WHAT’S BREWING IN THE CAPITOL THAT MAY AFFECT YOUR PRACTICE

February 3, 2011 § 2 Comments

Here’s a link to legislation pending in Jackson that may have some effect on your practice.

It’s early, and some things fall by the wayside while others get amended, but here are a few to take note of based on my own cursory, limited review:

  • HB 55 appears to take adult guardianships in the same direction that UCCJEA took child custody some years ago.  As our population ages, and younger people are taking responsibility for older adults, the tug-of-war between siblings for parents across state lines can create some head-scratching jurisdictional battles that this measure seeks to address.
  • HB 170 addresses an anomaly in the law created by the emancipation of a child.  The case law has held that the cause of action for past due child support becomes the enforceable obligation of the child after emancipation, even though the child support payments were due to the custodial parent.  This bill would allow the parent who was owed the support to collect it despite emancipation.
  • HB 689 is of high interest in chancery court since the supreme court handed down McDonald v. McDonald, 39 So.3d 868 (Miss. 2010), which held that hearsay in a guardian ad litem’s report is inadmissible.  This bill would correct that.  It spells out how hearsay in the report would be handled, and the procedure spelled out is similar to that proposed by Justice Pierce in his dissent to the majority opinion.

There are other bills proposing to:  revise requirements for durable powers of attorney; change acknowledgment requirements for recordation of certain instruments; revise procedures for filling judicial vacancies; clarify procedures for renewal of a judgment; specify where and when enforcement of liens takes place; spell out how disability payments are credited against child support; allow distribution of wrongful death damages without opening an estate; and filing-fee-funded increase in judicial salaries.  There’s plenty more there that might interest you.

MAKING SURE YOUR CLIENT GETS THE PROPER TAX TREATMENT OF ALIMONY

January 31, 2011 § Leave a comment

An important factor in determining whether to award alimony is the tax consequences of the court order.  We all know that periodic alimony is income to the payee and deductible by the payer if it meets the IRS’s requirements.

So what does the IRS consider to be the essential ingredients of an alimony award, either by agreement or by adjudication?  Section 71(b) of the Internal Revenue Code (IRC) provides that the following must apply:

  1. There must be cash payments to the recipient or third-party payments;
  2. Payments must be required by a written instrument;
  3. Instrument must not designate the payment as “not alimony” or as some other form of payment;
  4. The payer and payee must not be members of the same household;
  5. Payments may not be treated as child support;
  6. Payments must cease on death of the recipient;
  7. The parties may not file a joint tax return.

Payments that will not be treated as alimony by the IRS include:  child support; noncash transfers; payments that are part of a spouse’s community property income; payments for use of property; and payments for maintainenance or upkeep of the payer’s property.  Lump sum alimony, which is really an equalizing payment in equitable distribution, is not considered alimony by the IRS.

If you’re planning to use the form to prove the tax effects of alimony that I posted previously, you need to update it to conform to the latest version of IRC § 71(b).

It’s important to give some thought to these provisions regardless of which side you are on in an alimony dispute.  If you represent the client trying to get some cash, you might consider proposing to the court or negotiating for it to be in the form of a property division; as such, it would not be considered income.  Likewise, you can propose to the judge or negotiate for the payment to omit one of the ingredients above.  If you represent the party who will have to pay, make sure you get all of the essential ingredients included so that your client’s payments will be deductible.

PARENTAL LIABILITY

January 26, 2011 § 3 Comments

When a child commits a tort, can the parents be held responsible to pay the damages?

MCA § 93-13-2 sets out the rules for when the parents of a minor will be held liable for the acts of the minor, and the limits on that liability.  Here are the principal points:

  • The statute states that “Any property owner …” may recover damages.  Does this limit the scope of the statute to actions for damage to property, or are personal injury claims included?  It would seem that damage to property is what was contemplated, since subsection (1) specifically refers to any act of the minor that ” … damages or destroys property belonging to such owner.”  Subsection (2) refers to ” … damages [not injuries] to [sic] which such minor or other person would otherwise be liable.
  • The limit of recovery is $5,000, plus “necessary court costs.”
  • The statute applies to minors under the age of 18 and over the age of 10.
  • The act of the minor must have been malicious and willful.  Purely negligent acts or mere carelessness are not included.
  • The statute does not apply to a parent whose “parental custody and control” have been removed by court order or decree.  Thus, where the child’s custody is awarded by court order to one parent, the non-custodial parent will not be subjected to liability.  This raises an interesting point when the child commits a maliciously destructive act while on visitation with the non-custodial parent, since visitation time is tantamount to custodial time.  Cox v. Moulds, 490 So.2d 866, 870 (Miss. 1986).  The language of the statute appears to hinge on the parental control, so that the parent who should be in control of the child at the time of the damage is the parent who will face liability.  When the child is placed by court order in the control of a non-parental guardian, that guardian will be the one to deal with the liability issue.
  • The statute does not limit any other recovery under any other applicable provision of law. 
  • The purpose of the law is both to authorize recovery from parents in situations where they would not otherwise be liable, and to limit their liability.

