Social Security, Retirement Benefits, and Divorce ?

Social Security in the United States refers directly to a lesser known federal Old Age, Survivors and Disability Insurance program or OASDI. The program was originally rolled out in the 1930's in an attempt to limit what were seen as dangers to the American way of life such as increased life expectancy, poverty, and fatherless children. So the Social Security Act, signed in 1935, created social insurance programs to provide benefits to retirees, the unemployed, and as well as a lump sum benefit to the family at death.

 Many amendments have been made since the original Social Security Act of 1935. Most importantly; Medicare was added in 1965. The Social Security Act of 1965 also recognized for the first time that divorce was becoming a common cause for the end of marriages and added divorcees to the beneficiary list.
The largest component of benefits is retirement income.

 Throughout a person's working life the Social Security Administration keeps track of income and taxpayers fund the program via payroll taxes also known as FICA (Federal Insurance Contributions Act) taxes. The amount of the monthly benefit to which the worker is entitled depends upon the earnings record and upon the age at which the retiree chooses to begin receiving benefits.

FICA taxes are 7.65% for employees and 15.3% for self employed individuals. The amount of taxes paid is not directly used to calculate an individual's benefit. The rate is broken down into two parts: Social Security and Medicare. The portion is 6.2% and is paid on a maximum of $106,800 of income for 2009. The income maximum is also known as a wage base. The Medicare portion is 1.45% on all earnings. These rates are set by law and haven't changed since 1990. The wage base for Social Security is indexed each year for inflation and Medicare has maintained an unlimited base since 1993.


Self employed person's pay double the amount of tax because the employer is responsible for the other half of an employee's liability. A self employed individual is both employer and employee. There are wages not subject to FICA taxes including some state and local government employees who participate in alternative programs such as CalSTRS and CalPERS. Each state and local government unit with a pension plan decides whether to elect Social Security and Medicare coverage.

Civilian federal employees are covered by Medicare but usually not Social Security.
The earliest age at which reduced benefits are payable is 62. The age at which full retirement benefits are available is dependent upon the taxpayers age. An increase of regular retirement age was enacted to reduce the amount of benefits payable. For those currently over age 70 the normal age was 65. Anyone born after will fall somewhere on increasing scale which climbs incrementally to age 67 depending upon birth date. Anyone born after 1960 must reach age 67 for normal retirement benefits. Delaying receipt of benefits will increase a taxpayer's benefit until age 70.


Benefits are paid from taxes collected from other tax-payers. This makes it a pay as you go system and will eventually be directly responsible for the downfall of the program. At least as we know it today. In 2009, nearly 51 million Americans will receive $650 billion in Social Security Benefits. Economists project that payroll taxes will no longer be sufficient to fund benefits somewhere in the next 10 to 15 years. Once we can't cover the expense from cash flow, the program will begin drawing down the trust fund it has accumulated during times of surplus taxes.

We can only speculate what happens when the trust fund runs out. This is the cause for concern often discussed in the news and other media. The fix for this problem is the subject of much political posturing including that witnessed in President Bush's 2005 State of the Union address.


The first reported Social Security payment was to Ernest Ackerman, who retired only one day after Social Security began. Five cents were withheld from his pay during that period, and he received a lump-sum payout of seventeen cents from Social Security. This might give you an indication of how Social Security handles business.


A current spouse is eligible to receive survivor benefits equal to 100% of the deceased worker's benefit if they have reached normal retirement age.

Divorced spouses are eligible for benefits equal to one half of the worker's benefit if they were married for 10 years have not remarried and are at least 62 years old. This is called a derivative benefit. A spousal applicant must wait until the worker has reached retirement age, 62, in order to apply for benefits. The worker is not required to have applied for benefits in order for the ex-spouse to apply for spousal benefits. They are not entitled to increases for benefits taken after normal retirement age.

If a worker has died and the ex-spouse has reached full retirement age they can receive 100% of the worker's benefit as survivor benefits.

