Formulating a viable parenting plan after divorce in Poland

Formulating a viable parenting plan after divorce in Poland

The parenting plan ought to be precise and detailed, defining the respective responsibilities of the parents in all realms of the child’s life. At the same time, however, the parenting plan ought to be flexible enough to accommodate real-life practicalities.

How to prepare a viable parenting plan in Poland?

The parenting plan is a set of voluntarily agreed rules regulating exercise of parental rights and interacting with the child after the parents’ divorce. In order for the parenting plan to be included in a divorce decision handed down by a Polish court of law, the following prerequisites must be met: unanimous application by the parties to the divorce proceedings, submission of the parents’ agreement, and substantiation that it is reasonable to expect that the parents will co-operate in matters concerning the child.

Under the Polish Family and Guardianship Code, a court shall accept and affirm the parenting plan if it is compatible with the welfare of the child. The degree to which the parenting plan is accepted, and the exact means of its implementation, are left to the court’s discretion. The original parenting plan may be subject to modification in the course of the divorce proceedings, in line with the court’s own adjustments, and/or by the parents acting on the court’s recommendations.

Where the original parenting plan is deemed to be too succinct, the court may accept a plan in which the same basic provisions are extrapolated upon to a greater level of detail. Accordingly, the question arises, how to formulate a parenting plan which stands a good chance of approval as first formulated by the parties to the divorce proceedings?

The Polish Family and Guardianship Code does not lay down detailed requirements as to the form or contents of the parenting plan, leaving plenty of leeway for different solutions best suited to the specific circumstances of the given divorce. Albeit the legal doctrine states that a parenting plan may be formulated orally for the court records or worked out before the court as it sits in session, the written form is recommended. In general, a parenting plan should be specific, yet flexible, setting out how, and when, the various parental duties are to be performed to the child’s benefit, with due heed for the child’s age and personal circumstances.

A parenting plan may begin with a broad formulation of the parental rights and specifics as to how the child is to maintain contacts with both parents and as to how the child support costs are to be divided between the parents. Having defined this framework, it may move on to details, such as:

  • Contacts with the child – when the child is to spend time with each parent, where it will reside. Some attention may also be devoted to the question of the child’s contacts with other individuals, e.g. with new partners of the respective former spouses;
  • Vacations, holidays – issues such as with whom, and for how long, the child will stay during school vacations and/or public holidays, rules governing foreign travel with the child, who is to hold the child’s passport and other documents;
  • Health care for the child – who is to make decisions concerning, say, selection of physicians and modes of treatment, who is to attend to the child’s regular health regimen (check-ups, vaccinations), and who is to have access to the child’s medical records;
  • Education – who, and how, is to make decisions concerning the child’ educational path and future career choices, selection of schools, responsibility for maintaining contacts with the child’s teachers, permission for field trips / extracurricular activities, who is to cover the costs associated with the child’s education;
  • Finances – alimony as well as responsibility for all and sundry costs associated with caring for the child.

To the extent possible, any and all such matters ought to be consulted with the child herself – the Polish Family and Guardianship Code actually institutes such a duty for parents working on a parenting plan. It is also worth mentioning that the Polish Family and Guardianship Code establishes a rule that siblings should be brought up together, unless the welfare of the child requires a different outcome.

A parenting plan may also institute a procedure for subsequent amendment of its provisions and for resolution of any attendant disputes, i.e. appointment of an impartial mediator.

After they have agreed upon the proposed parenting plan, the parents present it to the court for assessment from the perspective of compliance with applicable laws and of the specific situation of the child. The court may duly adjust the proposed plan.

If the parents have reached agreement with regard to specific issues only, they may bring such an incomplete plan before the court. Should the court deem this to be insufficient, it may set an additional deadline for formulations of a fuller parenting plan or refer the matter to mediation.

Why prepare a parenting plan?

If the parents themselves do not reach agreement as to how they are to divide care and responsibility for their child, a divorce court sitting in accordance with Polish law may proceed to adjudicate on custody, financial support etc of its own accord, with the possible outcome that one parent will be awarded well-nigh complete custody, and the other – a limited set of basic rights, plus the duty to provide for the child financially. If the parents have not reached agreement on their own, or if they have proposed an agreement which is invalid or unenforceable, a Polish court may not leave the parental authority with both parents.

Accordingly, it is advisable that the parenting plan is precise and detailed, defining the respective responsibilities of the parents in all realms of the child’s life. At the same time, however, the parenting plan ought to be flexible enough to accommodate real-life practicalities.

While working out a parenting plan may seem like the last thing that divorcing parties want to do, its preparation, due to the circumstances mentioned above, is strongly recommended. In the end, they say that even the worst settlement is preferable to the best judgment. https://gessel.pl/en/in-memoriam-dr-janusz-fiszer-2/ 

Legal and Tax restraints for Chinese HNWI Offshore trusts

Legal and Tax restraints for Chinese HNWI Offshore trusts

Issues arising from setting up an offshore trust for a Chinese HNWI include the recognition of the trust itself and other legal and tax constraints.

