December 2014

How 401(k) accounts are handled in divorce

The amount of a 401(k) account that has accumulated during a marriage is considered to be marital property and thus subject to division in Massachusetts divorce cases. Although early withdrawals prior to the account holder’s reaching the age of 59 1/2 would normally give rise to an early withdrawal penalty, the law provides an exception to this when a withdrawal is made pursuant to a court’s order. When the divorce occurs, the court will issue a qualified domestic relations order defining the portion of the account owed to the other spouse and listing the payee spouse’s identifying information. If the order is not prepared correctly, the account holder may still be subject to the penalty. Upon a correctly completed and submitted QRDO, the plan administrator will then withdraw the amount ordered for payment to the recipient spouse. Although the account holder will not incur an early withdrawal penalty, the payee spouse will incur tax liability for the lump sum payment he or she receives if that is the manner in which they choose to receive what is owed. They may thus wish to explore other options, such as leaving the portion owed to them in the account of their spouse, with the percentage that belongs to them clearly defined in the QRDO. While the recipient will not be able to add funds to the amount or to withdraw prior to when their spouse does, doing so may provide some tax benefits. Another alternative is to roll the finds received over

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What is the legal significance of establishing paternity?

A man in Massachusetts cannot assert his legal fathers’ rights unless paternity has been established. Although many people believe that putting a man’s name on a birth certificate establishes paternity, this is not actually true. Unless a man and a woman were married at the time of a child’s birth, there is no automatic assumption of paternity. Paternity can be established after a child is born in a number of different ways. Both parents may sign a voluntary acknowledgment of paternity, or a DNA test may be used to establish paternity. If an unmarried father does not legally establish paternity soon after his child is born, he could risk another man stepping in to voluntarily assume paternity. Another man could do this by marrying the mother and agreeing to sign a legitimation form. Once paternity is legally established, a child’s father will be responsible for paying his share of the expenses for raising the child. The father will also have custody and visitation rights. If a mother tries to give her child up for adoption or allow a stepfather to adopt her child, the child’s father can stop these actions from going forward by refusing to provide his consent. If a father was unmarried when his child was born and his relationship with the child’s mother has ended, it may be wise for the man to establish paternity as soon as possible. An attorney may be able to help a father in this situation to assert his fathers’ rights and

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Fathers may object to adoption of their child

Massachusetts residents may know that parents may object to their child’s adoption. This fundamental right might be complex when the father is not married to the mother. In such cases, the biological father may need to take steps to assure that his rights are protected. One hurdle in establishing a father’s rights is paternity. This is done using DNA testing where genetic material is compared between the father and the child. There are times when the father is unaware that a pregnancy exists. In such cases, it may be difficult to have testing done before an adoption is completed. When this happens, it is problematic for a father to have any say on the adoption of his child. Fathers who are aware of the pregnancy may wish to have testing done quickly. The court may view prolonging this as a sign the father is not committed to caring for the child. To eliminate such an impression, the father may wish to have genetic testing done as soon as the child is born or while the mother is still pregnant if he believes she would want to give the child up for adoption as soon as the baby is born. Other things that might be done to illustrate the father’s parenting commitment include helping to pay for expenses related to the pregnancy and to begin paying voluntary child support once the birth occurs. In addition, establishing a parent-child relationship is essential. In spite of showing paternity and an effort at committed

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A look at how an inheritance is treated during a divorce

Massachusetts couples may be interested in information regarding the splitting of inheritances during a divorce. The outcome could depend on how the money is treated when received. When a marriage ends, there are often questions about whether certain property is included in the division between the former spouses. One type of property that may be contentious is an inheritance received by one spouse during the marriage. An inheritance received before or after the marriage is generally not considered marital property, so this is usually not divided. Similarly, when an inheritance is received during a marriage by only one spouse, this usually not counted as marital property. When the inheritance is received and the funds are kept separate from other marital property, it is usually safe. This means that the money is deposited in a separate bank account than the rest of the money owned by the former couple. If the inheritor commingles the inheritance with the rest of the couple’s money, though, this could make it part of the former couple’s marital property. This, in turn, would be part of the property division phase of the divorce. This could apply to both inheritances received during the marriage and outside of the marriage. It may be possible to show that the funds were never meant to be mixed, but the bar for proving this in court can be quite high. Understanding the proper way to handle inheritance funds, real estate holdings and other property in a high net-worth divorce can be

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Addressing complex property concerns during a divorce

While many Massachusetts divorces can be contentious as property division is discussed, some situations are more challenging because of the complex nature of marital and other assets. Business interests, stocks, real estate, and other issues may require particularly careful analysis to determine value and status as marital or separate assets. Those of you who hold executive positions, own your own companies or have a high net worth may find these issues to be particularly significant during divorce proceedings. An effective approach to property division begins with accurately valuing assets. Tax consequences should also be considered as certain funds are evaluated. In addition to determining the value of retirement resources, professional bonuses, stock options, and bank accounts, it is important to evaluate collectible items, antiques, and other physical belongings of value. Real estate and closely held businesses should also be evaluated. With an accurate value of the marital estate, it is possible to work toward setting attainable goals related to the property division phase of the divorce. The principle of equitable distribution is a guiding factor through this process. A fair division of assets is often determined by a judge, meaning that it is important to present a convincing argument for your wishes with regard to complex assets. It may be a priority to define certain properties as separate during this phase. A prenuptial agreement may also play a significant role in determining how marital assets are to be divided. If you are facing challenges related to high-value or complex assets

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