Friday, September 28, 2007

FAQ regarding Divorce # 17: How do we divide any retirement accounts?

Retirement accounts, not unlike mutual funds and some stock accounts, are assets acquired over the course of many years. In dividing these assets during a Divorce, you must first determine the character of the retirement account – in other words, whether it is Community Property or Separate Property (or, perhaps, both – as explained below).

First, purchases or contributions that occurred prior to the marriage would be Separate Property. Next, purchases or contributions that occurred after marriage would be considered Community Property. (Actually, it is a little more complicated than this, when you add in the earnings, losses, dividends and stock splits that occur in most retirement accounts, but the essential point is that such assets have a dual character.) Often, lawyers will hire financial experts to provide an opinion as to how much is owned by one spouse as separate property versus how much is jointly owned as community property, and therefore subject to division with the other spouse.

Also, retirement accounts (like 401k’s) are not usually divided under the Divorce Decree like other assets. This is true because there is often an administrator that is responsible for managing the retirement account. Under federal law, which Texas judges must follow, the Court will not be able to simply order the administrator to liquidate the account and pay it in cash to the respective spouses. Instead, federal law allows the state Court to issue a Qualified Domestic Relations Order (also simply known as a “QDRO” – pronounced for short “Quad Row”). The QDRO will set out how the account is to be divided. Ordinarily, the retirement account administrator will create another account in the amount (usually designated in either a total dollar amount or a percentage of the account as of a date certain) to be paid to the other spouse as specified in the QDRO. When the QDRO divides the account into two accounts, both spouses will be subject to the rules governing the retirement account (sometimes called the retirement “Plan”). Depending upon the Plan, disbursements for particular reasons may be allowed or loans may be allowed. You will need to check with the retirement account administrator to find out the rules relating to the Plan.

FAQ regarding Divorce # 16: Is there a way for me to continue living in the house with the children?

This question commonly arises for the simple fact that parents often believe that it is best for their children to have continuity by living in the same house. The equity in your home is like any other asset that is subject to division by the Divorce Court. The home can be sold and reduced to cash, but oftentimes this is not necessary. Sometimes, another asset can go to the other spouse, including retirement accounts of either spouse, to offset the large amount of equity received by the spouse who keeps the house.

Also, like any other commercial transaction, one spouse can essentially “loan” money to the other by taking back a Note and Deed of Trust (usually “junior,” or of a lesser stature, to the financing or mortgage used to purchase the house). This relationship is sometime referred to as an Owelty Deed or Owelty Lien, or sometimes as a Second Deed of Trust. This is nothing more than one spouse promising to pay the equity in the home over time (with a Promissory Note or simply a Note) and the other spouse receiving a Deed of Trust or other form of security so that if the Note is not paid, that party has recourse to ensure payment (which may include the ability to foreclose upon the house).

FAQ regarding Divorce # 15: What is the difference between "Community Property" and "Separate Property" in Texas?

Texas is a Community Property state. This generally means that income that is earned during the marriage and property that is obtained during the marriage is presumed to belong to both spouses (regardless of whose name may appear on the paycheck or title documents) and is subject to division by the Divorce Court in a manner that the Court deems to be “just and right.”

The best way to define Community Property is to determine what is not community property – then everything else is “presumed” to be that of the community. Generally speaking, either spouse will have a “separate property estate” in the event they acquire property (a) prior to marriage or (b) during marriage by some type of inheritance or by way of a gift. Again, the rest of the property is presumed to be community property.

Spouses can also agree to alter the “community property” presumption through certain types of written agreements. The most common type of such agreement is generally referred to as a “prenuptial agreement,” because it usually occurs prior to the marriage, but spouses can also enter into similar agreements after the marriage.

FAQ regarding Divorce # 14: How much will I have to pay in Child Support?