As more Chinese HNWIs have realized the unique benefits of offshore trust, especially in the areas of asset protection and succession planning, the number of Chinese HNWIs using offshore trust for wealth planning is increasing fast. However, setting up an offshore trust for a Chinese HNWI can be a complex task due to the Chinese legal and tax constrains.

The recognition of offshore trust in China

The first big question about offshore trust is always whether it is even legally recognized in China. Offshore trust is not specifically recognized by any of the written laws including the Chinese Trust Law. There is also no court case providing any guidance or clarification. However, just like that offshore holding companies are recognized in China, the general understanding based on the Chinese legal principles is that offshore trust should be recognized in China if it meets all the legal requirements in the jurisdiction where the foreign trust is formed.

The community property issue

Under the Chinese Marriage Law, the property obtained by a couple or either spouse during their marriage period is generally considered community property. Community property is jointly held by both the husband and the wife, which means that, even if only a small portion of the community property is disposed of by one spouse without the consent of the other spouse, such a transfer would be invalid. There are already enough court cases in China enforcing such rules.

As such, securing the consent of the other spouse is the essential precondition for contributing community property by one spouse to an offshore trust. Without such consent, the contribution could be held invalid under Chinese law (assuming China has the jurisdiction), which means the relevant assets may thus need to be returned by the trustee. This issue normally arises when a husband sets up an offshore trust for the benefit of his second family or when he intends to hide assets from divorce.

A related issue is when the consent of the other spouse is not obtained, whether the trustee shall have any liability. This issue will most likely come up when the trust assets are ordered by a Chinese court to be returned to the couple but the value of such assets under the trustee’s management has decreased significantly. Although there is no clear rule in China and there hasn’t been any court case in China providing any guidance, the answer to that question would likely depend on whether the trustee has acted with malice. Unfortunately, the term “malice” is not defined by Chinese law in the trust context. Trustees thus should exercise enough caution before taking on the trustee role.

The regulatory restrictions on putting assets into an offshore trust

Dependent on the location and type of the asset, there could be Chinese regulatory restrictions on contributing such assets to an offshore trust. For offshore assets, there is generally no Chinese regulatory restriction on the contribution of such assets to an offshore trust. If those assets are onshore assets, the contribution of such assets to an offshore trust is extremely difficult under the Chinese foreign exchange control rules, banking rules, foreign investment rules, and outbound investment rules.

For example, a Chinese individual is legally allowed to remit out only USD 50,000 annually. Another example is that a foreign entity (e.g. a trust company) is not allowed to own real property in China unless it is for self-use (e.g. used as office space for its Chinese representative office). As a result, the offshore trusts we have seen typically do not directly own onshore assets.

The uncertain tax treatment of an offshore trust

There are no specific tax rules on either domestic or offshore trust. By applying the existing general tax rules, until specific rules on trust come out, one could argue that technically a settlor would not be taxed on the contribution of assets to an offshore trust even if such assets have appreciated in the hands of the settlor.

Also, a Chinese non-settlor beneficiary would not be taxed on trust distributions as China doesn’t tax gift income yet. Lastly, the trustee would not be taxed on accepting or holding the trust property as long as it is a non-Chinese entity and operates outside China. However, whether such technical analysis could be respected by the Chinese tax authorities is an open question as, to our knowledge, there hasn’t been any actual administrative case on this.

The uncertainty regarding the withholding and reporting obligations of the trustee

While the existing Chinese anti-avoidance rules apply to enterprises, not individuals, they could come into play in the offshore trust context, especially when a special purpose holding company is formed underneath the trustee and controlled by the Chinese settlor. In that case, the SPV could be considered a Chinese tax resident if it is considered effectively managed in China. If so, the SPV would be subject to Chinese income tax on its worldwide income and need to file a tax return in China.

Even if the SPV is not considered a Chinese tax resident, if the trust property is Red Chip company shares, there could still be a technical requirement under Circular 698 that any transfer of the SPV should be disclosed to the Chinese tax authorities through an information filing. Failure to comply with this reporting requirement would be subject to a fine. In practice, a number of foreign trustee companies are reluctant to follow this rule because they take a position that such Red Chip companies are formed with bond fide business purposes. However, whether the SAT would respect this position has not been tested up till now. https://www.zhonglun.com/

How could PRC community property rules impact offshore trust planning?

How could PRC community property rules impact offshore trust planning?

Property acquired during marriage will be presumed as community property if not otherwise structured. Property planning helps to obtain clean title to the assets that a PRC settlor wishes to contribute to an offshore trust, and thus prevents potential risks and claims.

With the rapidly growing number of PRC high net worth individuals (“HNWIs”) and their increasing awareness of wealth planning, the use of an offshore trust by these HNWIs as a vehicle of wealth protection and preservation is becoming more and more popular in the PRC.

