Demystifying Cryptocurrency

What is Cryptocurrency?

Cryptocurrency (“Crypto”) is a form of digital currency. Unlike the U.S. Dollar, Crypto is decentralized, meaning there is no central authority or government that issues it and regulates its value. Instead, transactions are recorded and secured by a public ledger called Blockchain. The most common cryptocurrencies are Bitcoin and Ethereum. Crypto is purely intangible and is stored on digital wallets. It is used to purchase goods and services like other currencies, or it can be held as an investment.

How to identify ownership

If you suspect your spouse owns Crypto, here are some of the ways to identify if they have ownership:  

• Bank and credit card statements: Look for transactions with a cryptocurrency exchange, i.e. Coinbase, Binance, etc. and large withdrawals and deposits of money.

• Cryptocurrency exchange apps or digital wallet apps

• Tax Records: Form 8949 (Capital Gains/Losses), 1099 MISC. Importantly, check the first page of the Form 1040 Income Tax Return to see if the cryptocurrency box is checked.

• Wallets: Familiarize yourself on physical digital asset wallets and be on the lookout for any such devices.

Why it’s important:

Cryptocurrency is an asset that may have significant value. If it was acquired during the marriage, then it will be likely considered marital property and will divided like other assets. Understanding crypto can be daunting, but if you suspect that your spouse owns crypto, consult with an attorney on how to navigate locating and valuing these assets. Call our office at 240-396-4373 or click here to learn more.

Pension Benefits are for the Plan Participant and Designated Beneficiaries Only

The Employee Retirement Income Security Act (“ERISA”) provides in Section 1056(d) that any pension plan qualified under ERISA must include a rule that benefits provided under the plan cannot be assigned or alienated, except by Qualified Domestic Relations Order (“QDRO”). As this is a federal law, it preempts any state law to the contrary.

The reason is in the title of the Act – it is designed to protect the retirement income of employees and, by extension, their beneficiaries. In Boggs v. Boggs, 520 US 833 (1997), the United States Supreme Court made this clear. In Boggs, the wife died, leaving her community property interest in her husband’s pension to their sons in her will. The husband remarried, and the survivor benefit was paid to the second wife upon his death. The sons sued to claim they should receive the survivor benefit payments that would have been paid to their mother, the deceased's first wife, since it was given to them in a testamentary transfer.

The court found that the testamentary transfer of the first wife to her sons was a prohibited assignment of the first wife’s benefit. The Court clarified that ERISA prohibits a beneficiary’s testamentary transfer of undistributed pension benefits to another person.

What does this mean in a divorce case? If the case deals with a shared-interest division of an ERISA-governed pension plan and the alternate payee dies first, the alternate payee’s benefit cannot be paid to any third party. It must revert to the participant.

This is only with respect to shared interest divisions of ERISA-governed pension plans. The rules differ when dealing with a non-ERISA governed plan or a separate interest division. If you have a pension plan that you want assistance in handling, or have other retirement issues, please click here to contact our office or call us at 240-396-4373.

Firm Updates

Markham Law Firm is pleased to announce that Jillian S. Morris will be expanding her practice to include parent coordination. Ms. Morris, a Principal at the firm, has recently completed her parent coordination training and is eager to serve clients in this new role.

Ms. Morris has exclusively practiced Family Law in Maryland and Washington, D.C. for the past 15 years. Her practice focuses on all aspects of divorce, including child custody, child support, alimony, and property division. Ms. Morris also has extensive experience in domestic violence matters.  Ms. Morris is trained as a mediator and in Collaborative Law. She is a member of the DC Academy of Collaborative Professionals (DCACP). She currently serves as a facilitator and mediator at the Circuit Court for Montgomery County. She is also eligible to serve as a Child Privilege Attorney and Best Interest Attorney in Montgomery County and Guardian Ad Litem in the District of Columbia, and she has been appointed to do so on many occasions.