This usually depends upon three things: (1) the number of children involved in the Divorce, (2) whether there are any children “outside of the marriage,” and (3) how much you (as the “Non-custodial Parent,” or NCP) earns. The general percentages applied to your “Net Resources” (but not your current spouse’s Net Resources) are as follows:

One Child 20%
Two Children 25%
Three Children 30%
Four Children 35%
Five Children 40%
Six + Children Not less than Amount for Five Children

The percentages are slightly less if you have other children that are “outside of the marriage,” in other words you pay a little less (but not much) if you have children from a prior relationship for whom you also have a “legal duty of support.” If you are paying child support regarding other children, or if you support other children who reside with you, then you would pay a slightly lower percentage of your Net Resources than under the preceding guidelines.

“Net Resources” does not mean “net income,” however. It is not calculated based upon what you actually receive in your paycheck, because you can change this yourself (i.e. – take out more for a 401k contribution, etc.). The Court will calculate this fictional “Net Resources” by subtracting out what a single person taking the standard deduction and one personal exemption would pay in taxes (Social Security and FICA). You can find these amounts in the Attorney General’s Child Support Tax Tables, which is located on their website. The Court will also subtract any amounts actually paid by you for health insurance for the benefit of the Child, but not the portion of your health insurance deduction that applies to your own coverage. The Court will also deduct any union dues that you must pay.

Also, you need to be aware that the Court will consider any other sources of income that you are entitled to receive, including commissions, overtime pay, bonuses, interest on savings, dividends, capital gains, royalty income, net rental income, annuities, pensions, severance pay, retirement benefits, disability or workers’ compensation benefits, social security benefits, and similar sources of revenue. Persons who are self-employed should be aware that the Court will not merely look to your “salary,” if any, but may consider any benefits allocated to you from your business or undertaking, after taking into consideration the ordinary and necessary expenses required to produce such income.

There is a “cap” on the amount of Net Resources to which the foregoing percentage guidelines can be applied. That amount, for cases filed after September 1, 2007 (but before the next cost of living adjustment in 2013) is $7,500 per month. This is the maximum amount of Net Resources that the Court will usually consider for purposes of calculating your child support obligation, even if your actual Net Resources are greater. For example, a person with Net Resources of more than $9,000 per month with one child would generally pay child support in the amount of $1,500 each month, calculated as follows: $7,500 times 20% = $1,500.

Sometimes, the Court will award more or less than the amount calculated under the statutory guidelines, but only in compelling circumstances (this is referred to as a “Variance”). As the name “Guideline” implies, this is the amount that will guide the Court – and the amount you usually will pay.

FAQ regarding Divorce # 14: How much will I have to pay in Child Support?

This usually depends upon three things: (1) the number of children involved in the Divorce, (2) whether there are any children “outside of the marriage,” and (3) how much you (as the “Non-custodial Parent,” or NCP) earns. The general percentages applied to your “Net Resources” (but not your current spouse’s Net Resources) are as follows:

One Child 20%
Two Children 25%
Three Children 30%
Four Children 35%
Five Children 40%
Six + Children Not less than Amount for Five Children

The percentages are slightly less if you have other children that are “outside of the marriage,” in other words you pay a little less (but not much) if you have children from a prior relationship for whom you also have a “legal duty of support.” If you are paying child support regarding other children, or if you support other children who reside with you, then you would pay a slightly lower percentage of your Net Resources than under the preceding guidelines.

“Net Resources” does not mean “net income,” however. It is not calculated based upon what you actually receive in your paycheck, because you can change this yourself (i.e. – take out more for a 401k contribution, etc.). The Court will calculate this fictional “Net Resources” by subtracting out what a single person taking the standard deduction and one personal exemption would pay in taxes (Social Security and FICA). You can find these amounts in the Attorney General’s Child Support Tax Tables, which is located on their website. The Court will also subtract any amounts actually paid by you for health insurance for the benefit of the Child, but not the portion of your health insurance deduction that applies to your own coverage. The Court will also deduct any union dues that you must pay.

