Apr 28 2009 by Tom Scotney, Birmingham Post
The bleak picture of the financial year ahead painted by the Budget will lead to a dramatic increase in litigation, lawyers from Hammonds have claimed.
The chancellor has said that the next financial year will be the worst in terms of economic performance since the Second World War. And as the financial pressure increases, businesses will want to recoup and prevent losses as quickly as possible, which in turn will lead to an increase in disputes.
But the firm said taking a matter to court is not always the best option for trying to resolve the dispute and continue a business relationship. Not only can litigation damage business relationships, but the outcome is never certain and it detracts key employee time and some of the business’ financial resources away from the focus of the business.
Amanda Beaton, from the dispute resolution department at Hammonds in Birmingham, said: “A skilled lawyer can greatly assist in reducing litigation costs by effectively managing the dispute and in doing this alternative dispute procedures must be considered.”
One of the alternative dispute resolution procedures commonly used by litigators is mediation.
Erica Simpson, also from the firm’s dispute resolution team, said: “This is a highly effective method of resolving disputes. It is a structured negotiation which is assisted by an independent third party and normally takes place over the course of a day. Clients are more comfortable with it than with more formal dispute resolution procedures as they have control over the process and are familiar with negotiation.”
And mediation can help salvage business relationships which would flounder if the dispute proceeded to trial. Ms Beaton said: “As it is a relatively quick process and does not need as much preparation as would be needed if a more formal method of dispute resolution were undertaken, it is cost effective which is in the interests of every client.”
Mediation is also being encouraged by the courts who can penalise parties if they have not considered other alternative dispute resolution methods. Ms Simpson added: “When businesses consider the benefits of mediation, it is easy to see why it is becoming more popular than ever and most businesses want to consider meditation to resolve the dispute.”
Wednesday, April 29, 2009
Tuesday, April 28, 2009
Breastfeeding Not A Defense to Joint Physical Custody Canadian Court rules if you can’t wean, get a machine…
JUSTICE:ACCESS DISPUTE
Judge rules mom is milking her parental rights with breastfeeding defence
KIRK MAKIN
April 27, 2009
JUSTICE REPORTER
If you refuse to wean, then get a machine, an Ontario Superior Court judge has told a mother who used her breastfeeding schedule as a technique to deny access to her baby's father.
Jennifer Johne and Carl Cavannah met at a wedding on Aug. 27, 2005. Their brief affair resulted in a baby girl being born on June 16, 2006.
After the child was born, Mr. Cavannah quit his job teaching special-needs children and moved to Collingwood, Ont., to be closer to his daughter. He started making voluntary child-support payments, took parenting courses and pored over baby books.
However, Mr. Cavannah's intensive efforts to become a fully involved parent were thwarted, in part, by a rigorous breast-feeding schedule imposed by Ms. Johne.
"The child is now more than 29 months of age and is still being breastfed," Mr. Justice Alan Ingram wrote in an eight-page ruling.
"Jen believed strongly - through medical advice - in the merits of breastfeeding. However, the breastfeeding has a secondary impact upon Carl in that it is used as an excuse to restrict his access."
Judge Ingram quoted from an e-mail that Ms. Johne, a 35-year-old artist, sent to Mr. Cavannah shortly after the baby was born.
"A baby belongs with its mother, and if you had an understanding of the needs of a fully breast-fed baby and truly had [her] interests at heart, you would not be bringing this subject up again," she stated in the e-mail.
Given her intransigence, Judge Ingram said that Mr. Cavannah, 42, had been remarkably patient.
"Jen has been unwilling to give a timetable as to when the breastfeeding will end," Judge Ingram said. "But now, the time has come for Jen to have greater consideration for the relationship between the child and Carl. If she used a breast pump and provided the milk to Carl, he would be willing to give it to [the child]."
The judge also praised the child's parents. "She has two parents who have made her the centre of their lives, unusual in that this was an unplanned pregnancy between two parents who had a brief relationship and had not committed to having children," he said.
Under the Children's Law Reform Act, a mother and father are equally entitled to custody of a child. When an access dispute breaks out, judges use a list of criteria to determine whether or not to depart from an equal-access regime.
Judge Ingram ruled that Ms. Johne and Mr. Cavannah's child would be best served by a 50/50 access arrangement.
"As soon as Jen realizes that she is one of two equal parents and the parties find a form of communication, they should be able to get on with their common goal of facilitating and encouraging [the child] to reach her full potential," he said.