If an applicant is between age 62 and their normal retirement age; the application for benefits will be based on the applicant's earnings record. If one half of an ex-spouse's benefit is greater than the applicant's benefit on their own record; the applicant can choose to take whichever is greater. If you wait until your normal retirement age and file for spousal benefits you can continue to accrue benefits and enhancements for delaying your own retirement up until your age 70.


An ex-spouse's receipt of derivative benefits on the worker's record does not reduce the worker's benefits. It is even possible for more than one ex-spouse to collect on the worker's derivative benefits. This could lead to as much as 500% of the original benefit being claimed by the five ex-spouses.


Windfall Elimination Provision and Government Pension Offset Provision
For those worker's who are covered by a pension based on their own earnings not covered by Social Security a different method of computing benefits applies. The alternative method is called the Windfall Elimination Provision (WEP) and was created to close a loophole that enabled worker's who earned benefits in covered and non-covered employment from being labeled a low-earning worker and receiving a disproportionately large Social Security benefit.


The formula is weighted in favor of low earners because such a person is more dependent on Social Security. If the WEP is applicable it reduces a worker's Social Security benefit by 50% of the worker's pension benefit up to a maximum of $380.50 in 2010.

If you earned a pension based on work where you did not pay Social Security taxes, your Social Security spousal or derivative benefits may be reduced. The Government Pension Offset Provision (GPO) was enacted to treat retired government employees who had not contributed to Social Security similarly to retirees who had. The GPO reduces derivative benefits by two-thirds of other government pensions received. This can reduce Social Security benefits to zero.


The truly important ramification of the WEP and GPO on Social Security retirement benefits comes into play during divorce proceedings. Federal Law makes Social Security benefits the separate property of the party that earned them.


They are not assignable or divisible in a family law court and not considered an asset of the community in California.

Government and other pensions, on the other hand, are considered community property in the state of California to the extent benefits were earned during marriage. Derivative benefits under the Social Security program for ex-spouses would seem, at first glance to remedy the problem.

The non-worker spouse get's half of the worker's retirement benefit via derivative benefit payments. Getting to the true ramifications of the WEP and GPO during divorce proceedings requires sound financial planning.

Article Source: http://EzineArticles.com/334953

International Divorce in the Caribbean ?

You have probably heard of people jetting off to the Caribbean to get married. But did you know, you can also legally divorce in a foreign country, no matter where you happen to be located right now?

A vinculo matrimonii is a Latin term literally meaning "from the chains of matrimony." It has come to mean a complete and final divorce, as opposed to a legal separation.With up to half of all marriages in the western world ending in divorce, nearly all of us find ourselves at some time dealing with either our own divorce or that of a close family member or friend. Divorce is frequently a tragedy for all concerned, but it can be also be an opportunity for positive change and a fresh start. A speedy, amicable, affordable, and legally valid decree of divorce from a foreign country may well be 'just what the doctor ordered.'

The idea of offshore divorces is relatively new to most people in the western world. When it comes to divorce, it's always been a matter of "Do-As You-Are-Told" by a local lawyer, whose main purpose is to drag out the process for as long as possible in order to extract from you the highest possible fees!

In many US jurisdictions you have to wait 30-90 days or even up to two years. This is even if both parties approach the divorce mutually agreeing to it, without any fuss or fanfare - and that's also after all the financial wheeling and dealing!

Elsewhere, things are even worse. In Ireland you have to wait four years at an absolute minimum. In the Philippines, you can simply never ever get divorced!

The Origins of "Quickie" Divorces

Mexico can be credited with inventing the "quickie" foreign divorce business. The jet-set of the fifties and sixties frequently flew to Acapulco to obtain fast divorces. Later Tabasco, the smallest state in Mexico, made a brief foray into the offshore divorce business.

