Berman & Asbel, LLP

May 2011 Archives

9th Cir. Denies Prop 8 Stay While Standing Issue goes to CA Supreme Court

In the Proposition 8 gay marriage ban case in California, the U.S. Court of Appeals for the 9th Circuit has denied the plaintiffs' request for a removing the stay on District Judge Vaughn Walker's ruling that Prop 8 was unconstitutional.  Judge Walker's original order would have allowed marriage of gay couples to resume in California but then the Court of Appeals issued a stay pending appeal. A decision on the constitutionality of Prop 8 by the 9th Circuit Court is awaiting a decision first by the California Supreme Court on the issue of standing.  A key issue in this appeal is whether the supporters of the Prop 8 gay marriage ban have standing to appeal Judge Walker's decision.  The lawsuit challenging Proposition 8 named then Governor Arnold Schwarzenegger and then Attorney General Jerry Brown as defendants in the case.  Schwarzenegger and Brown, however refused to defend the law in court.  Brown continues to take that position now that he is Governor.  The individuals and organizations who put Prop 8 on the ballot are seeking to defend the law.  The question is whether these private individuals and organizations have the legal right or standing to even appeal Judge Walker's decision. The U.S. Court of Appeals for the 9th Circuit where the appeal was filed, a federal court, decided that this standing issue is an unclear question of California state law.  The 9th Circuit invoked a procedure to certify a specific question of state law regarding this standing issue to the Supreme Court of California since that court is the final authority on what is the state law of California.  The lead attorneys for the plaintiffs challenging prop 8, Ted Olsen and David Boies, had argued that standing in federal court is a question of federal law and thus there was no need for the certification to the California state Supreme Court.  See article by Melanie Nathan for more on this point. So, a decision by the California Supreme Court on the standing issue must come first.  Only then will the 9th Circuit possibly take up the underlying constitutional merits of the Prop 8 challenge.  On the other hand, if the California Supreme Court rules the Prop 8 supporters have no standing to appeal, the 9th Circuit would then probably dismiss the appeal.  The supporters of Prop 8 might then attempt to appeal to the U.S. Supreme Court.  Whatever happens, these appeals will go on for a long, long time.

