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Postnuptial agreements

Someone who read my previous article asked me whether prenuptial agreements are better enforced than postnuptial agreements by courts in New Jersey and in New York. Although both types of agreements are routinely enforced, both types of agreements are subject to scrutiny. States have a strong interest in the matters of marriage and divorce and naturally, the parties who sign those agreement have special confidential relationships.

When an agreement is challenged (it never gets challenged by the court, only by a party), there is always a concern about the possibility of unequal bargaining power in a marriage situation. Here is the difference why postnuptial agreements may be subject to higher level of scrutiny. Marital relations often produce situations with unequal bargaining power. When it comes to postnuptial agreements a wife is usually more invested in marriage than a bride who can easily walk away from it (unless she is about to marry Tom Cruiz or Alec Baldwin).
Who generally wants a postnuptial agreement? A postnuptial agreement is often used by a successful businessman who wants to protect his investments and business from the volatility of divorce proceedings. Alternatively, a postnuptial agreement may be used by a wife who is unhappy about her prenuptial agreement and wants to modify that agreement.
The courts scrutinize the agreement by using the standard how much an agreement deviates from an equal split. In a leading case on the issue, Pacelli v Pacelli, a husband offered his wife of ten years far less than she would have received under New Jersey’s equitable distribution rules. He refused to negotiate, presented the offer as a take-it-or-leave-it deal, and “moved out of the marital bedroom.” New Jersey court set aside that agreement. A New Jersey Supreme Court decision to invalidate a postnuptial agreement stemmed from its observation that a wife“faced a more difficult choice than the bride who is presented with a demand for a pre-... Read More »

Italian Man, 99, Divorcing Wife of 77 Years Over 60-Year-Old Affair

This year has been filled with its share of sudden and surprising divorces in the entertainment and political world, but this split may take the cake.

A 99-year-old Italian man filed for divorce from his 96-year-old wife of 77 years after he found letters from an affair she had 60 years ago.

The man, identified in court papers as Antonio C., discovered the letters exchanged between his wife and a former flame in an old chest of drawers days before Christmas, according to the Telegraph. He confronted his wife, Rosa C., who reportedly admitted to the affair, and tried to convince him to stick with their marriage.

But despite the nearly eight decades that they spent building a life together, a scorned Antonio C., moved ahead with the divorce. (Guess he never heard of “let bygones be bygones.”) The letters were the latest woes in the couple’s long marriage during which they had five kids, 12 grandchildren and one great-grandchild together, according to UPI.

Originally from Sardinia, Antonio C. reportedly met Rosa C. in the 1930s while he served as part of the Italian Carabinieri in her native Naples. The Italian press pointed to the couple’s southern blood as the catalyst for the breakup, the Telegraph noted.

Once Antonio and Rosa C.’s divorce is finalized, they will become the oldest divorcees, according to the Telegraph, taking the title from fellow Brits Bertie and Jessie Wood, both aged 98, who called it quits in 2009 after 36 years of marriage.... Read More »

YOUR TAX RETURN - 2012 EDITION

It is paradoxical that as tax law becomes more complex to frustrate loopholes, that very complexity creates the opportunity for more loopholes. It is perverse that the loopholes are employed by few, while everyone must deal with the complexity aimed at them. Despite government efforts the tax gap (estimate of tax owed but not paid) somehow widened between 2001 and 2006, the last measured period, to $385 billion, 14.5% of taxes owed (Wall Street Journal 1/7/12). In his book “Why the Law is So Perverse, Leo Katz, provides a humorous example of how human beings find ways around rules. The example is paraphrased by Jonathan V. Last in his article “Illogical but Not Unjust,” (Wall Street Journal 12/13/2011):

Mr. Katz imagines children waiting in line to see a movie when Suzy arrives to find her friend Amanda already in line. Amanda is happy to let Suzy cut in line behind her, but the other children in line object to this (According to playground law line-cutting requires the consent of the party who will be immediately behind the cutter.) The other children are happy to let Suzy cut in front of Amanda, but Amanda is not. So Suzy proposes that she cut in from of Amanda, but later allow Amanda to cut in front of her, thus using two front-cuts to achieve the singe back-cut that playground law justly forbids.

