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Benjamin N. Neece, Attorney, Woodruff Family Law Group

“Behind the Bar” is a multi-part blog series that will focus on specific aspects of the practice of law ranging from the Rules of Evidence, Rules of Civil Procedure, and other important legal practice technicalities in an effort to provide readers a better understanding of regularly overlooked and misunderstood concepts that lawyers are faced with on a day-to-day basis. 

In our previous installment of “Behind the Bar” we touched on the first part of Rule 4: Service of process, and the requirements involving the “who” and “what” aspects of the rule. In this installment we will complete our review of Rule 4 by discussing the “when,” “where,” and “how;” relating to proper service of a Summons.

Proper service to a “natural person” can be attained by delivering a copy of the Summons and Complaint (S&C) to the individual personally, or leaving copies at the dwelling house or regular abode with “someone of suitable age/discretion residing therein.” It can also be accomplished by delivering a copy of the S&C to an agent authorized by appointment (an Attorney) or law to be served or accept service; mailing a copy by certified mail or registered mail, return receipt requested, addressed to party, and delivering it; or using a designated delivery service authorized under the law to effectuate process and obtaining a delivery receipt. There exist many other potential types of parties to legal proceedings, each requiring slight variations to the rule; but regardless of who the party to receive process is, Rule 4 provides many avenues to meet the requirements set forth therein.

Even in this day and age, with all the advantages of technology and information, the circumstance may arise where personal execution of service upon an individual is effectively impossible because they are unable to be located.  In this situation, where a party cannot, with due diligence be served by normal means, they may be served by publication.  Service by this means consists of publishing notice of service once a week for three consecutive weeks in a newspaper which is qualified for legal advertising which is circulated in the area where party to be served is reasonably believed to be located, or if that information is unknown, in the county where action is pending.  In either case, proof of service must be completed by means of submitting affidavits with the court showing that service was properly executed and where service was via publication, the affidavit must state why publication was necessary and proof of said publication.

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Benjamin N. Neece, Attorney, Woodruff Family Law Group

“Behind the Bar” is a multi-part blog series that will focus on specific aspects of the practice of law ranging from the Rules of Evidence, Rules of Civil Procedure, and other important legal practice technicalities in an effort to provide readers a better understanding of regularly overlooked and misunderstood concepts that lawyers are faced with on a day-to-day basis.

No two legal proceedings are alike, each has a different set of facts, parties, circumstances, and inevitably, different outcomes.  One thing most share, however, is the seemingly endless number of steps and hoops to climb and jump through in reaching a conclusion. Why, you might ask, does the legal process take so long and be so complicated?  A big part of the answer to this question involves behind the scenes activity known as the “Rules of Civil Procedure,” which comprehensively regulates every aspect of legal proceedings in extensive detail. Rule 4 is one of the most basic and fundamental rules that regulates Summons’, the process of service, and the consequences of failing to follow proper procedure.

By design, Rule 4 provides a detailed roadmap of how to effectuate service of process while providing a framework for providing notice of claims and proceedings to adverse parties. While purely a technical aspect of the legal process, the vitality of abiding by this rule cannot be understated as no court has jurisdiction to proceed with a legal matter until proper service occurs. Simply put, it does not matter how many other boxes are checked in the legal process, failure to meet the requirements under Rule 4 will keep your case on the sidelines until they are met. Continue reading →

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Family Chiropractic Sports Injury & Rehab Clinic, v. Comm’r, T.C. Memo. 2016-10, 2016 WL 234515 (2016)

Facts: Husband and wife operated a chiropractic The practice had an Employee Stock Ownership Plan (“ESOP”). Husband and wife were the only participants.

The parties were divorced in Iowa. The decree was silent on the ESOP, but the wife agreed to transfer her interest in the ESOP to the husband. She later did so.