Also, you need to be aware that the Court will consider any other sources of income that you are entitled to receive, including commissions, overtime pay, bonuses, interest on savings, dividends, capital gains, royalty income, net rental income, annuities, pensions, severance pay, retirement benefits, disability or workers’ compensation benefits, social security benefits, and similar sources of revenue. Persons who are self-employed should be aware that the Court will not merely look to your “salary,” if any, but may consider any benefits allocated to you from your business or undertaking, after taking into consideration the ordinary and necessary expenses required to produce such income.

There is a “cap” on the amount of Net Resources to which the foregoing percentage guidelines can be applied. That amount, for cases filed after September 1, 2007 (but before the next cost of living adjustment in 2013) is $7,500 per month. This is the maximum amount of Net Resources that the Court will usually consider for purposes of calculating your child support obligation, even if your actual Net Resources are greater. For example, a person with Net Resources of more than $9,000 per month with one child would generally pay child support in the amount of $1,500 each month, calculated as follows: $7,500 times 20% = $1,500.
Sometimes, the Court will award more or less than the amount calculated under the statutory guidelines, but only in compelling circumstances (this is referred to as a “Variance”). As the name “Guideline” implies, this is the amount that will guide the Court – and the amount you usually will pay.

FAQ regarding Divorce # 13: Can we vary from the Standard Possession Schedule?

Yes. The Standard Possession Schedule only applies when the conservators/parents cannot agree about visitation. Therefore, for conservators that discuss their child’s schedule and plan out what is best for them, the visitation schedule is whatever you agree it should be – on a day by day and (perhaps) minute by minute basis. Thus, the Visitation Schedule, in whatever form, is usually what happens when there is no “mutual agreement.”

FAQ regarding Divorce # 12: How does the "Standard Possession Schedule" work?

Over the years, the Texas Legislature has looked at and repeatedly refined what we now refer to as the "Standard Possession Schedule." The reason we have a very detailed schedule is simple -- many parents cannot agree as to the best schedule for their children. Therefore, the Texas Legislature has stepped in to set out its own schedule.
The so-called “Standard" Schedule usually gives the conservator/parent that does not have the right to designate the primary residence of the child (in a Joint Conservatorship) or the Possessory Conservator in all other situations, the right of possession and access to the child on the first, third and fifth weekends (when there is one) of every month. The Standard Schedule attempts to make an even distribution (or as close to even that it can) of each and every minute of the child’s life between the respective parents; this includes all major holidays, the child’s birthday, Father’s Day, Mother’s Day, spring break, extended summer visits, and many, many other situations. The Standard Schedule also sets out who will pick up and who will drop off the child, and where and how this exchange of possession will occur. Although this is a daunting task, under most situations, the Standard Schedule does an excellent job of allocating the child’s time with each parent in a fair and equitable manner.
The danger in departing from the Standard Schedule (under most situations) is that lawyers cannot always contemplate all of the situations that can arise in the future, which may lead to future confusion or disagreements between the conservators. This is not to say that the Standard Schedule is what is best for your child; we recognize that there are situations where the Standard Schedule is partially or completely inappropriate. However, you should understand that the “split” schedules that many conservators attempt can be difficult on a child who must repeatedly pack up and go to another house, and can lead to the child essentially living out of a suitcase. Such situations are usually difficult – even for adults – and can be particularly disruptive for a child.

FAQ regarding Divorce # 11: How does Custody work in Texas?

In Texas, there are many forms of “custody” and “custodians.” We refer to these persons or entities (in the case of foster care, etc.) as “conservators.” In most situations, the parents will be named so-called “Joint Managing Conservators” (JMC); this is presumed to be best for most of Texas’ children. JMC is most similar to situations where the parents are still married and make decisions “jointly” for the best interests of their child.
Unfortunately, many times parents cannot get along and sometimes do not make decisions that are in the best interests of the children. Sometimes they make decisions based upon what is best for them, or don’t make decisions at all. In certain circumstances, if there is evidence to support a different approach or an agreement between the parents, other forms of conservatorship may come into play. A “Sole Managing Conservator” (sometimes referred to as only a “managing conservator”) generally has all of the powers of conservatorship (i.e. – the authority to consent to medical treatment involving invasive procedures, the power to designate the primary residence of the child, the power to make educational decisions) without any input from the other parent. In contrast, a “Possessory Conservator” generally has visitation rights and will usually have limited authority to make certain parental decisions while the child is in the custody of that conservator.
The rules governing conservatorship are complicated and an attorney should be consulted for specific questions as to what form of conservatorship is best suited to your particular situation.