Beware of some quick and cheap divorces; you get what you pay for

Everybody wants a bargain.  That's true when people need legal work done too.  Sometimes however what seems like a bargain really isn't one at all.  Online legal services or do-it-yourself form kits may work for some people in some situations but for others, they can create a real mess.  As Rob Clarfeld asked in his May 17 Forbes blog post on do-it-yourself legal work, "Would you also perform surgery on yourself?" I have had several clients who had already gotten a divorce but then had protracted litigation with their former spouses over the marital residence.  By the way, in every one of those cases, the court in Cameron County, Pennsylvania issued the divorce.  There is nothing wrong with that court.  It just so happens that the Court of Common Pleas in Cameron County, Pennsylvania charges much lower fees for filing divorce cases than in other counties and the procedural rules for divorce in Pennsylvania allow a divorce action to be filed in any county in the state.   However, if you have a problem come up and need to have a hearing, you might have to travel a long way to get to the court. People often obtain their divorce decree with no problem but in these low-cost services, the parties are only getting a divorce decree without any resolution of their marital property issues.  If the two parties owned a house together while they were married, they still own it together after the divorce if the divorce case did not address it.  Some people may just have agreed to sell the house and split the money.  In other cases, one of the former spouses is living in the house - perhaps with children.  The other spouse, at some point, wants to get out of owning that house.  The motivation could be to convert to cash his or her share of the value of the house or perhaps the existence of a mortgage on that house is impacting that person's credit (even if the loan is in good standing) and making it harder to get a new loan. So what happens next is that if the parties cannot agree on what to do about the house, a whole new legal action must be filed in the county where the house is located and, if the parties cannot agree on another resolution, the judge will have little alternative but to order that the house be sold and the proceeds divided.  This type of case, called a partition, can become even more expensive because in addition to the parties needing to pay for lawyers, it may also be necessary for the judge to appoint a master.  The master is a neutral lawyer who oversees the sale and division of the asset as regarding various claims for credit each party may have against the other concerning who put what into the house, who paid the mortgage, who got to live there rent-free and so on.  That master will also charge fees, which typically must be equally shared by the two parties. So that quick and cheap divorce they got is now looking much more expensive and it may end up costing them as much or much more than it would have had these property issues been handled in the original divorce case. Failure to address property issues in the divorce can have even worse consequences for some.  When a divorce case is pending, the court has a great deal of latitude to deal with dividing up assets acquired during the marriage and the court is not bound by whose name is on the title.  The court can order assets to be transferred between the husband and wife to reach an equitable resolution.    Thus, in a divorce, one spouse may have rights to receive a share of assets belonging to the other spouse such as part of an IRA, 401(k) or sole-titled house or brokerage account.  Once the divorce decree is final, however, it is most likely that any such rights are lost and the parties then only have ownership rights to those assets on which their name is on the title.  When you are dealing with a house or other assets worth hundreds of thousands of dollars or more, one must be careful about the risks when trying to save a few hundred or maybe a thousand dollars or so. Even in simple divorce cases with no property issues and no children, the do-it-yourself approach can cause problems.  There are certain documents that must be filed and there are rules on when they must be filed.  One mistake can lead to a chain reaction of procedural problems.  The person thinks they are filing all of the required papers and then when they try to obtain the final decree, court administrator for divorces rejects it with little explanation.  In the counties where I practice, the court administrator's office will only give a very general indication of the reason for the rejection and they do not give advice on how to fix the problem.  When individuals have come to me for help after falling into such procedural difficulties, it often ended up taking more time, and costing them more in legal fees to fix the problems than it would have cost had I handled the matter from the beginning. Now there are ways to reduce expenses of divorce.  One part of my practice is mediated divorces where I actually work with both the husband and the wife when they are able to come to an agreement on how they want to divide their assets.  In these cases, both parties understand (and get it in writing) that I am not representing either one against the other and I am just facilitating their making an agreement.  They are always free to consult their own separate lawyer if they choose.  In cases such as these, the parties may end up only spending a fraction of what a contested divorce with lawyers on both sides would cost but by my working with them, I can help them to make sure that all the issues needing to be resolved in the divorce are considered before that final decree is signed. Readers should not solely rely on this note but should consult with a competent attorney licensed in their state. You can also find more information in my firm's websites on Family Law and Wills and Estate Planning and Administration.

DOMA does not stop everything: Steps that same-sex and unmarried couples can take to build rights and protections around their relationship