The IRS decertified the ESOP, resulting in the loss of valuable tax benefits, on the ground that the transfer to the wife violated the antiassignment provision of the plan and the antiassignment provision of ERISA. The practice filed a declaratory judgment action questioning the decertification.

Issue: Did the IRS err in decertifying the ESOP?

Answer to Issue: No.

Summary of Rationale: The plan provided that vested benefits could not be transferred. There was no divorce exception. The wife’s vested benefits were transferred to the husband. Therefore, the provision was violated and the ESOP was correctly decertified.

Observations: Continue reading →

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Dahl Aerospace Employees’ Ret. Plan of Aerospace Corp., 122 F. Supp. 3d 453 (E.D. Va. 2015)

Facts: A Virginia divorce decree, incorporating a settlement agreement, gave each spouse the option to elect survivor benefits under the retirement plan of the other This provision was not immediately stated in a DRO or qualified by the plan.

The husband’s pension plan allowed him, upon retirement, to elect a 50%, 75%, or 100% survivor benefit.

The husband retired on July 31, 2014, 11 years after the divorce decree. He did not notify his former wife in advance, or give her any option to elect survivor benefits. Instead, he elected his current wife as 50% survivor beneficiary. He stated in his election that no outstanding court order required him to name another person as survivor beneficiary—a blatantly false statement.

Upon learning of the husband’s retirement, the former wife’s counsel prepared a draft DRO requiring the husband’s employer to act as if the husband had elected 100% survivor benefits for his former wife. The retirement plan refused to qualify this order, on the grounds that the husband had already elected a 50% benefit for his current wife and he was only permitted to name one survivor beneficiary.

The former wife sued the plan and the husband in federal court, seeking a declaratory judgment that the husband’s election of his current wife as survivor beneficiary was void for fraud, and that the plan was required to qualify an appropriate DRO naming the former wife as survivor beneficiary. The plan and the husband moved to dismiss the wife’s action.

Issue: Should the wife’s action be dismissed?

Answer to Issue: Yes.

Summary of Rationale: The plan argued that the wife lacked standing, because she was not an actual plan But a person with a claim to benefits is also entitled to sue the plan. The former wife had a colorable claim to benefits.

At the time the husband retired, there was no QDRO in effect limiting his choice of survivor beneficiary. Therefore, the former wife could prevail only by establishing that the husband’s survivor benefit election was void. She cited no case law holding that an election of survivor benefits is void if a false statement is made which defrauds a former spouse who has not yet obtained a QDRO. In the absence of such law, the court refused to hold that the survivor benefit election was void.

Because the former wife did not obtain a QDRO, the husband’s election of his current wife was enforceable under ERISA, even though the election violated a state court order.

Observations:

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Leesa M. Poag, Attorney, Woodruff Family Law Group

In recent legal news, the Mississippi state Senate has passed new legislation that will have citizens of Greensboro and divorce attorneys alike glad that we live in North Carolina.

Unlike North Carolina, Mississippi law recognizes both fault-based and no-fault divorces. If the requirements are not met for a no-fault divorce, you must prove to a judge that your spouse has committed one of the fault grounds enumerated by the Court in order to be granted your divorce.  The new legislation has added two additional grounds for a fault-based divorce.

The only ground permitted for a no-fault divorce in Mississippi is irreconcilable differences. For the Court to grant this no-fault divorce, both parties must agree that there are irreconcilable differences between the parties that prevent them from continuing their relationship as husband and wife, and both parties must agree to seek the divorce.

If the parties don’t agree that they should divorce, the only way for a party to be granted a divorce is by proving to the court that their spouse has committed one of the fault grounds. One side must prove to the court that the other has committed some fault that should allow the party to be granted a divorce.  The most common grounds of fault are typically adultery and desertion.

The new legislation passed by the Senate seeks to add two more grounds – separation and domestic violence.  The separation ground would require that the parties have lived separate and apart for at least two years without the intention to resume the marital relationship.  The domestic violence ground would allow a person to seek a divorce if their spouse has perpetrated cruel and inhumane treatment towards them, including spousal domestic abuse.