Phil Epstein, a family lawyer expert, described the ruling as "one which will be of comfort to involved fathers who wish to be equal parents."
Mr. Cavannah declined to discuss the case, and Ms. Johne could not be reached for comment.
However, Ms. Johne's lawyer, Carol Allen, noted in an interview that it is very difficult to argue in favour of a continuation of breast-feeding after a child is two years old since pumping is a viable alternative.
Ms. Allen said that her client may soon be returning to court because she is dissatisfied with Judge Ingram's solution to the access issue.
"The schedule allowed the father to work four days a week, and then have the child from Thursday to Sunday or Monday night," Ms. Allen said. "That leaves the mom with no weekend time. It is probably going to have to be revisited. It's unfortunate."
Ms. Johne lives in a small town about 20 minutes from Collingwood, where she helps her mother operate a small daycare.
Judge rules mom is milking her parental rights with breastfeeding defence
KIRK MAKIN
April 27, 2009
JUSTICE REPORTER
If you refuse to wean, then get a machine, an Ontario Superior Court judge has told a mother who used her breastfeeding schedule as a technique to deny access to her baby's father.
Jennifer Johne and Carl Cavannah met at a wedding on Aug. 27, 2005. Their brief affair resulted in a baby girl being born on June 16, 2006.
After the child was born, Mr. Cavannah quit his job teaching special-needs children and moved to Collingwood, Ont., to be closer to his daughter. He started making voluntary child-support payments, took parenting courses and pored over baby books.
However, Mr. Cavannah's intensive efforts to become a fully involved parent were thwarted, in part, by a rigorous breast-feeding schedule imposed by Ms. Johne.
"The child is now more than 29 months of age and is still being breastfed," Mr. Justice Alan Ingram wrote in an eight-page ruling.
"Jen believed strongly - through medical advice - in the merits of breastfeeding. However, the breastfeeding has a secondary impact upon Carl in that it is used as an excuse to restrict his access."
Judge Ingram quoted from an e-mail that Ms. Johne, a 35-year-old artist, sent to Mr. Cavannah shortly after the baby was born.
"A baby belongs with its mother, and if you had an understanding of the needs of a fully breast-fed baby and truly had [her] interests at heart, you would not be bringing this subject up again," she stated in the e-mail.
Given her intransigence, Judge Ingram said that Mr. Cavannah, 42, had been remarkably patient.
"Jen has been unwilling to give a timetable as to when the breastfeeding will end," Judge Ingram said. "But now, the time has come for Jen to have greater consideration for the relationship between the child and Carl. If she used a breast pump and provided the milk to Carl, he would be willing to give it to [the child]."
The judge also praised the child's parents. "She has two parents who have made her the centre of their lives, unusual in that this was an unplanned pregnancy between two parents who had a brief relationship and had not committed to having children," he said.
Under the Children's Law Reform Act, a mother and father are equally entitled to custody of a child. When an access dispute breaks out, judges use a list of criteria to determine whether or not to depart from an equal-access regime.
Judge Ingram ruled that Ms. Johne and Mr. Cavannah's child would be best served by a 50/50 access arrangement.
"As soon as Jen realizes that she is one of two equal parents and the parties find a form of communication, they should be able to get on with their common goal of facilitating and encouraging [the child] to reach her full potential," he said.
Phil Epstein, a family lawyer expert, described the ruling as "one which will be of comfort to involved fathers who wish to be equal parents."
Mr. Cavannah declined to discuss the case, and Ms. Johne could not be reached for comment.
However, Ms. Johne's lawyer, Carol Allen, noted in an interview that it is very difficult to argue in favour of a continuation of breast-feeding after a child is two years old since pumping is a viable alternative.
Ms. Allen said that her client may soon be returning to court because she is dissatisfied with Judge Ingram's solution to the access issue.
"The schedule allowed the father to work four days a week, and then have the child from Thursday to Sunday or Monday night," Ms. Allen said. "That leaves the mom with no weekend time. It is probably going to have to be revisited. It's unfortunate."
Ms. Johne lives in a small town about 20 minutes from Collingwood, where she helps her mother operate a small daycare.
Thursday, April 16, 2009
Underwater Stock Options, A Problematic Marital Asset
In today’s economy a new issue has arisen regarding stock options that once upon a time had value as a marital asset. With the economic downturn, a majority of stock options are now underwater. Approximately, two thirds of public companies report their stock options underwater. How should we treat this asset in a divorce settlement?
