The Ins and Outs of Cohabitation & Divorce Law

The Ins and Outs of Cohabitation and

DivorceThomas J. Petrelli, Jr., Esq.Petrelli Law, P.C.www.petrellilaw.com

Thomas J. Petrelli, Jr. presented the following presentation about PA law for unmarried couples April 2013 to the Philadelphia Legal Secretaries Association. Tom Petrelli’s goal is to help families overcome the difficult legal matters that arise with divorce, child custody, premarital agreements, and domestic violence.

© 2013 | Petrelli Law, P.C. | 1845 Walnut Street, Suite 1600, Philadelphia, PA 19103 | (215) 523-6900

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What Unmarried Couples Need to Know About Ending Relationships �

© �013 | Petrelli Law, P.C.

In this session, we will cover some of the less-common issues that present themselves in family law practice, including:

What Unmarried Couples Need to Know About Ending Relationships

What Will Happen to Your Pennsylvania Pet if You Divorce

Why Prenups are Important Planning Tools for Many Couples

Retirement Plans and Divorce

Marriage and Your Partner’s Debt: How to Protect Yourself

Adoption of Step-Children and Subsequent Divorce

The Gray Areas of Family Law

What Unmarried Couples Need to Know About Ending Relationships .............. 4

What Will Happen to Your Pennsylvania Pet If You Divorce? .............................. 11

Why Prenups are Important Planning Tools for Many Couples ........................... 13

Retirement Plans and Divorce .............................................................................. 16

Marriage and Your Partner’s Debt: How to Protect Yourself ............................... 20

Adoption of Step-Children and Subsequent Divorce ........................................... 21

Content

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What Unmarried Couples Need to Know About Ending Relationships 3


What Unmarried Couples Need to Know About Ending Relationships

Breaking up is hard

to do, whether from a

marriage or a long-term

relationship. The legal

differences, however, can

be viewed as either a

blessing or a curse.

Ending a marriage, both

parties are protected by

the state’s legal rules.

When unmarried, issues

are less clear and the

responsibility of coming

to an agreement primarily

falls on individual

couples’ shoulders.

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If the couple co-owned property together, they will need to decide who gets what.

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Couples need to be more creative, and have to look at areas of the law such as contract law and property law. An example:

John and Janet break up.

They have lived together in John’s house for five years,

But only John’s name is on the deed;

However, Janet has been paying half the monthly mortgage payments.

If John does not agree to reimburse Janet for her share of the mortgage

payments, what are Janet’s options?

Janet’s options:Argue they had an implied contract that she would get something in return for

her payments beyond the right to live in the house

I.e. – her payments entitled her to an ownership interest in the equity in the

house and were not just rent payments

Seek a partition of the property to enforce her right to reimbursement for her

payments

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Regarding property, couples cohabitating in a shared home when breaking up will need to consider:

House – transferring title via a new

deed and refinancing the mortgage

if both names are on it

Transferring deed

Taxes

Real estate transfer taxes

Gift tax if no consideration

Taxes apply because the couple is

not married (unmarried couples do

not get the same tax benefits as

married couples)

If the couple chooses to sell the co-owned home:

If own as tenants in common, get

share of proceeds proportionate to

ownership interest

If joint tenants with rights of

survivorship, assume split 50/50

but want an agreement in writing

Things to consider: Did the parties

previously enter into an agreement

as to who gets what share of

proceeds in event of break-up?

Credits to person who paid the

down payment?

How did they share the mortgage

payments?

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If the couple cannot reach an agreement regarding the sale of the house, they can resort to a partition proceeding.

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Additional items to consider when splitting up as an unmarried couple:

Jointly-held bank accounts

Shared apartment: A couple can

agree to break their lease, or

remove one party’s name from the

lease

Splitting up possessions

Courts in Pennsylvania do not have

power to divide the property of

unmarried couples as they do for

married couples

Big ticket items that both people

paid for (i.e. electronics such

as televisions and computers,

furniture, artwork) must be agreed

upon between the couple

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Does the couple have children together?