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Belot v. Comm’r, T.C. Memo. 2016-113, 2016 WL 3248031 (2016)

Facts: During their marriage, the parties operated a dance studio. The business consisted of an S corporation which was the actual studio, an LLC which operated a boutique selling dance clothing, and another LLC which owned the real estate on which the studio operated. The parties owned each of these entities in different percentages.

The parties were divorced in New Jersey in 2007. The decree incorporated an agreement signed by the parties, in which they agreed to convey interests in the entities so that each of them owned 50% of all three entities. The decree therefore left the divorcing parties as joint owners of the business.

Later in 2007, the wife filed a complaint against the husband, alleging that he had mismanaged the studio, and seeking to remove him as director and employee. This action was settled in 2008 by an agreement, in which the wife agreed to buy the husband’s interest in the business for $900,000 to be paid at closing, and $680,000 to be paid over 10 years.

The husband filed tax returns which claimed that the sale of the business under the 2008 agreement was a § 1041 exchange. When the IRS assessed a deficiency, the husband then appealed to the Tax Court.

Issue: Was the transfer required by the 2008 agreement a 1041 exchange?

Answer to Issue: Yes

Summary of Rationale: The IRS relied upon Reg. § 1.1041-1T(b), Q&A-7, which provides:

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Jennifer A. Crissman, Attorney, Woodruff Family Law Group

            The name “Responsible Individuals List” may sound like an accolade to parents; however, this is a misnomer. For those unfortunate enough to find their family in the midst of an investigation of child abuse, neglect, and dependency the List is likely to be mentioned. It is important that anyone who finds themselves in this situation be aware of what the term means and the ramifications of being on this list.

The Responsible Individuals List and Consequences

            The actual list is comprised of the names of individuals who are found to be responsible for the abuse and serious neglect of a juvenile. The List was created by statute in 2006 in response to federal requirements under the Child Abuse Prevention and Treatment Act (CAPTA). The primary goal of the federal regulation was to create a child abuse registry that was accessible to certain authorized agencies which must determine the fitness of an individual to care for or adopt children.

In 2010, the NC Court of Appeals held that placement on the List impacts an individual’s Constitutionally protected liberty interest. In re W.B.M., 690 S.E.2d 41 (N.C. App. 2010). Placement on the List can prevent an individual from being able to care for children, whether it be through employment, fostering or adopting. Although the List can affect a person’s ability to care for children, the statutes do not address the length of time an individual is placed on the List. The statutes also do not provide for an expungement procedure after a specified period has expired.

The List and Caring for One’s Children

            Although placement on the List can prevent a person from adopting or fostering, the List does not necessarily prohibit an individual from caring for their child. There are currently no cases in North Carolina that address being added to the Responsible Individuals List and then being denied reunification with your children. Further, North Carolina statute, the North Carolina Administrative Code and the Department of Social Services Manuals only address using the Responsible Individuals List for employment purposes or foster/adoption/kinship placement determinations. Currently, it appears the impact of being placed on the Responsible Individuals List is limited to children who are not biologically your own.

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by Benjamin Neece, Attorney

With Valentine’s Day around the corner, love is in the air and it is a great time to express it to those who you care about most.  It is important that during this festive season that you remember that your children are the ones who need your love the most and we are here to help with some creative ideas on how to make the most of your time with them.  When it comes to time with your children, it is important to remember the deliberate nature in which you must approach each moment you have with them.  Visitation must become more than simply being together; it is of the utmost importance to engage your children, take part in new and exciting experiences with them, and create lasting memories that you can share together for years to come.  Valentine’s Day is a great opportunity to express and grow the love between you and your children and it never hurts to have a few ideas in your back pocket to make your time together special.