Companies that issue stock options have to report the outstanding options as an expense on their books, driving meager earnings down. As a result, new policies are being introduced by several companies where they are re-pricing the stock options or recalling the options and reissuing them at a lower price. This may result in a new vesting schedule. This issue may also arise when a spouse loses a job, is lucky enough to find a new job and receives stock options from his subsequent employer to compensate him/her for marital options left on the table during the job change. It is necessary to anticipate this issue and address the manner of treating and dividing recalled or re-priced options when negotiating a property settlement.
It is important to include in the settlement agreement appropriate language to preserve capital gains treatment for the ultimate exercise and sale of qualified stock options. The spouse in whose name the stock options are titled (Husband) would need to hold onto the options on behalf of the other spouse (Wife), and upon the ultimate sale of her share of the options, Husband would pay to Wife her net share of the option proceeds after taking into account taxes. Possible language to include in the settlement agreement follows.
“It is understood that the Husband shall hold said options on behalf of the Wife. Husband shall not unreasonably withhold Wife’s request to sell her share of the options. Wife recognizes Husband’s fiduciary relationship to the corporation, and Husband will not be required to impair that relationship by exercising the options. Wife acknowledges that upon exercise of the options there will be a tax consequence to Husband, and she will be entitled to receive only the net after tax proceeds from the exercise of the option (net defined as Husband’s net). Husband shall have an affirmative duty to advise Wife of the vesting of the options, as well as the expiration date of the options.”
Monday, March 30, 2009
Transfer of Property Incident to Divorce: Tax Benefit
Many of us have worked on cases where the ultimate property settlement was hampered due to lack of liquidity. This often occurs in families where the most significant asset is either a closely held business or real estate.
Often one of the parties requests that the ultimate disposition of these non-liquid assets be finalized some time in the future when the closely held business or real estate interest is sold. He or she further posits that the real value of these assets will only be known with certainty at the time of sale.
Although this is a strong argument, this is often described as a “RFD” (recipe for disaster). There is a significant tax reason not to delay the property settlement until the ultimate sale.
The Internal Revenue Code states that “no gain or loss is recognized to the transferor on a transfer of property between spouses or between former spouses incident to a divorce, nor is the value of the property included in the gross income of the transferee”.
A property transfer is deemed to be incident to a divorce if
* The transfer occurs within one year after the date the marriage ends, OR
* The transfer is related to the ending of the marriage
A property transfer is related to the ending of the marriage if
* The transfer is made under the original or modified divorce or separation instrument, AND
* The transfer occurs within six years after the date the marriage ends.
This tax free transfer of property between divorcing parties is a tremendous tax benefit. If the ultimate transfer does not occur under these rules, the tax consequences could be devastating. For example, let’s assume 50% of the proceeds from the sale of a closely held business are transferred to a former spouse outside the requisite time period. Let’s further assume the company originally cost $100,000 and is valued at $400,000 at the time of the transfer. Tax will be owed on 50% of the $300,000 gain ($400,000 less $100,000) by the transferor. Even if the tax is incurred at capital gains tax rates, the tax is unnecessary.
Often one of the parties requests that the ultimate disposition of these non-liquid assets be finalized some time in the future when the closely held business or real estate interest is sold. He or she further posits that the real value of these assets will only be known with certainty at the time of sale.
Although this is a strong argument, this is often described as a “RFD” (recipe for disaster). There is a significant tax reason not to delay the property settlement until the ultimate sale.
The Internal Revenue Code states that “no gain or loss is recognized to the transferor on a transfer of property between spouses or between former spouses incident to a divorce, nor is the value of the property included in the gross income of the transferee”.
A property transfer is deemed to be incident to a divorce if
* The transfer occurs within one year after the date the marriage ends, OR
* The transfer is related to the ending of the marriage
A property transfer is related to the ending of the marriage if
* The transfer is made under the original or modified divorce or separation instrument, AND
* The transfer occurs within six years after the date the marriage ends.
This tax free transfer of property between divorcing parties is a tremendous tax benefit. If the ultimate transfer does not occur under these rules, the tax consequences could be devastating. For example, let’s assume 50% of the proceeds from the sale of a closely held business are transferred to a former spouse outside the requisite time period. Let’s further assume the company originally cost $100,000 and is valued at $400,000 at the time of the transfer. Tax will be owed on 50% of the $300,000 gain ($400,000 less $100,000) by the transferor. Even if the tax is incurred at capital gains tax rates, the tax is unnecessary.