Some courts in holding that communications imparted for tax return preparation are not protected by the attorney-client privilege have called tax return preparation a mere scrivener’s function. I am sure that no judge so holding has ever tried to prepare a modern-day federal income tax return. In fact, every entry on a tax return is an interpretation of some provision of tax law codified in the Internal Revenue Code. These interpretations of law, however, involve and often combine both legal and computational determinations. Most returns are prepared by non-lawyers and most CPAs who are often very capable return preparers know when to team-up wi... Read More »

CAVEAT FOR LAWYERS: IRS HAS YOU IN ITS SIGHTS

The IRS over the years has gained considerable experience and expertise in how to screen for audit and conduct audits of attorneys. In March, 2011, IRS issued a revised Attorneys Audit Technique Guide (Guide) for use by its field agents and office audit examiners. The IRS says of these guides in general:
“…Audit Techniques Guides … help IRS examiners during audits by providing insight into issues and accounting methods unique to specific industries…. (The Guides) explain industry-specific examination techniques and include common, as well as, unique industry issues, business practices and terminology. Guidance is also provided on the examination of income, interview techniques and evaluation of evidence.”
The Guide in an introductory note also states: “This document is not an official pronouncement of the law or the position of the Service and cannot be used, cited, or relief upon as such.” Nonetheless, the revised guide for attorneys is helpful to tax lawyers and attorney clients in that it offers and insight into what IRS is looking for and how it goes about finding what it is looking for. The Guide should not be viewed as the final word on any tax matter, however; it mostly presents the IRS side of the story which often is not the whole story for any tax issue.
Attorneys are likely candidates for audit due in part to their occupation, high earnings and occasional receipt of cash in payment of fees, more common in some practice areas such as criminal and immigration law. Lawyers also attract attention when unreasonably low wages are paid by Professional Associations or LLCs that have elected S Corporation status.
The Guide has three fairly comprehensive chapters covering:
 Overview of Attorney Returns
 Audit Steps
 Audit Issues
Chapter 1, Overview of Attorney Returns
The Guide discusses:
 How lawyers operate and get paid including advance fees, cash fees and contingent fees.
 Typical boo... Read More »

YEAR-END TAX PLANNING WORRYING!

We are nearing the close of another year. The merriment of holiday cheer is occasionally interrupted by thoughts of saving some taxes before year-end. Traditionally, this process of reviewing what has been done and what might be done is called year-end tax planning. This year it’s more like the Bacharach-David song laments, “Wishin' and hopin' and thinkin' and prayin'” that things will turn out good; but, knowing that wishing and hoping won’t make congress function as it should.
The Super-committee failure was in large measure also a failure at failing because the committee did not issue a report that would enable congress to easily pick up the track of its negotiations and start from there. We are left with great uncertainty about the structure of our tax system which oils the wheels and levers of our economy. We are left wondering if several economic stimulus measures will be extended and whether the Medicare system will implement draconian reimbursement reductions that could impact availability of care.
Thus, attempting to compare tax results in 2011 with projected tax results in 2012 or 2013, after contemplated tax moves, is like playing a game of chess with eyes blindfolded. Below is a chart of some expiring tax provisions and prospective tax rate changes that may or may not ultimately become effective, depending on what congress takes up for consideration and is able to accomplish before year-end.








UNCERTAINTYOF EXPIRING TAX BENEFITS AND END TO BUSH ENACTED LOWER TAX RATES:

SOME OF THE ITEMS AFFECTED-

ENDS AFTER 2011 ENDS AFTER 2012 BEGINS IN 2013
Soc. Security 2% tax cut for employees (lowers rate to 4/2% on taxable wages) Top tax rate 35% (new top rate 39.6%) 3.8% surtax on net inv. Income (joint over $250K/ single over $200K)
AMT tax patch protection Cap gains rate 15% (new rate 20% / 28% collect.) Personal exemption phase out
Faster asset write-offs Qual. Div. rate 15% (new top div. rate 39.6%) Limit of itemized d... Read More »