For younger children Valentine’s Day is a big deal; a good way to keep within the spirit of the holiday is to set aside time for fun and celebration.  A trip to Charlotte, NC provides many options to accomplish this.  Charlotte is home to the Discovery Place Museum- a childhood utopia that is sure to keep everyone entertained while engaging in interactive learning.  Afterwards, crafting valentines to exchange with each other and even take home is a great way for kids to express their love to both parents in a meaningful and fulfilling way. Continue reading →

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Anderson v. Comm’r, T.C. Memo. 2016-47, 2016 WL 976816 (2016)

Facts: An Alabama court entered a pretrial order in a divorce case, requiring both parties to “[m]aintain status quo as to payment of house note or rent, utilities, food, necessities, fixed credit obligations, ” 2016 WL 976816, at *1. After the order was entered, the husband transferred at least $1,000 each month to the wife “for her spending money and other things that I had previously paid for.” Id.

The husband took an alimony deduction for the amounts paid. When the IRS did not allow the deduction, the husband then appealed to the Tax Court.

Issue: Were the payments alimony for federal tax purposes?

Answer to Issue: Summary of Rationale: The first requirement in the federal definition of alimony states that it must be received under a “divorce or separation ” I.R.C. § 71(b)(1)(A). A “divorce or separation instrument” includes “a decree of divorce or separate maintenance or a written instrument incident to such a decree.” Id. § 71(b)(2)(A). A pretrial order is not a divorce decree, but it is a written instrument incident to such a decree. Thus, the premarital order was a divorce or separation instrument.

The pretrial order directed the husband to maintain the status quo. The husband testified that the payments were intended to cover things he had previously paid for. He was therefore maintaining the status quo, as required by the order, so that the payments were received under a court order. There is no requirement that the divorce or separation instrument list the specific exact amount of support required.

The pretrial order did not specify whether the payments stopped upon death. But the payments occurred periodically, so they were periodic alimony, and Alabama case law stated clearly that periodic alimony ceases upon the death of the payee. Because the payments stopped upon death, they were alimony for purposes of federal tax law.

Lesson: Temporary support, alimony pendente lite, or postseparation support can all constitute alimony under federal tax law, so long as it is clear from the language of the agreement or the order, or from state law if the order is silent, that the obligation terminates upon death of the payee.

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Wolens v. United States, 125 Fed. Cl. 422 (2016)

Facts: The parties married in New York, but divorced in England. Their English divorce decree provided for a large initial payment to be made by the husband to the wife, followed by annual payments of £441,667 in 2007, 2008, and 2009. (The 2009 payment was one pound less.)The husband’s initial tax return did not claim the 2007 payment as alimony. He later filed an amended return which did claim the 2007 payment as alimony. The IRS disallowed this return and refused to issue a refund.

The husband then filed suit in the Court of Federal Claims to obtain the refund. The IRS then moved to dismiss the action, arguing that the husband could not establish that the 2007 payment terminated upon death of the payee. The husband filed a motion for summary judgment, arguing that the payments clearly did terminate.

Issue: Was the 2007 payment alimony?

Answer to Issue: The answer depends upon material issues of fact; the motion to dismiss and motion for summary judgment are therefore denied.

Summary of Rationale: If the 2007 payment did not terminate upon death of the payee, it clearly could not be alimony for federal tax purposes. The agreement itself was silent on this point. The key question was therefore whether the payment automatically terminated at death under the controlling domestic relations law. “[A]lthough the government has shown that the term ‘lump sum’ is typically associated in the United Kingdom with a division of marital assets, it has not established that this is the only reasonable interpretation” of the agreement. 125 Fed. Cl. at 430. In particular, the annual payments might be construed together as a periodic obligation, instead of being construed separately as individual lump-sum obligations. The IRS’s motion to dismiss was therefore denied.

The husband’s motion for summary judgment was also denied, for essentially the same reason; the decree was ambiguous, and its construction was therefore an issue for trial. Continue reading →