Friday, March 27, 2009
The Domino Effect of The Current Economic Crisis
The deepening recession, increased unemployment, and a stalled housing market have negatively impacted most of our clients’ financial situations. Many clients’ homes are underwater because of declining values. Other divorcing couples who are fortunate enough to have equity in their most significant marital asset, their home, can not sell their house. Combine that with the plummeting values of retirement accounts, and we are looking at marital asset balance sheets that are nothing less than bleak.
When the marital residence or small business is the most significant marital asset, the party who is able to retain the house or business may reap a significant benefit down the road, rather than the one who is compensated by cash or other assets, because the value of the house or business is likely to increase once the economy recovers.
The credit crisis has impacted us, as practitioners, as well. How many times have you heard from a client that their credit card is maxed out and he/she can not replenish their retainer? Discovery has been completed but there is no more money to fund the litigation. Where does that leave us?
Instead of thinking of ways to get out of the case, perhaps we should begin to think of alternative ways to resolve the case in a more cost-effective manner. We are all familiar with mediation and late case evaluation. Arbitration is another alternative when impasse has positioned the parties and created a standstill. A three person arbitration panel, comprised of a family law expert, a financial expert and a mental health professional, may provide an insightful resolution that is far more productive than going to court. Bringing additional professionals into the picture may bring difficult issues into focus.
If the main problems are financial in nature, involving marital asset division or support alternatives, introducing a financial neutral to work with the parties may move things in the right direction. One thing many of us have not considered is the value that a financial neutral would contribute to helping the case settle in mediation. The presence of the financial expert at the mediation, working in conjunction with the mediator, would provide answers to many of the financial issues that impede the settlement process. Issues such as the tax savings associated with different support options, the variations in pension values caused by using different interest rate assumptions, and the after tax versus before tax values of various assets could be resolved right on the spot. When the primary sticking points center on custody issues, the assistance of a parent coordinator or child specialist could prove invaluable.
Today’s economy requires us, as legal professionals, to assemble a team that will serve our clients in a cost-effective manner. Although we all know that some cases are destined to go to litigation, we should attempt to utilize alternative methods of resolution prior to taking this final leap. Mediation, arbitration and a form of the collaborative law model are just a few possibilities. We are fortunate to live in a community replete with knowledgeable and experienced experts who can provide our clients with wonderful resources. It is up to us to inform our clients of the availability of those options.
Sue K. Varon, Esq. and Martin S. Varon, CPA, CVA, JD
Tuesday, March 24, 2009
Obama’s Stimulus Plan Benefits Small Business Owners
Several benefits in the Stimulus Plan benefit small business owners. However, some of the tax relief expires in 2009 or 2010 so it is important to speak to a certified public accountant to fully take full advantage of any benefits of the legislation.
IRS section 179 generally requires businesses to depreciate equipment purchases over the life of the property. In an effort to encourage small businesses to purchase equipment, the new stimulus package now generally allows a business to immediately write off the cost of equipment, up to $250,000 (an increase from $125,000) in the year of purchase. Further, the incentives (which include grants and loans to local governments and nonprofit groups) set out to expand broadband internet access to underserved areas, may allow more people to work from home.
Small businesses with gross revenue of up to $15 million will be able to carry back net operating losses (which occur when the business deductions exceed the income for the year) for up to five years. This is an increase from the previous rule of two tax years.
A business with adjusted gross income in 2008 of up to $150,000 can avoid underestimated tax penalties in 2009 by making timely estimated tax payments based on 100% of the 2008 tax liability. If the business adjusted gross income exceeds $150,000, penalties may be avoided by making estimated payments on 110% of the 2008 tax liability.
For 2009 and 2010, the new making work pay credit is 6.2 percent (which is the equivalent of the rate of social security tax) of a taxpayer’s earned income or $400 ($800 for married filing jointly), whichever is less. As a result a taxpayer receives a credit equal to Social Security withholding. There is a phase out on this credit as a person’s modified adjusted gross income increases from $150,000 to $190,000 on a joint return ($75,000 to $95,000 on an individual return). Note, the credit is unavailable if the taxpayer qualifies as someone’s dependent or is a nonresident alien. Although this credit was not previously available to small businesses, the stimulus package allows small business owners to take advantage of this credit as well.
These are merely some of the benefits available to small businesses under the new stimulus package. It is important to meet with a certified public accountant to learn all the specifics and limitation of these as well as other benefits provided in the stimulus package.