The act is in derogation of the common law, and therefore must be strictly construed.  I do not find any case law construing this statute or interpreting its applicability.

A FEW RANDOM THOUGHTS ABOUT JOINT CUSTODY

January 21, 2011 § 3 Comments

  • An award of joint legal custody was reversed where the reason assigned by the trial judge was to allow the mother to participate in and keep up with the children’s activities.  Joint legal custody requires the parties to confer in the joint decision-making about decisions affecting the children’s lives.  Concern for access to information does not warrant award of joint legal custody.  Lowrey v. Lowrey, 25 So.3d 274, 296 (Miss. 2009). 
  • The trial court is not required to consider the Albright factors in determining whether to award joint legal custody, since they apply only to physical custody.  Palculict v. Palculict, 22 So.3d 293, 297 (Miss. App. 2009).
  • MCA § 93-5-24(2) provides that the trial court in an irreconcilable differences divorce may award joint custody only “upon application of both parents,” but in all other cases the court may award joint custody “upon application of one (1) or both parents.”  But where the parties have consented to an irreconcilable differences divorce and agreed for the trial court to adjudicate custody, the chancellor may award joint custody.  Crider v. Crider, 904 So.2d 142, 148 (Miss. 2005).  
  • “There are … significant legal consequences attached to each form of custody.  If parents accustomed to joint decision-making disagree, the parent with sole legal custody has authority to make unilateral decisions regarding the child.  A move by one of two joint custodians triggers an Albright analysis to determine which parent should take sole physical custody.  In contrast, when a parent with sole custody relocates, the relocation is not in itself a reason to modify custody.”  Bell, Mississippi Family Law, § 5.04[4].
  • Joint custdy is inappropriate where the parties are unable to communicate and cooperate.  Lewis v. Lewis, 974 So.2d 265, 266 (Miss. App. 2008).   

INSOLVENT ESTATES

January 13, 2011 § 5 Comments

When the debts and expenses of the estate exceed the value of its assets, the estate is said to be insolvent, and there is a procedure for adjudication of insolvency, satisfaction of creditors, and payment of administration expenses that is spelled out in MCA § 91-7-261 through -268.

The estate is insolvent when its debts and the expenses of administration exceed the value of the real property and the other property that is not exempt.  You can find out more about exempt property here.

Either the administrator or a creditor may petition the court to adjudicate its insolvency.

MCA § 91-7-261 sets out the procedure to determine insolvency.  The administrator is required to “take proper steps speedily to ascertain whether the estate be solvent or insolvent.”  If the administrator finds that the estate is insolvent, she files a “true account” itemizing all of the personal estate, assets of every description, the land of the deceased, and all of the deceased’s debts.  Notice is given to the devisees or heirs, and the matter is presented to the court for hearing.  If the court determines from the account that the estate is indeed insolvent, the chancellor will order that the assets be sold and that the expenses of ” … the last sickness, the funeral, and the administration, including the commissions …” are first paid out of the proceeds,” and that any remaining proceeds be divided among the creditors ” … in proportion to the sums due and owing them respectively …” 

The procedure for distribution of remaining proceeds among the creditors is provided in MCA § 91-7-269.  After the time to probate claims has elapsed, a notice is published for three consecutive weekss in a newspaper published in the county that the claims against the estate will be taken up by the court on a day and at a time certain, that any and all claims not required by law to be probated shall be filed with the clerk by a stated date, and that all creditors may attend.  A hearing is held at which the administrator may object to any claim, evidence is presented pro and con, and the court may either allow it in whole or in part, or reject it in whole or in part.  The administrator may file a verified application to be reimbursed for claims paid peior to the adjudication of insolvency, and the court shall treat them as if they had been properly probated.       

MCA § 91-7-271 provides that the allowed claims shall be paid pro rata, and any creditor not paid within ten day of the court’s order shall have execution against the executor or administrator and the sureties on his bond. 

Any suit pending against the executor or administrator at the time of insolvency does not abate, but may be prosecuted to final judgment, according to MCA § 91-7-273, but -274 bars suits from being filed after the estate is declared insolvent.  You should read -273 carefully for the effect of and payment of a judgment against the estate for suits that were pending when the insolvency is determined.

