Postdivorce Problems Involving 401k Plans (or other “Qualified Assets”)

When a husband and a wife (the parties) get divorced, “qualified” plans such as 401k plans are divided by the husband and wife by means of a Qualified Domestic Relations Order (a QDRO) which is a court order directing the plan administrator to break up the participant’s 401k into a portion for the “participant” and a portion for the “alternate payee”. The parties can also waive the pension rights of the other in a Property Settlement Agreement (the “Agreement”).

In one case decided in March of this year, the parties waived rights to the pensions of the other in their Agreement. The husband had previously (before the divorce) named his wife as his beneficiary of the 401k. After the divorce a QDRO was never completed, the husband did not change his beneficiary and he died. Due to a prior decision decided by the US Supreme Court in 2009, the wife received the total 401k plan because she was the named beneficiary even though she had waived it.

But the recent case was brought before the Third Circuit Court of Appeals and it was decided that although the surviving wife was entitled to the proceeds because she was the named beneficiary on the plan documents, the estate of the deceased participant could sue her under the contract (the Property Settlement Agreement) for the benefits she wrongfully received due to her waiver of those benefits.

This case reminds us all to follow through after a divorce. First, all assets  should be reviewed to make certain that your ex-spouse is not your named beneficiary; and, secondly, you must make sure that all QDROs are completed as soon as possible after you are in court.

I would not want to be the attorney for the participant who died. The attorney’s fees to file such an appeal through the Federal Courts must have been very high and my guess is that a malpractice case will be brought by the estate of the husband against his attorney.

QDRO Results Testimonial

Testimonial

We were hired by the former wife to draft a QDRO and transfer 100% of  the ex-husband’s 401(k) to her. These parties had been in the process of getting this done through their original attorneys for about a year with no success.

We were able to get the QDRO done, and the 401(k) into the wife’s name very quickly.

When all was said and done, she said,

“Kristy, this is all set, thanks to you.   Cannot thank you enough.  The process was started last August.”    

Anonymous in Portsmouth, RI

Be Careful Representing Yourself in Family Court Matters

I spoke with a mother yesterday, who lives with her daughter in California. The father (ex husband) filed an action in Family Court to compel visitation with the 6 year old child. Mom could not afford an attorney, but she wondered what she could plan on happening that day in court. She wondered whether she needed to bring her daughter and whether the matter would be completed that day given that she has to fly in from California to contest it.

I will not go into the detailed answers to all of her questions here, but wanted to point out that it is ALWAYS BEST to consult an attorney for such a matter, because if she filed papers on her own, she could have missed the opportunity to file a motion to dismiss the action, because it probably should be heard in California!

Jurisdiction in child custody matters can be tricky for attorney, nevermind a lay person. Some attorneys will not take the time to warn a person about such things when they hear "I cannot afford an attorney," but we will, to the extent we can.

If you have Rhode Island Family Court questions, and aren't sure where to turn, call me!

“2013 Veteran COLA Passes House”

Week of July 16, 2012

The House of Representatives passed the Veterans' Compensation Cost-of-Living Adjustment Act of 2012 (H.R. 4114). 

Although this is seen by many as a formality, passing the COLA is often pushed to the end of the year. According to House Committee on Veterans' Affairs press release, taking care of this now ensures that Vets will be given the benefits they were promised without any last minute "political tug-of-war." If signed into law, H.R. 4114 would increase the annual cost-of-living rate for veterans, which goes into effect on December 1, 2012. It is estimated that this year's COLA will be approximately 1.9 percent. The legislation now heads to the Senate for consideration.

For complete guides to all veterans benefits, visit the Military.com Benefits Center.

RI Mediation Client Testimonial

Rhode Island Mediation Client Testimonial

 “As the year comes to an end, I can not let another day go by without properly thanking you. The work you did with my husband and I during mediation was creative, resourceful and simply clever. You both were attentive to our present and future needs- emotionally, financially and legally. There were many occasions throughout the time you spent with us where I thought there was no possible way to come to a middle ground. Luckily, with your guidance and perseverance you made the impossible, possible. 

Thank you … from the bottom of my heart for your determination and consideration while working with us. My gratitude is endless.”

Don't Forget the Tax Refund!

As family law attorneys, we often think of income taxes as a means to review income and available assets as we go through the case. It is only at this time of year where, for most (if not all) of our clients, we also need to think about the potential income tax return and refund.

It is important to note that if you are in a contested divorce situation, then your attorney should at least consider asking the court for a restraining order with regard to spending the 2011 refund. Specific options include restraining the parties from cashing the refund until further order of the court, or perhaps more commonly, asking the court to order that the funds be deposited into an "escrow account" so that those funds are not spent without an agreement of the parties or by further court order. A restraining order can also be useful in child support cases that have not been running through the Child Support System. (Those child support cases which are running through the system should be intercepted if someone owes money to the custodial parent automatically.)

Parties can be tempted to file together without speaking to their attorney because the case is in the early stages, there aren't any issues yet, or the promise of "quick cash" is alluring. However, doing so could be a mistake for tax reasons, as well as the fact that the funds could be easily deposited into a joint account, and then removed by one party. It is much easier to "hold" the funds, than it is to "chase" the funds.

If you have questions about your income tax refund and you are in the process of a divorce, contact your attorney and ask the question. If you are thinking about a divorce and are not sure what to do, call us at 401-841-5700 or go to www.CounselFirst.com.


***WE DO NOT GIVE TAX ADVICE, BUT WE CAN POINT OUT POTENTIAL PITFULLS AND NOTIFY YOU OF THE ISSUES SO YOU CAN ASK YOUR TAX EXPERT THE CORRECT QUESTIONS.***

Affordable Medical Membership Plan

I received this article as part of a monthly newsletter this week, and I thought it could be useful to our clients and friends. The contact person is Robin at Robin G Smith Consulting. Call her at 888-363-3914 or go to her website at is www.robingsmith.com for more information, or call us!

As 2012 begins, many people will find themselves with new health benefits and higher deductibles, or, increasingly, with no health insurance at all, particularly in the 50—64 year old age category. Additionally, the latest focus of healthcare reform has become prevention, or wellness, vs “sickness” care. Companies are struggling to find solutions to health cost inflation, and new paradigms are emerging that feature “worksite” clinics, and direct, affordable pre-paid primary care (another story here). I offer one such program, Medical Membership Plans (MMP).

A MMP is a prepaid primary care plan for companies and individuals ($84/month individual, $99/family), where care is delivered by a national network of urgent care centers. There are no co-pays, no deductibles, no pre-existing conditions, and care generally includes all services that can be delivered at the urgent care center (x-rays, injections, labs, etc.) This plan is open to all, and is a membership plan, not health insurance. Many clinics are available, al?though, geographically, some areas are better covered than others— e.g. Worcester and Boston area, MA, great, Cape Cod, not so good. RI has many clinics available, and CT has good coverage in the urban areas. Call me (Robin) for more information, or a list of participating providers in your area. The MMP model may help drive down health costs.

Unemployment Benefits Until March

The Temporary Payroll Tax Cut Continuation Act of 2011 was passed this month by Congress, and the Emergency federal benefits for the unemployed, which were scheduled to expire on December 31, were extended for two months.

The legislation will need to be revisited by March, but for those of you who received a notice and expected your benefits to end as of January 1, 2012, you now have a bit of a chance to re-group in the event the checks will stop coming as of March 1, 2012.