There has been much news about legal challenges against the federal Defense of Marriage Act (DOMA) which defines marriage under federal law as a union of one man and one woman and which allows states to refuse to recognize same-sex marriages legally entered under the law of another state.  The Obama Administration is dropping defense of this law but House Republicans are retaining counsel to defend it.  These are important developments but  in the meantime, same-sex couples and their families need to get on with life now so what can they do to protect themselves and their families if they live in a state such as Pennsylvania which will not recognize them as a married couple? One issue faced by same-sex couples is access to medical information and the right to make medical decisions for a partner who is unconscious or incapacitated. The partner is not automatically recognized because Pennsylvania does not recognize gay marriage or civil unions. However, Pennsylvania law does allow any competent adult to sign a document stating who is to make medical decisions and to have access to information. This document is sometimes called a "Medical Power of Attorney" or a "Medical Decision Making Surrogacy" document. Pennsylvania law specifies an order of priority  of persons who can decide in the absence of a signed document - spouse, adult child, parents, siblings and so on - but if the patient has a signed document stating who they want, that document is to prevail. So for gay couples, whether married or not, to ensure they can see to each other's medical needs and decisions if needed, it is an imperative but simple matter to have an attorney prepare a medical power of attorney. In addition, gay couples may wish to consider signing durable powers of attorney to enable each partner to engage in necessary financial transactions in the event that one partner becomes incapacitated. Such a power of attorney can prevent a dispute with a partner's family over control of personal assets in the event of incapacity. Wills - under Pennsylvania law, if there is no will, a person's assets that do not carry their own separate beneficiary designation go to relatives in a priority order set by state law.  Because same-sex partners cannot be recognized in Pennsylvania as married under current law they are not included in this order of priority,  so if partners wish to leave their estates to each other, they must do so with a will. An attorney practicing in the area of wills, trusts and estates can prepare a will to achieve this objective. Joint ownership of property - In addition to a will, same-sex partners and other unmarried individuals can help ensure that certain assets go to the person they choose through joint ownership of assets.  The idea is to set up the ownership so that if one partner dies, the survivor becomes the sole owner.  With real estate, care must be taken that the deed makes it clear that the surviving owner is to become the sole owner as this is not the automatic legal presumption as it is in the form of title for those who are legally married who own property together.  An attorney with experience in preparation of deeds will know how to do this.  With other assets, care should be taken to either have a clear beneficiary designation or designation of ownership that the surviving owner is to become the sole owner. Joint ownership has the benefit in Pennsylvania of mitigating inheritance taxes.  Unlike other types of taxes, the inheritance tax rate is determined not by the amount of money involved but by the relationship of the recipient to the deceased.  The rate for a spouse is 0 percent; for children and descendants 4.5 percent; for siblings 12 percent and for anyone else it is 15 percent.  Because same-sex marriages are not recognized in Pennsylvania, a bequest to a same-sex partner, no matter how long the relationship, would be taxed at the highest 15 percent rate.  However,  if an asset is owned jointly by two people and that ownership was established more than 1 year before the date of death, then only one-half of the value of the asset is counted as part of the estate for purposes of calculating the inheritance tax.  This can be a major savings when leaving a house to a partner through joint ownership rather than a bequest in a will. There is a downside, however to joint ownership of assets.  Unlike a will which can be unilaterally changed at any time, once someone is made a joint owner of an asset like a home, one cannot take that back unilaterally.  This can become a problem if the relationship breaks up.  Therefore, when such joint ownership is created, the partners may wish to consider having a contract drawn up to specify what happens to such assets in the event the relationship ends. Beneficiary designations on life insurance policies, retirement accounts and annuities - such accounts generally allow a person to choose who should receive it in the event of their death.  Making sure these designations are up to date with one's wishes are an effective way to direct important assets to a partner.  Lifetime gifts - Same-sex couples cannot take advantage of the provisions in the federal tax code that exempt unlimited amounts of gifts between spouses from estate and gift taxation.  However, they can make use of the provision that allows anyone to give to annual lifetime gifts.  Currently, a person can give up to $13,000.00 per year per recipient.  Over time, if used consistently, this provision can enable one to gradually transfer significant sums to a partner.  Of course, with a gift, once that money is given away, it cannot be taken back if the relationship ends. Readers should not solely rely on this note for planning but should consult with a competent attorney licensed in their state. You can also find more information in my firm's websites on Family Law and Wills and Estate Planning and Administration.

Protecting your will and other documents from potential challenge by angry relatives