FINAL DECISION-MAKING AUTHORITY IN JOINT LEGAL CUSTODY

January 6, 2011 § 3 Comments

MCA § 93-5-24 provides that the joint legal custodians shall “share the decison-making rights, the responsibilities and the authority relating to the health, education and welfare of a child,” and “An award of joint legal custody obligates the parties to exchange information concerning the health, education and welfare of the minor child, and to confer with each other in the exercise of the decision-making rights, responsibilities and authority.”

The problem is that the statute does not delineate exactly how final decisions will be made after the conferring is done.  Common sense tells us that there can not be a committee of two.  What if, for instance, the father demands that the child attend military school in Chattanooga, but the mother is just as adamant that the child attend Lamar in Meridian?  Or how about if one parent believes that the child should have botox injections for cosmetic reasons and the other is opposed?  Or one parent takes the position that the child should take ADHD medication, and the other is opposed to medication?  Or one wants the child to have the usual childhood immunizations and the other does not out of fear of autism.  The statute does not inform us how those ties or any others, some involving important decisions about the children, will be broken.

In this district, both chancellors take the position that joint legal custody is not in the best interest of the child and will not be approved unless there is some form of a tie-breaker provision. 

Some lawyers try to skirt the problem by providing in a PSA that the parent with physical custody at the time will have final decision-making authority.  This approach does not work, however, because the effect of life-affecting decisions like those enumerated above carry over into the other parent’s custodial time in shared physical custody arrangements.

Most PSA’s address the issue by providing that one parent or the other will have final decision-making, or tie-breaking, authority.  That still means that both parents must confer, consult and participate in the decision-making process as required by the statute.  Although the physical custodian is the most logical tie-breaker, I had a case once where the mother had sole physical custody and the parents shared joint legal custody of a paraplegic child.  They agreed that the father would have final decision-making authority because he would continue to be responsible to transport the child to and from school, to and from all of his activities and family and church events, and to and from Birmingham for numerous and frequent medical visits.    

It is okay to allocate responsibility between the parents, as, for instance, where the father is going to pay for private school, and the parties agree that he will have final decision-making authority as to the child’s education, with the mother to make final decisons as to the health and welfare.  In such a case, it would be wise to define exactly what the scope of authority would be as to education, since the three realms of decison-making overlap somewhat.  For instance:  “Father shall have the final decision-making authority as to which school the child will attend in Lauderdale County so long as both parties reside therein; all other decisions will be finally decided by the mother.”

In cases where one parent is the sole physical custodian, the case of Clements v Young, 481 So.2d 263, 266 (Miss. 1985), offers a little help and guidance.  In that case, the Mississippi Supreme Court stated:

“Our law necessarily provides that the award of custody to a parent incident to a separation or divorce vests in the custodial parent the right to make, and responsibility for making, day to day decisions regarding the care and welfare of the children. Except as otherwise agreed by the parties in writing, the custodial parent may determine the child’s upbringing, including his education and health and dental care. Such discretion is inherent in custody. It is vested in the custodial spouse though not spelled out in detail in a separation agreement or custody decree.”

Clements does not address what happens where the parties “otherwise agree in writing,” as where they agree to joint legal custody with one to have sole custody.  Have they “otherwise agreed” that the sole physical custodian will no longer have final decision authority, or is it presumed that the physical custodian will have it?  Clements involved other issues and so is distinguishable on its facts.  In my opinion, the best practice where one parent is the physical custodian and they share joint legal custody is simply to name the final decision-maker in the PSA.          

An important reminder:  I posted before about the danger of relying on the term “primary physical custody.”  Designation of one parent as “primary” physical or legal custodian has no legal meaning whatsoever, and will not impart decision-making authority.

DO I NEED TO OPEN AN ESTATE TO DO THAT?

January 4, 2011 § 4 Comments

Seated in your office are the decedent’s adult children, asking your advice about daddy’s estate, which consisted of $5,000 in a bank account, a high-mileage car, and his last paycheck from Lockheed, which they have yet to receive.  They candidly tell you that they don’t have a lot of money to pay to probate an estate. 

I know what you’re thinking:  “Oh, well.  One more low-to-no fee estate won’t kill me.”

But hold on a minute.  Take time out to check out these statutes:  MCA §§ 91-7-322 and 323, and 81-5-63 and 81-12-143.  You’ll see that they allow you with some simple paperwork to get your clients the money and title to the car without the necessity of opening an estate.

MCA § 91-7-322 and 81-5-63 allows the bank to pay up to $12,500 to the decedent’s “successors” as defined in the statute, with the filing of a simple affidavit.  The same section would authorize issuance of title to the car. 