Note: The information contained in this article represents a brief summary of specific potential tax benefits and should not be relied upon without seeking the advice of an independent professional as to how any of these provisions may apply to a specific situation.
Martin S. Varon, CPA, CVA, CEBS, JD
mvaron@armvaluations.com
and
Sue K. Varon, Esq.
svaron@armvaluations.com
www.armvaluations.com
IRS section 179 generally requires businesses to depreciate equipment purchases over the life of the property. In an effort to encourage small businesses to purchase equipment, the new stimulus package now generally allows a business to immediately write off the cost of equipment, up to $250,000 (an increase from $125,000) in the year of purchase. Further, the incentives (which include grants and loans to local governments and nonprofit groups) set out to expand broadband internet access to underserved areas, may allow more people to work from home.
Small businesses with gross revenue of up to $15 million will be able to carry back net operating losses (which occur when the business deductions exceed the income for the year) for up to five years. This is an increase from the previous rule of two tax years.
A business with adjusted gross income in 2008 of up to $150,000 can avoid underestimated tax penalties in 2009 by making timely estimated tax payments based on 100% of the 2008 tax liability. If the business adjusted gross income exceeds $150,000, penalties may be avoided by making estimated payments on 110% of the 2008 tax liability.
For 2009 and 2010, the new making work pay credit is 6.2 percent (which is the equivalent of the rate of social security tax) of a taxpayer’s earned income or $400 ($800 for married filing jointly), whichever is less. As a result a taxpayer receives a credit equal to Social Security withholding. There is a phase out on this credit as a person’s modified adjusted gross income increases from $150,000 to $190,000 on a joint return ($75,000 to $95,000 on an individual return). Note, the credit is unavailable if the taxpayer qualifies as someone’s dependent or is a nonresident alien. Although this credit was not previously available to small businesses, the stimulus package allows small business owners to take advantage of this credit as well.
These are merely some of the benefits available to small businesses under the new stimulus package. It is important to meet with a certified public accountant to learn all the specifics and limitation of these as well as other benefits provided in the stimulus package.
Note: The information contained in this article represents a brief summary of specific potential tax benefits and should not be relied upon without seeking the advice of an independent professional as to how any of these provisions may apply to a specific situation.
Martin S. Varon, CPA, CVA, CEBS, JD
mvaron@armvaluations.com
and
Sue K. Varon, Esq.
svaron@armvaluations.com
www.armvaluations.com
Monday, March 23, 2009
Post-Divorce Planning: Tips for the Divorce Attorney and The Client
Negotiating a final settlement in a divorce is usually a very stressful time for all parties: the husband, the wife, the children, and both attorneys. Despite the tension and delicacy of the issues, it is important not to lose sight of something very important. It is critical to start thinking of the future for the ex-husband, ex-wife, and the children.
Income Taxes
It is very important to start considering the tax consequences to all parties immediately. Tax filing statuses, brackets and exemptions have changed, and it is imperative to consider the effect on all taxpayers. The divorced couple has gone from a Married Filing Joint or Separate (MFJ or MFS) status to either a Single or Head of Household status and the applicable tax tables have changed significantly. The payor of alimony is entitled to a new above the adjusted gross income line deduction and this may lead to an adjustment of his/her withholding requirements. Or, if the payer is self employed, the alimony deduction may decrease the size of his/her estimated payments.
The recipient of alimony is now receiving income where there is no tax being withheld. It is probably necessary for that party to start making quarterly estimated tax payments.
Insurance
It is very important to make sure that the parties have the proper type and amount of insurance in place. After the divorce, is your client covered under a health insurance policy? If not is COBRA available, or is it time for your client to be added to coverage at his/her place of employment? If that option is not available, is it time for your client to obtain an individual policy? The types of policies and coverage vary significantly so your client should review this with someone experienced in the insurance industry.
Is disability insurance needed or warranted?
Is your client’s automobile still insured? Is it time to review this policy?
Is your client’s home and personal belongings properly and adequately covered? It is advisable for your client to meet with both his/her personal and property and casualty insurance advisors.
Wills
After the divorce, your client needs to update his/her will. Not only do changes have to be made regarding the distributions to heirs, it is critical to consider the issue of who should be the guardian of the children should the parties die prematurely.
Beneficiary Designations
It is necessary to update the beneficiary designations under any retirement plans and life insurance policies as soon as possible.
Meetings As Soon As Possible
It would be advisable for your client to meet with the following people :
- Family Attorney
- CPA
- Insurance Broker
- Head of Human Resources at the company where your client works
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