FAQ regarding Divorce # 10: What exactly is a Divorce Decree?

We usually ask you to consider the Divorce Decree in terms of being a “Rule Book” for all of the various things that could or might happen after the Divorce is granted. The actual granting of the Divorce is nothing more than the Judge declaring that the marriage is dissolved for either “grounds” or on the “no fault” ground of insupportablility. Insupportability just means that there are so-called “irreconcilable differences” -- referred to in Texas as a “discord or conflict of personalities that destroys the legitimate ends of the marriage relationship,” provided further that “there is no reasonable expectation of reconciliation.”

The rest of the Decree (as well as other pleadings referred to as Temporary Orders or Final Orders) provides guidelines and rules for dealing with any children (such as custody or “conservatorship,” the powers of conservatorship, visitation, child support, medical support, and health insurance coverage), property (such as assets and debts), and various other issues such as any change of name, taxes, and similar matters.

FAQ regarding Divorce # 9: When does my Divorce become final?

Although this might seem like a simple question, the answer is more complex. Ordinarily, the Divorce case becomes final when the “plenary power” of the Texas court has expired. This ordinarily occurs thirty days from the date that the Divorce Decree (sometimes called the “Judgment”) is signed by the Judge. If, however, some type of Motion is filed after the Decree is signed, such as a Motion for New Trial or similar pleading, then the time periods are extended to allow for the possibility of an appeal from the Decree.

Although there are other situations where the Decree can be changed, clarified, or appealed, these situations are not normal and can be very difficult to bring about a substantive (or meaningful) change in the Decree. Also, when a “material and substantial” change in circumstances occurs, a party may ask that the Court modify the Divorce Decree or a prior order in the case.

FAQ regarding Divorce # 8: How does the Texas waiting period work?

The Court does not have the power to grant a Divorce for at least sixty days after the Divorce petition has been filed. The Texas Legislature’s reason for requiring this waiting period is to ensure that something as serious as a Divorce is not rushed into without a period of reflection and thought. This waiting period cannot be waived by agreement or shortened by the Court.

FAQ regarding Divorce # 7: Can I move after the Divorce case is filed?

Ordinarily, yes. As long as you were a resident of Texas for at least six months and of the County where you filed for ninety days before filing the Divorce petition, then you can move after the petition is filed. However, you should be aware that many Courts have “local rules” requiring notice and possibly agreement from the other spouse (or an order from the Court) before you can move out of the County where the Divorce petition was filed, particularly when children are involved. You should also check to see if a Temporary Restraining Order, Temporary Injunction, or some geographical restriction is in place before you leave.

It is generally a good idea to wait to move until after the case is finalized, and we strongly suggest at least waiting until service of process is obtained to be sure that the case does not have to be dismissed. However, if relocation is absolutely necessary prior to the time the Divorce becomes “final,” there are procedures that allow you to legally do so.

FAQ regarding Divorce # 6: I just moved here, can I still get a Divorce?

Maybe. It depends on where you moved from and how long you have lived here. Texas has a residency requirement. At least one spouse must have resided in this State for the preceding six month period prior to the filing of the Divorce case, and one spouse must have resided in the County where the Divorce will be filed at least ninety days preceding the date of filing. This is “jurisdictional,” meaning that the Court has no power to act, including granting the Divorce, unless the residency requirement is met.

FAQ regarding Divorce # 5: Can I get a legal separation?