MCA § 91-7-323 allows the former employer to pay any outstanding wages directly to the successors. 

MCA § 81-12 143 authorizes a savings and loan to pay a savings account to successors without an administration, provided that they execute a bond.

FAMILY VIOLENCE AND ITS IMPACT ON VISITATION

December 9, 2010 § 1 Comment

We’ve already discussed the impact of family violence on the court’s adjudication of custody here and here.  Family violence also directly affects visitation.

MCA § 93-5-24(9)(d)(i) provides in part:

“A court may award visitation by a parent who committed domestic or family violence only if the court finds that adequate provision for the safety of the child and the parent who is a victim of domestic or family violence can be made. “

The statute sets out specific actions that the court may take in such a case.  The court may:

  1. Order the exchange to take place in a protected setting;
  2. Order supervised visitation;
  3. Order counselling or an intervention program for the perpetrator;
  4. Order the perpetrator to abstain from possessing or consuming alcohol or controlled substances before and during visitation;
  5. Order the perpetrator to pay a fee for supervised visitation;
  6. Prohibit overnight visitation;
  7. Require a bond for the safe return of the child; or
  8. Impose any other conditions for the safety of the child, other parent or other family members.

The court may order that the residence address of the custodial parent or child be kept confidential.

The court may not require a victim of domestic or family violence to attend counselling, individually or with the perpetrator, as a condition of visitation.

ONE WAY TO PUT $50,000 IN THE POCKET OF YOUR CLIENTS

December 3, 2010 § 5 Comments

You are representing the executrix who is one of three siblings who are the legatees of the decedent.  They have come to you because their dad’s only asset of any real value, other than his furniture and an old car, was a life insurance policy with a face value of $50,000 that he had made payable to his executor for the estate, and the estate needs to be probated to receive the insurance proceeds.

The catch is that the creditors have claims that exceed the proceeds of the life insurance policy:  $17,000 to various credit cards; $8,000 to a loan company; and $36,000 to doctors and hospitals for the final illness.  Pretty bleak. 

The furniture and car are exempt property, as we know.  Is there anything else you can do?

Look at MCA § 85-3-13.  Here’s what it says:

The proceeds of a life insurance policy not exceeding Fifty Thousand Dollars ($50,000.00) payable to the executor, or administrator, of the insured, shall inure to the heirs or legatees, freed from all liability for the debts of the decedent, except premiums paid on the policy by any one other than the insured, for debts due for expenses of last illness and for burial; but if the life of the deceased be otherwise insured for the benefit of his heirs or legatees at the time of his death, and they shall collect the same, the sum collected shall be deducted from the Fifty Thousand Dollars ($50,000.00) and the excess of the latter only shall be exempt. No fee shall be paid or allowed by the court to the executor or administrator for handling same.

Under this section, the first $50,000 in life insurance proceeds is exempt from the claims of creditors, although that amount would be reduced by the amount of any other life insurance proceeds that the legatees receive from policies on the decedent’s life.  The only exceptions to the exemption would be:  Any claim made for payment of life insurance premiums made on the policy by someone other than the insured; and any claims for the burial and administrator’s or executor’s attorney’s fees for administering the estate, since those are not debts of the decedent, but rather are debts of his estate.  Dobbs v. Chandler, 36 So. 388 (Miss. 1904).  But attorney’s fees incurred in recovering insurance proceeds are not an administrative expense chargeable against the proceeds.  Abernethy v. Savage, 132 So. 553, 554 (Miss. 1931).   

The exemption is not limited to the spouse and children, but inures to the benefit of the heirs or legatees, and must be liberally construed in their favor.  Coates v. Worthy, 17 So. 606; on suggestion of error, 18 So. 916 (Miss. 1895).

The exempt proceeds are divided among the heirs or legatees on a pro rata basis.  Magee v. Bank of Hattiesburg & Trust Co., 98 So. 541 (Miss. 1923). 

The insurance proceeds must be payable to the executor or administrator of the estate.  In Rice v. Smith, 16 So. 417 (Miss. 1894), the court found the proceeds not to be exempt where the insured had named himself, his executors, administrators and assigns as beneficiaries.  Held that the decedent himself was the true beneficiary, and that his administrator held the proceeds just as if the decedent himself had held them.  This is a curious result, since it seems to presuppose that one may somehow collect one’s own life insurance proceeds.  But the significance of this case is that the statute requires the beneficiary to be the executor or administrator.   

Caveat:  MCA § 85-3-11 disallows the exemption where the decedent can be proven to have used life insurance to defraud creditors. 

Note:  The cases cited are ancient, but I believe them to be good law and I found no negative history.               

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