Informal custody arrangements

can work, but it is highly advisable

to get a written custody agreement

If there is no written agreement,

have to go through courts

Is one party moving out of the

area? Pennsylvania has a relatively

new relocation statute that

requires notice of the move and

allows the other parent to object

– if there is a dispute, have to go

before a judge

– Judge considers many factors

– safety and crime rates of the

two areas, reasons for move,

financial benefits to child,

school systems, etc.

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What Unmarried Couples Need to Know About Ending Relationships 10


Life Insurance Beneficiary

Designations

– Retirement accounts, etc.

– make sure to change your

beneficiary designations

– Wills – if your ex was a

beneficiary in your will, and you

want to remove him/her, make

sure to do it promptly

Does Common Law Marriage still exist?

Became invalid after January 1,

2005

Common law marriages that were

contracted on or before January

1, 2005 were grandfathered in as

marriages. 23 Pa. C.S. § 1103

Requisites for common law

marriage:

– Can only be created by an

exchange of words in the

present tense, to establish

husband-wife relationship

– Constant cohabitation

– A “reputation of marriage”

(i.e., other people think you’re

married)

Courts disfavored common law

marriages, difficult to establish

What Will Happen to Your Pennsylvania Pet If You Divorce? 11

© �013 | Sacks, Weston, Petrelli, Diamond & Millstein LLC

Many people consider their pets

members of the family

However, pets are treated as

personal property by Pennsylvania

courts

– Resolve future pet ownership

in divorce proceedings

via a Property Settlement

Agreement

Cannot petition for “custody” of

your pet

Pets are not subject to custody or

“visitation” agreements

Best for parties to resolve the

issue of who will keep the pet

between themselves

What Will Happen to Your Pennsylvania Pet If You Divorce?

What Will Happen to Your Pennsylvania Pet If You Divorce? 1�


When negotiating an agreement,

consider:

– Who can better provide for the

pet’s needs? Who has more

time to care for the pet? More

room available?

– Are there children involved

who have bonded with the

pet? Reliance on the pet to

accommodate special needs?

– Who has primary custody of

those children?

A PA Court addressed a divorce settlement agreement that provided for shared possession of a family dog. DeSanctis v. Pritchard, 803 A.2d 230 (Pa 2002)

Wife kept the dog, but husband

was allowed to visit

Husband petitioned the court to

enforce the agreement when wife

moved away

Court determined dog was

property. Explained that the

parties’ visitation agreement for

the dog was synonymous to a

visitation agreement for a table or

a lamp

Court did not enforce the

agreement pertaining to visitation

of the dog

Why Prenups are Important Planning Tools for Many Couples 13


Prenups, often referred to under the law as premarital agreements, make it possible for soon-to-be spouses to agree as to how they will split their assets should they divorce someday. Couples can thus contract around what a state court would otherwise determine in terms of how they should divide their property.

Why Prenups are Important Planning Tools for Many Couples

Why Prenups are Important Planning Tools for Many Couples 1�


There are some common situations when couples sign a prenup, such as:

If one spouse is significantly

wealthier than the other

If both spouses have substantial

income and assets at the time of

marriage. This is especially true

today, when couples are waiting

longer to get married and are more

likely to have a high paying job,

own a house, or have received

an inheritance. A prenup is a

good way to organize a complex

assortment of property and to

keep assets earned prior to the

marriage separate.

If one spouse has helped the other

earn an advanced degree which

will contribute to significant earned

income (i.e. legal or medical)

Another benefit to signing a

prenup is that it forces newlyweds

to disclose their full financial

situations and discuss them with

each other, disclosing possible

surprises during marriage.

A prenup is also a good idea if

one spouse enters the marriage

with large amounts of debt (from

student loans, major credit card

debt) or if one or both spouses

have children from a prior

marriage.

Why Prenups are Important Planning Tools for Many Couples 1�


Couples can use prenups as an

estate planning tool, whereby they

agree to waive what is called an

“elective share.” When one spouse

dies, the elective share is the

portion of the deceased spouse’s

property to which the surviving

spouse is entitled. Sometimes

spouses agree to waive their

right to the elective share, for

example if one spouse already has

enough wealth or if the spouses

plan to provide for each other

through other means such as life

insurance.

If you are planning a marriage, you

should discuss the possibility of

a prenup with your fiancé and an

attorney. You should have these

conversations early, as courts

are suspicious of prenups signed

within a couple of months before

the marriage date.