After law school Ms. Morris gained invaluable experience when she served as a law clerk to the Honorable Fern Flanagan Saddler at the Superior Court of the District of Columbia for two years while Judge Saddler sat on the domestic relations and domestic violence dockets.

Ms. Morris was selected to SuperLawyers Maryland 2023 and had repeatedly been selected for inclusion as a "Rising Star" by Maryland SuperLawyers Magazine and DC SuperLawyers Magazine. Ms. Morris is listed in Best Lawyers for 2021 and 2022 in “Ones to Watch”.  Ms. Morris has  received a Martindale-Hubbell Peer Review Rating of AV Preeminent® in the field of Family Law.

In her new role as a parent coordinator, Ms. Morris will bring together her experience as a litigator, mediator, and mother to work with divorced parents to help them problem solve, communicate effectively, and coparent. 

To schedule a consultation or learn more, call our office at 240-396-4373 or click here to contact us.

Retroactive Child Support in Maryland and D.C.

Retroactive child support is child support that is awarded for a period of time predating the child support order (i.e. child support payments for the past). Retroactive child support is applicable in both initial child support requests and any subsequent modifications. The laws regarding retroactive child support are different in each state, so it is important to understand what you can and cannot request from the Court.

Retroactive Child Support in D.C.

“In the District of Columbia parents have an unqualified obligation to contribute to the support of their children.” Burnette v. Void, 509 A.2d 606, 608 (D.C. 1986). Child support is a right which belongs to the child. Pursuant to D.C. Code § 16-916.01(v), a judicial officer may award support for a period not to exceed the 24 months preceding the filing of the petition or request for child support. This means that in D.C., a judge may award you retroactive child support to up to two years before when you initially file. In certain special circumstances, a judge may even award retroactive child support beyond the two-year time frame, but only when the parent with the duty to pay support has acted in bad faith or there are other extraordinary circumstances.

In Hight v. Tucker, the D.C. Court of Appeals held that a father who had no legal responsibility to support the child (i.e. paternity had not yet been established) was still required to pay child support retroactively. Hight v. Tucker, 757 A.2d 756, 761 (D.C. 2000). A child has the right to child support and “the legal status of [the child’s] caretaker has no impact on that right.” Id.

Retroactive Child Support in Maryland

            In Maryland, the Court may award retroactive child support only to the date of filing the request (either through a complaint for divorce, custody, or solely child support, or any request for modification thereto). M.D. Code, Family Law, § 12-101. This is an important consideration in deciding when to file your request for child support. You will likely not be entitled to any support prior to that date. Similar to D.C., child support is the right of the child and cannot be waived by the parents. “In the case of a child, the obligation of the [parent] to support, imposed by law, cannot be bargained away or waived.” Zouck v. Zouck, 204 Md. 285, 298-99 (1954).

            How is Retroactive Child Support Calculated?

            In Maryland and D.C., retroactive child support is calculated in roughly the same manner. Retroactive child support is calculated using the parties’ pre-tax income and childcare expenses and the physical custody/visitation arrangement at the time child support should have been paid. The Court will input these numbers into the child support guidelines calculation for their respective jurisdiction. The guidelines calculation will output a monthly child support amount. This number will be multiplied by the number of months for which outstanding child support was owed. The payor may receive credit for amounts previously paid.

Do you have further questions about your claim for retroactive child support? If so, please contact the Markham Law Firm team at 240-396-4373.

What is ERISA and why is it important?

ERISA is the Employee Retirement Income Security Act, a federal statute initially passed in 1974 and revised periodically since then. The main purpose of ERISA is to protect employees’ retirement savings in plans provided by employers by providing minimum standards for the plan fiduciaries.

It is important to note that not all employers have plans subject to the ERISA standards. Specifically, governments at all levels are exempt, as are many church plans and charitable 501(c) plans. In addition, private employers may have some plans that are subject to ERISA’s regulations and some plans that are not.

