. 23 Pa.C.S.A. Section 3323(d.1) helped clarify and streamline the division of marital property when one spouse dies, and draws a bright line when equitable distribution takes effect.

As a point of clarification, grounds for divorce are typically based on the consent of the parties under 23 Pa.C.S.A. Section 3301(c), or if the parties have been separated for two (2) years under 23 Pa.C.S.A. Section 3301(d). Therefore, if both parties have executed an Affidavit of Consent under Section 3301(c), or an uncontested Affidavit Under Section 3301(d) has been filed, and the Court entered an order approving divorce grounds under one of those sections, then 23 Pa.C.S.A. Section 3323(d.1) applies and the marital property would be divided through equitable distribution if one of the divorcing spouse’s dies. Otherwise, the property of the divorced spouse proceeds through typical estate law as if no divorce action had been filed at all.

Despite the enactment of 23 Pa.C.S.A. Section 3323(d.1), which modified divorce law, there was still the possibility of a conflict between divorce law and estate law. While 23 Pa.C.S.A. Section 3323(d.1) made it clear that equitable distribution controls the marital property of the parties after divorce grounds are established, it made no mention of the possibility of any attempt by the surviving spouse to elect against the will of the decedent spouse or attempt to collect inheritance under the terms of the decedent spouse’s estate.

In order to close this potential loophole, the Pennsylvania legislature passed 20 Pa.C.S.A. 2106(a)(2) to modify estate law to make it consistent with 23 Pa.C.S.A. Section 3323(d.1)’s modification of divorce law. 20 Pa.C.S.A. 2106(a)(2) reads: “[A] spouse shall have no right or interest under this chapter in the real or personal estate of the other spouse if: (i) the other spouse dies domiciled in this Commonwealth during the course of divorce proceedings; (ii) no decree of divorce has been entered pursuant to 23 Pa.C.S. § 3323 (relating to decree of court); and (iii) grounds have been established as provided in 23 Pa.C.S. § 3323(g).” Under 20 Pa.C.S.A. 2106(a)(2), once divorce grounds are established by the court, as described above, the entitlement of the surviving spouse to any part of the estate of the decedent spouse is completely severed, except regarding the exception described below, leaving equitable distribution the sole and exclusive remedy to the surviving spouse to any of the decedent spouse’s property. Indeed, 20 Pa.C.S.A. 2106(a)(2) functions to modify the decedent spouse’s will to revoke any provision to pass any property to the surviving spouse. The only exception to 20 Pa.C.S.A. 2106(a)(2) is when the decedent spouse specifically and explicitly indicates that his/her intention is to provide certain property to the surviving spouse regardless of the entry of divorce grounds or decree in divorce.

Finally, 20 Pa.C.S.A. 2106(a)(2) makes it clear that if divorce grounds have been established, the surviving spouse will no longer be entitled to any life insurance policies, pensions, annuities, and other sort of similar benefits of the decedent spouse.

To sum up, 20 Pa.C.S.A. 2106(a)(2) served to make estate law consistent with 23 Pa.C.S.A. Section 3323(d.1) in divorce law and, when both are applied, they each serve to ensure that, for all intents and purposes, if divorce grounds are established, the only route the surviving spouse has available to secure property from the decedent spouse is via equitable distribution.

This article also appeared in the Philadelphia Bar Association’s Upon Further Review on June 10, 2011 and can be found on my website here.  This article wasd also reprinted in Volume 33 Issue No. 3 (September 2011) of Pennsylvania Family Lawyer.

Showing Entitlement in Order to Receive Alimony Pendente Lite

I am excited to say that I won a recent alimony pendente lite (“APL”) case on the basis of entitlement.  This is a pretty rare occurrence as evidenced by the paltry amount of case law on the subject.

 

A little background may help.  First, APL is the support a spouse receives while a divorce case is pending.  The spouse who receives is, probably obviously, the spouse with the lower income and fewer assets.  The purpose of APL is to help the spouse with less income/assets to be able to adequately provide for him/herself and litigate the divorce simultaneously.  Most of the time, entitlement is merely assumed either because the numbers are clear or many practitioners presume there is no defense against it if s/he represents the spouse earning more money.

 

Most APL petitions are filed using a template that is rarely, if ever, varied from case to case.  The averments in the template allege that the petitioner (the person seeking APL) cannot sustain her/himself during the litigation and cannot provide for his/her reasonable own needs without the APL.  I have litigated dozens of APL cases on either side and never seen anyone challenge a petitioner on the basis of the averments in the APL petition and about a year ago, I decided I would try and see what happens.

 

The response I have received from everyone at the APL hearings so far was surprise.  Opposing attorneys react extremely negatively when I bring out the APL petition and cross examine on the averments made in it.  I suspect it is because this likely never happened before to them.  Indeed, one attorney admitted as much exclaiming on the record something like “everyone knows the petition is just a form!”  Conversely, the response I have received from the support masters has ranged from confusion (but allowing the examination) to something like a bemused spectator.

 

The fact is, an APL petition is a formal document filed with the Court which contains verified averments of facts about the petitioner made by the petitioner.  Merely because it is a form or a template does not, somehow, lessen the significance of the fact that it contains factual averments which are verified by the petitioner to the court as true.  My suggestion to those who think “it is merely a form” would be to rethink using it if your client does not conform to its averments.  Merely having lesser income does not automatically mean that one is entitled to the APL.

 

In the recent case I mentioned above, the Wife made a very good living earning a six-figure salary (though less than her spouse), was able to pay all of her expenses out of her income (without the APL), as well as make contributions to her retirement funds each pay period.  Needless to say, she was more than able to meet her reasonable needs and sustain herself if she could do all of the things listed above with her own income (absent the APL), namely satisfy all of her monthly bills and save for retirement.  APL, in this case, would not equalize the two parties over the course of the divorce litigation, but only serve to enrich the petitioner.

 

Luckily for me and my client, the judge agreed and ruled that the wife was not entitled to the APL.  I think the lesson here is that one cannot assume some things, namely, one is not entitled to APL merely on the basis of making less money than one’s spouse and that the averments in an APL petition cannot be examined merely because it is a “form” or “template.”  The allegations made in the petition are important and are formal representations to a court and should be taken seriously as such.

 

Finally, every case is unique and do not read the above and presume it applies to your case.  This article is not legal advice for your particular case.  Each case is handled differently based on its unique set of issues, facts, and circumstances.  The take away from the above, is, I think, first, be sure that what you aver in an APL petition reflects the truth and reality.  Second, be sure to consider arguing entitlement if defending an APL petition if it is clear that the petitioner has sufficient income/assets to sustain him/herself.  APL is not designed to enrich one party and/or impoverish the other.  Instead, it is designed to try and make both parties able to both sustain themselves and pursue the divorce litigation.

Divorce After Death?

Here is yet another an article, by Adam S. Bernick, Esquire, who is of counsel to my firm, providing some sound advice and insight into the estate planning process.  This article can be found on my website here and was originally published in Upon Further Review” on December 8, 2009, and can be seen  here.

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