However, all that is ancient history. Amendments to the Mexican Nationality and Naturalization Law which took effect in March 1971 require that an alien be a legal resident of Mexico before he or she may apply for a Mexican divorce. Becoming a legal resident is a rather complicated, time-consuming process, taking several months. Because of these restrictions, few foreigners will find it practical to attempt a Mexican divorce.

Incredibly, even though Mexican quickie divorces were stopped in the 1970s, we have found people as of 2006 still offering them for sale on the internet. This is a scam of which potential divorcees should be forewarned.


Fast Divorces on the Island of Hispaniola

Today, the fastest divorces in the Western Hemisphere are to be found a short flight from Miami, Florida - on the island of Hispaniola, just next to Puerto Rico and the US Virgin Islands.

In 1971, just a few months after religious interests caused the Mexican congress effectively to knock on the head the Mexican "quickie divorce" business which had grown popular during the 1960s, an enterprising Mexican lawyer persuaded lawmakers in the Dominican Republic to pass law #142 allowing por vapor instant divorces for non-residents. Not to be outdone, in 1974 the Republic of Haiti (the Dominican Republic's smaller neighbour on the island of Hispaniola) passed similar laws, that are in fact even more 'user friendly.'

This type of divorce has become popularly known as the 'VIP Divorce', because over the years numerous celebrities and thousands of other famous people have taken advantage of these liberal divorce laws. To name a few, in no particular order: Elizabeth Taylor, Mia Farrow, George Scott, Mike Tyson, Robin Givens, Richard Burton, Sylvester Stallone, Michael Jackson and Lisa Marie Presley, Diana Ross, Jane Fonda, Mariah Carey, Marc Anthony, and Tommy Mottola (the former president of Sony records).

Yes, sure these people have money. But Caribbean divorces don't have to cost as much as you might expect! They are becoming more and more popular with ordinary citizens - and above all with global citizen families, who may well have roots in more than one jurisdiction already.

 Dominican Republic v Haiti
Today, despite its ups and downs, the Dominican Republic is a successful economy and a pleasant country to visit, boasting a highly developed tourist sector. Therefore, it's preferable to divorce in the Dominican Republic where possible. Haiti, in contrast, is the poorest country in the western hemisphere and much less stable - though of course that doesn't make its laws any less valid.

The big difference between the two is that in the Dominican Republic, mutual consent is required. The defendant spouse doesn't have to travel there, but will be required to appear in person to sign papers agreeing to the divorce in a Dominican consulate elsewhere in the world.

In Haiti, however, unilateral divorce is allowed. This is useful where spousal consent cannot be obtained for whatever reason, but a divorce is required for remarriage, business purposes or simply for a fresh start. The process requires public notices in Haiti informing the spouse of the impending action, following which a default judgement granting the divorce is issued if no reply is received within twenty-one days.

Recognition by Other Jurisdictions

As you might already have guessed, the big question on most people's minds is whether this type of offshore divorce will be legally recognised in their home countries, or wherever else they need it to be recognised.
Unfortunately, this is also one of the most difficult questions to answer. But in a few words, the answer is generally positive! Here's why...

First of all, "offshore" divorce is perfectly legal. No doubt about that. There is no law we know of anywhere in the world that prohibits people from going to another country and getting divorced.

Whether it is accepted where you live depends in practice on whether anyone disputes it. It's a fact that worldwide, more than 99.9% of divorces are never disputed. The only person who is likely to dispute the divorce would be your spouse. Most people obtain their spouse's written consent - and then the spouse is precluded from disputing it later by the legal principle of estoppel. Estoppel is defined in my law dictionary as a bar to alleging or denying a fact because of one's own previous contrary actions or words.

In the USA, courts in many states (for example New York) specifically accept international divorces. Courts in most others accept them on a case-by-case basis under the principle of comity.

The Social Security Administration and the Veterans Administration are other departments that specifically accept and recognize international divorces. The State Department authorizes and requires US consulates abroad to legalize foreign divorce decrees by granting "full faith and credit" to the signatures of foreign courts. Such legalizations are issued routinely by American embassies in the case of the Caribbean divorces.