ERISA impacts family law practice when it comes to dividing retirement interests. Plans that are regulated by ERISA are called “qualified” plans. Most importantly, qualified plans are required to be divisible by QDRO. This requirement means that it is definitively possible to transfer a share of a qualified plan from one spouse to another as a part of the divorce proceedings. ERISA also provides minimum requirements for a participant to take out a loan from a retirement plan or protect a spouse’s interest in the survivor benefit during the marriage. These protections mean that during the marriage, the retirement account is fairly well protected from being disbursed without spousal consent, and the spouse must approve of someone else getting the survivor benefit. Once the divorce is final, though, those protections end. Qualified plans can still have additional rules and regulations that must be followed when dividing it in a divorce proceeding so it is important to look into each plan and know its intricacies.

Non-qualified plans are not subject to these rules and are thus not protected. They are not required to be divisible or to protect a spouse’s interest during the marriage. They may also not provide survivor benefits or require that survivor benefits be provided only to a surviving spouse and not a former spouse. A general word of advice for non-qualified plans is to tread carefully and do additional research into their specific rules.

If you have a qualified or non-qualified plan in your case and want assistance in handling it, or have other retirement issues, please contact our office at 240-396-4373.

When Can I File My QDRO?

In the best case scenario, the parties have negotiated their Agreement and filed for an uncontested divorce. The QDROs were attached as exhibits to the Agreement, and are filed with the Court in advance of the uncontested divorce hearing. When this happens, the Court will process the QDROs along with the Judgment of Divorce, so everything is generally entered on the same day.

What happens if that is not the case?

If the parties do not get the QDROs prepared before the uncontested divorce hearing, they should be completed as soon as possible thereafter, especially if a person is awarded survivor benefits. In cases where substantial time has passed, it is possible that the account holder has spent the money that should have been transferred, or died and had the funds disbursed to a different beneficiary or through the estate. In either scenario it is difficult or impossible to recover the funds for the former spouse.

Similarly, if the case goes to trial, the parties can have QDROs drafted and submitted during the trial in the event the Court agrees with their proposed division of the assets. Alternatively, if the QDROs are not submitted during the trial, they should be completed as soon as possible following the issuance of the Judgment of Divorce for the reasons listed above.

While the reasons listed here are more to protect the spouse that is to receive the funds, it is also a hassle being the party that owns the account to be divided. That party should safeguard the funds that are supposed to be transferred, which could be difficult if that party comes into a financial hardship.

Whenever possible, the parties should agree on when the process to draft the QDRO will start, and who is responsible for seeing it through to completion. This way, the expectations are clear for both parties.

At any point in your case, if you have a question about timing, or steps to take regarding the division of retirement assets, please contact our office at 240-396-4373.

Congratulations to Leah Ramirez on nomination to become a Fellow of the American Bar Foundation

The Fellows is a global honorary society of attorneys, judges, law faculty, and legal scholars whose public and private careers have demonstrated outstanding dedication to the highest principles of the legal profession and to the welfare of their communities. Membership in the Fellows is limited to 1% of licensed lawyers in a jurisdiction. Your nomination to the Fellows by your peers and your election by the Board of the ABF is a great honor.

More importantly, I am proud that as a Fellow, I support an organization committed to expanding knowledge and advancing justice. The ABF’s research, programming, writing, and policy recommendations have helped move the legal profession and society as a whole toward greater equality and justice.

QDRO Corner: Dividing an Individual Retirement Account

Individual Retirement Accounts (IRAs) by law do not require a Domestic Relations Order to divide upon divorce. So, many financial institutions have created their own form that in combination with the judgment of divorce will provide all the required information they need to transfer funds from the account holder to the former spouse.

 These forms are your friends, especially when drafting the separation agreement. They will tell you things like does the former spouse need to have an account at that financial institution to receive the funds? Will the financial institution transfer with gains and losses, or do they require a flat sum as of the date of transfer? Can you designate specific securities to be transferred? What documents do you need to submit with the form?