Retirement Plans and Divorce 1�


A big part of the divorce process is dividing up the property the spouses had

during the marriage - lawyers call this equitable distribution of marital property

Along with houses and bank accounts, retirement accounts are another class of

property that often gets divided during divorce

Reasons why retirement accounts get divided during divorce:

One spouse has significantly greater retirement savings than the other,

either because one spouse didn’t work or one spouse had a job that

provided them with better retirement benefits than the other

– giving some of these savings to the other spouse guarantees that spouse

some retirement proceeds to which he or she could have had access to

had the parties remained married

There are not enough liquid assets available to achieve a fair split of the

parties’ wealth

– For example, this may be if the only significant assets are a house and a

retirement account

In some cases a retirement account is the biggest asset of the marriage

Retirement Plans and Divorce



Qualified Domestic Relations

Orders (QDROs)

– Normally if you take out funds

from your retirement account

prior to retirement, you are

taxed on the withdrawals and

owe penalties for premature

withdrawals

– You can avoid taxes and

penalties if you have the funds

distributed via a QDRO

• Both the states and

IRS have provisions for

QDROs – in section of IRC

explaining ERISA rules

A law firm prepares the QDRO,

both spouses sign it, and it is then

filed with the Court, Court issues

it as a court order, enforceable

through the courts

401(k)s and defined benefit plans

must be transferred via QDRO

IRAs do not have to be, but can

be done via QDRO – if not, you

must make sure to include specific

language referencing section

408(d)(6) of the Internal Revenue

Code



It is important to including the right language in your Property Settlement Agreement.

Write out that funds will be

transferred via a QDRO

Include the cut-off date which will

be used for calculating the amount

subject to distribution

– Date of separation?

– Date of the property

settlement agreement?

Beneficiary Designations

Can change them via a QDRO

If no QDRO, make sure to change

the beneficiary(ies)

– In a 2009 case (Kennedy v.

Plan Administrator for Dupont

Savings & Investment Plan),

the U.S. Supreme Court held

that a deceased man’s ex-

wife, and not his current wife,

was entitled to his retirement

proceeds because he did not

remove his first wife from the

beneficiary designation



Ensuring the division of retirement assets happens according to plan:

Problems can arise if the

distribution of assets is not made

promptly

Often happens after the divorce

decree is issued – this is fine

But, if wait too long, risk the

chance that account holder

removes retirement assets, for

example due to unemployment,

and not enough are left to

distribute according to the

agreement (this has happened to

a client recently)

Marriage and Your Partner’s Debt: How to Protect Yourself �0


Marriage and Your Partner’s Debt: How to Protect Yourself

Community Property v. Common Law StatesPennsylvania is a Common Law State

Debts incurred prior to the

marriage is separate debt

Debts incurred during the marriage

– If debt incurred by one spouse

in their name only, it typically

belongs to that spouse alone

Who signed for the debt?

– Is your name on the account?

/ Did you co-sign for the loan?

– Caveat: Separate debt incurred

for joint benefit

How to protect your credit

– Credit reports

Caution: A word about refinancing

one spouse’s pre-marital debt

Equitable distribution

– What happens to the assets?

The debt?

– What is marital? What is

separate?

Adoption of Step-Children and Subsequent Divorce �1


Pennsylvania’s Adoption Act

Effect of Adoption

– Termination of parental rights

• Voluntary / involuntary termination

– Severs legal relationship with the entire biological family

– Creates new legal relationships with adoptive family

Adoption of Step-Children and Subsequent Divorce

Open Adoption vs. Closed Adoption States

Post Adoption Contact Agreements

– Voluntary agreements for continuing contact/ communication

Now enforceable in PA (Act 101 of 2010)

Adoption of Step-Children and Subsequent Divorce ��


Subsequent divorce has no effect

on the adoption of step-child

– Legally, the child remains the

child of the adoptive step-

parent

– The relationship between child

and step-parent is permanent

after adoption and cannot

be reversed by a subsequent

divorce from the biological

parent

If you adopt your step-child

– You are assuming the legal

responsibilities

– You are assuming the financial

responsibilities

– Child will have the same

rights & responsibilities as a

biological child

The Ins and Outs of Cohabitation & Divorce Law

Law

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