Collaborative Divorce or Cooperative Divorce?

"Collaborative divorce" is the new buzz word in family law practice. Its proponents enthuse about better and less costly settlements, greater client satisfaction, fewer accounts receivable, and less stress in the practice of law, than they can achieve through a conventional approach to family law disputes.

 How realistic are these claims? What are the down sides of "collaborative divorce"? Does the concept of "collaborative divorce" present ethical pitfalls and possible malpractice minefields for the unwary practitioner?
Lawyers who participate in the "collaborative divorce" movement use methods borrowed from more established alternative dispute resolution procedures to resolve family law disputes without litigation.

However, unlike more accepted dispute resolution procedures, in "collaborative divorce" the lawyers and their clients agree that they will not engage in formal discovery, will voluntarily disclose information, and will settle the case without court intervention of any kind . They assume a duty to inform the attorney for the other party of errors they note in opposing counsel's legal analysis or understanding of the facts. If they are unable to settle the case, both lawyers must withdraw from representing their respective clients and the estranged spouses must start over with new counsel.


Good Lawyers Routinely Practice Cooperatively
Even the most enthusiastic supporters of "collaborative divorce" concede that the concept of settling cases rather than litigating them is hardly novel. Capable family law practitioners have always directed their effort and creativity toward reaching agreement rather than duking it out in court.

 It isn't news to anyone that litigation is expensive - sometimes prohibitively so - and that the most satisfactory settlements derive from skilled negotiation between capable counsel rather than a court-imposed resolution of disputed issues. How does the idea of "collaborative divorce" differ from what experienced practitioners do as a matter of course?

Courtesy. The commitment of lawyers and parties to treat each other courteously is not a new one. Capable attorneys consistently endeavor to work cooperatively with opposing counsel to identify and value assets, set and meet scheduling deadlines, and otherwise facilitate resolution of the case.

They respect legitimate positions taken by the other party and encourage their clients to be realistic and respectful as well. They are willing and able to compromise, and they are creative in crafting acceptable resolutions of disputed issues. "Collaborative divorce" supporters intimate that their process is unique because lawyers commit that they will not "threaten, insult, intimidate, or demonize" other participants in the divorce process. Good lawyers don't do that now.

 The American Academy of Matrimonial Lawyers, which historically has provided a model for good practice nationally, has promulgated "Bounds of Advocacy" that set a high standard for professional courtesy and cooperation.

Emotional cost. "Collaborative divorce" proponents say their process is designed for parties who don't want to go to war and who don't want "to hate each other for the rest of their lives." This description fits the vast majority of family law clients, including most of those whose cases end up in court.

 Clients almost always care about the emotional cost of adversary proceedings, and about the impact of the divorce action on their children and other family members. To suggest that people who really care will give up the protections provided by court oversight is to do a vast disservice to most of our clients.


Financial cost. "Collaborative divorce" supporters want to reduce the costs of the process by streamlining the discovery process. This also is not a new idea. Good lawyers have always sought to keep formal discovery to a minimum, to share costs of appraisals, to stipulate to values, and to cooperate in other ways to keep costs down. Many experienced practitioners routinely utilize mutually agreed upon short-form interrogatories, four-way meetings, joint telephone or in person conferences with experts, and other such collegial arrangements.


As the above analysis indicates, the goals espoused by "collaborative divorce" lawyers do not differ in degree or in kind from the goal of the vast majority of the family law bar. Most lawyers try a cooperative approach first. Most lawyers agree - and most of their clients concur - that resolution of issues by settlement is preferable to litigation. And in most cases, lawyers and their clients resolve disputed issues by agreement and do not resort to the courts.