You want to think about filling out the form and attaching it to the separation agreement. Why? Some forms only require the signature of the account holder, so the former spouse doesn’t have to agree to the form before it’s submitted to the financial institution. In a contentious case where the parties don’t trust each other this can be a big deal. Having it filled out in advance can give the parties an expectation for what is supposed to be transferred.

The biggest hurdle we’ve seen with IRA transfers is that many require the use of their form regardless of if you had a Court Order done, and many financial institutions will NOT transfer gains and losses as of a historical date on a transfer amount. Meaning, they are requiring a flat sum or percentage of the account to be transferred as of the date of division. Given the volatile market this is a difficult fact for many to swallow.

We have come up with a few creative solutions to effectively include gains and losses, and are happy to work with you on your case to see if we can come up with something that works for you. Please contact the Markham Law Firm team to discuss solutions with our team.

Preparing for the Holidays During Divorce or Separation

The holidays are a stressful time for everyone – but especially those battling custody issues or in the process of a divorce or separation. However, you can take action now to reduce stress this coming holiday season.

If you and your spouse have an interim agreement, whether formal or not, it is important that you follow it. Stability is important for children and your compliance demonstrates a willingness to co-parent to the Court.

However, if you don’t have an interim agreement in place, now is the time to create one. In proposing a holiday schedule to your spouse, here are some important factors to consider:

• Work schedules

• School schedules

• Role of religion

• Any family traditions or events

• Children’s relationship with extended family

• Travel and logistics

• Current custody arrangement 

You and the other parent should work together to come up with the best holiday schedule for your family. Some popular holiday schedules include:

• Fixed holidays (i.e. one parent always gets Thanksgiving)

• Alternating holidays (i.e. one parent gets Thanksgiving this year and one parent gets Thanksgiving next year)

• Dividing school breaks (i.e. one parent gets the first half of winter break, one parent gets the second half)

• Dividing the day (i.e. one parent gets Thanksgiving for the first half of the day, one parent gets the second half)

• Or any combination of the above (alternating which parent gets the first half of winter break and which parent gets the second half)·     

Mediation is a great avenue to help you and your spouse communicate effectively and create a holiday plan that works for your family. Please contact the Markham Law Firm team at 240-396-4373 to schedule time with one of our trained mediators today.

QDRO Corner: Dividing Defined Contribution Accounts: When to Equalize the Balances Out of As Few Accounts as Possible, and When to Divide Each and Every Account

We’ve all seen the cases where the parties have multiple retirement accounts, some traditional, some Roth, some mixed, some IRAs, some qualified employer-sponsored accounts.

The first consideration is Roth and traditional funds. Roth funds have already been taxed, therefore they are of different value than traditional funds which will be taxed when removed from the retirement account. Since they are not of the same value, they should not be compared against each other. Meaning, if a couple has both Roth and traditional accounts there should be at least two DROs. 

The second consideration is the investments within the accounts. If equalizing multiple accounts out of just one, is that account invested in risky or conservative investments? Are all the accounts invested in a similarly risky or conservative fashion? Depending on how the market is behaving, it will impact the market gains and losses on the account balance, and will likely impact each party’s preference as to which account is funding the transfer.  

Since DROs take substantial time to be processed before the funds are actually transferred, this is an important consideration, especially in today’s volatile market. Someone in tune with the market might suggest the transfer come out of one account of another because they anticipate that such account will do better or worse in the market while the DRO is being processed. But, would it be more in line with the agreement to divide each account so that the transfer comes out of all the investments, risky and conservative, and the alternate payee shares in the gains and losses across all accounts?

The final consideration on whether to divide each account or equalize out of one account is the cost of having the multiple orders prepared. Sometimes parties have over 6 retirement accounts to divide, which at a cost per order could be substantial. In that case, the client has to determine whether they believe they will receive more gains from dividing each account and do they have the current cash available to pay for those orders.