Previously, I described some steps that individuals can take to provide rights and protections to their same-sex partner or other person who cannot be recognized as a spouse under Pennsylvania law.  Perhaps you have created such documents naming a friend, or a favorite charity as a beneficiary.  OK, so you have been to see your attorney and working with your attorney, you have had a set of documents drawn up that will give your partner, friend or favorite charity various rights to receive property or, in the case of individuals, to have access to you in the hospital or to make medical decisions on your behalf.   You have made these decisions and have excluded your parents, siblings, children or other close family members because this is how you want to do things.  You are of sound mind and you know you have the right to make these choices so no one can challenge them right?  Actually, wrong. It is a fact of life in the legal world that pretty much anyone can file anything to sue someone or challenge something even if the merits of the case make it unlikely they will win in the end.  So if you are worried that your relatives will be upset about your choices and will try to challenge them, what can you do? First, let's understand what are the reasons that a document like a will or a trust could be challenged.  The law provides a very strong presumption that if a will meets the basic requirements of being in writing, signed by the testator making the will and is also signed by two adult witnesses, it is presumed to be valid.  Somebody wanting to challenge the validity of the document has a heavy burden of proof to convince the court why it should not be valid. The first major category of challenge would be to attempt to prove that the testator (person whose will it is) lacked testamentary capacity.  The law presumes that every adult has testamentary capacity which means having "an intelligent knowledge regarding the natural objects of his bounty, the general composition of his estate, and what he desires done with it, even though his memory may have been impaired by age or disease." (rule stated in a Pennsylvania Supreme Court case called In re Brantlinger's Estate, 418 Pa. 236, 210 A.2d 246 (1965). Put simply, testamentary capacity means that a person understands who are the persons to whom one would generally most likely expect to give their assets - spouse, children, parents, siblings etc.; the person understands what he or she owns - in general (does not have to be down to small details) and what he or she actually wants to do with it.  A challenger has to show that the person who signed the will did not even have that basic capacity.  It is not enough to show that the person was elderly or ill.  The burden of proof (clear and convincing evidence) is quite high - not as high as beyond reasonable doubt like in a criminal case but higher than in a regular civil case.

The other path to challenge a will or trust is for the challenger to prove - again by clear and convincing evidence - that the will or trust was the product of undue influence.  To prove undue influence, the challenge must show three things:  1) that the person who signed the will or trust was in a mentally weakened state due to a physical or mental disease or condition; 2) that there was a person who was in a close position to be trusted by the person who made the will or trust (a "confidential relationship"); and 3) that the person who had this confidential relationship with the person who signed the will received some sort of substantial benefit in the will or trust.  

If the challenger proves these three elements meeting the high burden of proof, then the burden of proof shifts to the person promoting the will or trust to show that there was in fact no undue influence.

These challenges are not easy to win but they do happen and they can be expensive to defend against.   So what can you do if you are worried that your relatives might try to challenge your carefully made plans?  There are several steps you can choose. •Discuss plans openly with family.  Open communication can help head off future disputes.  In some families this will work but, of course, in others it will not so other tactics may be necessary.
•In your will or trust, or in a separate document, provide an explanation as to why you are including or excluding certain people. 

•Video - some people go so far as to make a video recording of the will signing and of the testator explaining their decision so that in the event of a future challenge, not only can the words be heard but one can see their expression and demeanor.

•Have a meeting alone with the attorney - it is very common for couples to meet together with an attorney when having their wills or trusts prepared.  If, however, you schedule a meeting alone with the attorney, the attorney has an opportunity to discuss the plan without the partner present.  This may then enable the attorney, if he or she later becomes a witness in a challenge, to be able to testify about meeting with the testator alone and discussing the matter without the other partner present. •Obtain a medical report from a personal physician at about the time these documents are being signed.  The medical evidence in challenges to wills and trusts often involves going back and making a determination based on medical records generated at about the time the document was created.  A specific report by a doctor attesting to the health and mental soundness of the testator can potentially deter a challenge later.

•Give limited gifts to relatives and use in terrorem clauses.  This is an interesting strategy that uses a carrot and a stick.  For example, a person might want to leave almost all of their estate to their partner but gives a conditional gift to a parent, child or other family member.  The condition, or in terrorem provision states that in the event that anyone attempts to legally challenge the will or trust, the gift is revoked and for purposes of interpreting the document, the challenger shall be deemed to have died before the testator.  This can be a strong stick to deter a challenge and it can also provide further evidence to the court of the resolve that the testator had when making this decision. Readers should not solely rely on this note for planning but should consult with a competent attorney licensed in their state. You can also find more information in my firm's websites on Family Law and Wills and Estate Planning and Administration.

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