The Limits of Collaboration

Despite the most concerted efforts of capable counsel, we all know that not all cases settle, and those that do settle sometimes don't settle easily. All of us have encountered the frustration of the last-minute, courthouse steps agreement, after completion of all the work and stress of trial preparation. Why is it that some cases don't settle until the very last minute, and some cases don't settle at all?


Unsettled Legal Issues. Legitimate reasons to resort to litigation are not always evident at the beginning of a case. Much appellate work involves issues the existence of which - or at least the seriousness of which - did not surface until significant discovery and negotiation had occurred. Where the law is unsettled or where counsel genuinely disagree about the appropriate interpretation and application of the law to the facts of their case, it is not only reasonable but necessary to ask the judge to intervene.

 Cooperative counsel can reduce the complexity and expense of litigation by limiting contested issues, stipulating facts where possible, agreeing in advance to the admission of exhibits, declining to engage in delaying tactics, and other behavior that is both practical and considerate. Lawyers can commit themselves to conduct the proceedings without animosity and can counsel their clients to be courteous to the other side. But the court has the last word on interpreting and applying the law.


Reality Testing. All clients say they want a "fair" result and many of them genuinely mean it. But they may have a very self-absorbed definition of "fair." Many years ago Leonard Loeb, whose wisdom and example have greatly influenced the development of a civilized standard of practice for family law attorneys, pointed out an important truth: "Sometimes the hardest negotiation you have to engage in is the one with your own client." A client who simply cannot see the broader picture despite counsel's best efforts may require the reality therapy of a temporary order hearing, or a pretrial with the judge, or a deadline for responding to formal discovery, in order to be capable of backing down from an unreasonable stance so settlement negotiations can proceed.


Scheduling Orders. We have all represented a left-behind spouse who does everything possible to avoid or at least delay the divorce, or a party who is preoccupied with business affairs or other family problems and just can't get around to dealing with the work and decision-making implicit in the divorce process. If one party would prefer that the marriage continue, or if completing the action is not a priority, the court may need to facilitate progress in the case by issuing a scheduling order and setting deadlines.

Counsel can cooperate by being reasonable and courteous in setting initial deadlines and in agreeing to extensions where necessary. The process need not be - and usually is not - antagonistic.

Financial Disclosure. A client may, deliberately or inadvertently, fail to disclose assets without the rigorous attention to financial detail that formal discovery entails. Surely we have all had the experience of finding forgotten assets when a client produces the records necessary to back up his or her interrogatory answers.

In other circumstances, the client and/or counsel may need the assurance of due diligence in discovery in order to be comfortable with a proposed settlement, especially where the estate is complex or the assets are substantial.


Stability. Then there is the personal factor: divorce presents a significant life crisis for most of our clients, and we see them at their most vulnerable and most needy. The commencement of a divorce action is often accompanied by anxiety, guilt, an danger, and may throw a family into chaos.

 If one party's antagonism toward the other is so overreaching that he or she is unable to proceed rationally and courteously, interim court orders may be the only way to achieve a level of stability that permits collaborative discussion of the long-term issues presented by the case.


In each of the above situations, the legal system provides structure and finality, and often sets the stage for the ultimate negotiated resolution of the matter. Court processes, rather than being an impediment to settlement, often facilitate it.


The Effectiveness of a "Collaborative Divorce" Approach
Do "collaborative divorce" techniques provide an effective response to the above limitations? Unfortunately, they do not.


Reality Testing. A client whose sense of "fair" is out of kilter with that of the other party and the lawyers will defeat the collaborative process, and both sides will have to incur the expense and delay of starting over with new counsel. Reality testing through a temporary order hearing or a pretrial with the judge is not an option in "collaborative divorce." The lawyer representing a difficult client must either advocate for the client's unreasonable position or take a public position adverse to the client's view.

 An attorney cannot ethically make either of these choices, The first is at least arguably frivolous; the second violates the requirement that we advocate diligently for our clients. Proponents of "collaborative divorce" have not provided a solution to this ethical dilemma.