Although some states recognize a “legal separation,” Texas does not. The only procedure for a recognition that persons are going to cease living together as husband and wife in Texas is Divorce. With that said, after you file for a Divorce there is nothing that requires you to carry through with it (unless, of course, the other spouse decides to file a Counter-Petition for Divorce of their own). Usually the Divorce case can be dismissed if the spouses “reconcile.”

FAQ regarding Divorce # 4: I just got served with Divorce papers, what should I do?

After being served with a Divorce Petition, you become the “Respondent” in the Divorce case. Most lawyers will advise you to immediately obtain an attorney and to not agree to anything and certainly don’t sign anything. If you do not respond in writing, with particular language and within approximately twenty days (actually, by the “Monday next following the expiration of twenty days”), then a Default can be taken against you. At the Default hearing, your spouse will oftentimes receive anything and everything they request in Court.

You should also be aware that many “Waivers of Service” also contain language instructing that the case can be taken up and considered by the Judge without further notice to you. A form containing this language, if signed, could also result in a Default being taken against you with everything going to your spouse. You should review all proposed waivers with caution, since you definitely don’t want this result!

FAQ regarding Divorce # 3: How do I file for a Divorce?

A divorce case is initiated like any other lawsuit with the filing of a legal “pleading.” In the Divorce context, this pleading is the Original Petition for Divorce filed in either a District Court or a County Court with domestic relations jurisdiction. Once filed, this Pleading must be served upon the other spouse, unless the other spouse has voluntarily waived service. The spouse who filed the petition is referred to as the “Petitioner.”

FAQ regarding Divorce # 2: Should I get divorced?

Sometimes people want a lawyer to tell them whether they should get a divorce or not. This is usually not the function of a lawyer and any guidance in this area is personal opinion, rather than legal advice, so please treat it as such and proceed carefully. However, most attorneys will use their experience to explain the circumstances under which someone may want to proceed with a Divorce and the possible outcomes from such proceedings. Each lawyer will explain it differently, but here are some common situations when we agree that a spouse would be justified in filing for Divorce:

a) Physical Abuse – No one should be required to live with the fear of being physically battered when there is a disagreement among spouses;

b) Adultery or Cheating on you by your Spouse – Marriage implies an element of exclusivity. Although no one is perfect, if your spouse insists on maintaining relationships outside of marriage, then Divorce would seem appropriate;

c) Alcohol or Drugs – Again, no one is perfect, but if the substances control your life (such as interfering with a normal relationship with you, your children, or with work obligations, or results in repeated criminal incidents) then Divorce is understandable.

Oftentimes, people cite to financial problems, mental cruelty, mental or physical problems, or irreconcilable differences, as grounds justifying divorce. Every relationship probably has an element of each of these issues. The question is whether such problems and/or differences destroy the legitimate ends of the marriage relationship. If you have unsuccessfully tried counseling and/or medical intervention, or your spouse is unwilling to obtain help or change, then it is understandable that you want to end the marriage.

FAQ regarding Divorce # 1: Should I hire a lawyer or try to do it myself?

We get asked this question all the time. We usually respond with a rhetorical, “Would you do surgery on yourself?” We do not think you should represent yourself in any Court proceeding. However, if there is basically no property other than personal possessions, no children, and all you’re really doing is getting the Court to bless a separation that has already occurred, it may very well be that the downside of a mistake is substantially outweighed by the certainty of attorney’s fees. You should understand that representing yourself will not be easy unless you already have some legal training. Also, you should proceed very cautiously.

You should also be aware that most attorneys will not step in to correct any problems created when you represent yourself (called “pro se” representation). We have seen many situations when a pro se litigant gets to the Court date only to have the Judge deny the divorce because he or she failed to meet all of the procedural requirements. You must also understand that, other than telling you what the defect is, the Judge is unlikely to help because of they are prohibited (as are Court staff generally) from giving legal advice to the parties. If you decide to represent yourself, you must get the most current “do it yourself” package (one set is available at http://www.tyla.org/family_law.html) and make sure that you understand all of the procedures before taking action.