Delay, Expense, and New Counsel. A client who wants to stall progress in a "collaborative divorce" can do so indefinitely, until the court threatens to dismiss the action and the party wishing to proceed must then retain new counsel to request a pretrial. Again, both sides incur the expense and delay of bringing a new attorney up to speed. The attorneys who know the facts and have established rapport with their clients cannot continue to be involved. How can this result benefit anyone?


Diligence. Lack of due diligence in discovery may subject the attorney to a malpractice claim [see Helmbrecht v. St. Paul Ins. Co., 122 Wis.2d 94, 362 N.W. 2d 118 (1985)], may violate the ethical requirement of diligent representation, and may make the client uneasy about signing on the dotted line. In complex cases and cases in which there is a disparity in the spouses' respective familiarity with or involvement in financial affairs, the security of formal discovery is not available to help resolve "collaborative divorces."


Timely and Efficient Court Intervention. If there is sufficient antagonism that experienced counsel are unable to negotiate an agreement, or if one party refuses to comply with an agreement, court intervention is necessary. Under the "collaborative divorce" approach, both lawyers must withdraw just at the time that an attorney who knows the case is most effective.


Malpractice Issues
In collaborative divorce, the parties and their respective lawyers sign a single contract, at least arguably creating obligations of each lawyer to the other attorney as well as to both clients. The collaborative law contract puts each lawyer in privity with both parties and with opposing counsel, creating a basis for contract claims to which an attorney is not exposed in standard practice.

 Moreover, the collaborative divorce contract assumes, though it does not specifically state, that each client completely waives his/her attorney's obligations to maintain client confidentiality and not to inform the other party or lawyer of his/her legal, factual, or strategic errors. Yet, the contractual commitments required for "collaborative divorce" eliminate these obligations and substitute in their place obligations to disclose and to inform that are at least theoretically actionable either as contract claims or negligence (malpractice) claims.
Assume that Attorneys A and B and their clients have agreed to proceed with a "collaborative divorce." Attorney A makes a mistake that disadvantages client A and benefits client B.

 If Attorney B fails (deliberately or negligently) to correct the error, can client A sue Attorney B for malpractice? If Attorney B corrects the error, to his/her own client's detriment, can Client B sue Attorney B for malpractice? Does the existence of a "collaborative divorce" contract provide a defense to malpractice? Does it increase malpractice exposure by permitting each party to sue both lawyers?


If, unknown to Attorney A, Client A fails to provide full financial disclosure and thus disadvantages Client B, can Client B sue Attorney A for malpractice? Can Client B sue Attorney B for failing to take steps to discover the omission? Can Client A sue either or both of the attorneys for malpractice if the nondisclosure was inadvertent and would have been discovered through standard formal discovery, and if the effect of the error is that the judgment is vacated and litigated with new counsel with Client A held liable for Client B's additional costs?


If Attorney A fails to spot an issue that would likely be resolved in Client A's favor, does Attorney B have a duty to raise the issue? If Attorney B fails to do so, can Client A sue Attorney B for malpractice? If Attorney B raises the issue, can Client B sue Attorney B for malpractice?


Have you notified your insurance carrier? How will you pay for breach of contract litigation and possible judgments against you that your malpractice insurance does not cover?

"Collaborative Divorce" May Increase the Cost of Divorce

"Collaborative divorce" is marketed as a cost-saver for clients, but is it really? We all know that settlement is less costly than litigation. The issue is not whether "collaborative divorce" is less expensive than litigation, but whether it permits participants to spend less than they would if they employed more conventional settlement approaches. Most lawyers try informal discovery first and proceed to interrogatories or requests for document production or depositions only where informal attempts have failed or where the information provided is suspect.

 Most lawyers schedule contested trials only after repeated attempts to arrive at negotiated settlements. Most lawyers genuinely believe that better and more creative settlements can be achieved through negotiation and creative planning rather than through a court-imposed resolution. Virtually no good lawyer chooses litigation as the first and best option.