Setting up an offshore trust for a PRC HNWI could be a complicated task not only because of the PRC legal and tax constraints, but also as a result of the potential impact of the PRC community property rules. Under the PRC Marriage Law, any property acquired during marriage is presumed to be jointly owned by both spouses, i.e. community property. Therefore, a spouse contributing community property to a trust without the consent of the other spouse could face serious legal risks. The trustee in such a case may be exposed to certain liabilities as well if there is a lack of due diligence.

PRC Community Property Rules

Under the PRC Marriage Law, any property acquired by a couple or either spouse during marriage is presumed to be jointly owned by both spouses, unless there is specific evidence that would point to a contrary conclusion. Community property includes but is not limited to salaries and wages, bonuses, business income, investment income, income related to intellectual properties and gift income acquired by either spouse during marriage.

In comparison, separate property mainly refers to the following:

  1. Property acquired by a person prior to marriage
  2. Property acquired by gift or inheritance during marriage while the underlying gift agreement or the will specifies that the property belongs to one spouse
  3. Property agreed to be one spouse’s separate property in a pre-nuptial or post-nuptial agreement.

With the broad definition of community property, as a practical matter, most of the PRC HNWIs would be subject to the community property rules, especially those who are in their 40s or 50s and created their family wealth over the past two decades during which the PRC achieved record-high economic growth. To them, almost all their family wealth would theoretically be community property, even though some assets may have been recorded under one spouse’s name for title recording purposes.

One important question is whether the income generated from the investment of one spouse’s separate property during marriage would be community property or not. The answer is generally yes, with the exception that bank interest earned on separate property remains as separate property.

Because of the PRC community property rules, when community property is contributed by one spouse into an offshore trust without the consent of the other spouse, the contribution would be held invalid, which means that such property may thus need to be returned to the claimant spouse. One tricky related issue here is whether the trustee would be held liable to the other spouse, especially in the event where the trust assets have depreciated in value.

While there are no clear rules in the PRC dealing with such an issue, based on the general legal principles, a PRC court would likely base its decision on whether the trustee acts in good faith or with malice. Since the term “malice” is not clearly defined by the PRC laws, a PRC court may exercise extensive discretion on the interpretation. A trustee should thus conduct sufficient due diligence regarding the ownership of the assets in question and enough care must be taken to minimize such risks.

How to Best Deal with PRC Community Property Rules

A married couple can try to use pre-nuptial or post-nuptial agreements to work around the community property issue. The pre-nuptial or post-nuptial agreement is gradually becoming the most efficient way for spouses to determine their desired ownership entitlement to their community property, which is legally allowed under the PRC Marriage Law. A legally enforceable pre-nuptial or post-nuptial agreement preempts the application of the default community property rules.

Such an agreement can be executed either before marriage, at the point the couple get married or during the course of their marriage. And it can cover any property already owned by the couple and even their prospective property. It can also have the retroactive effect as long as that is a manifestation of the spouses’ genuine intent.

A common question asked by some US tax practitioners is whether the execution of a post-nuptial agreement would be treated as a gift from one spouse to the other spouse, which could potentially create certain US tax issues. A typical scenario is where the wife, a US citizen or green card holder, enters into a post-nuptial agreement with her husband, a Chinese citizen, under which she agrees that certain assets would belong to her husband. The theoretical view in the PRC currently seems to be that this should not be treated as a gift.

In the context of offshore trust, another common question is whether a consent letter signed by the other spouse, instead of a formal post-nuptial agreement, would be sufficient under the PRC laws. The current view of many practitioners in the PRC is that a carefully drafted consent letter based on the full knowledge of the other spouse should be sufficient.

Conclusion

Obtaining clean title to the assets that a Chinese HNWI wishes to contribute to an offshore trust is far more complex than it appears. Without proper planning or care, the contribution would be problematic to both the settlor and the trustee. Therefore, both of them are highly recommended to seek sufficient professional legal advice before taking the first step. https://www.zhonglun.com/en/

Maintenance for surviving spouse

Maintenance for surviving spouse

This article will explore what happens with the maintenance for surviving spouses after the death of their partner. A surviving spouse, regardless of the matrimonial property regime in terms of which they are married, may have a claim for their reasonable maintenance requirements against the deceased’s estate.

Maintenance for surviving spouses

The Maintenance of Surviving Spouses Act 27 of 1990 (hereinafter referred to as “the Act”) allows, in certain circumstances, widows / widowers to be maintained from their deceased spouses estate. This is obviously in conflict with the common law, which requires that a matrimonial relationship exist between the parties, which gives rise to a duty of support. Death or divorce ordinarily brings that matrimonial relationship to an end. The aforementioned Act therefore altered the common law in this regard.

Section 2(1) of the Act provides that:-

“If a marriage is dissolved by death after the commencement of this Act the survivor shall have a claim against the estate of the deceased spouse or the provision of his reasonable maintenance needs until his death or remarriage in so far as he is not able to provide therefore from his own means and earnings.”

A claim for maintenance by a surviving spouse will compete with a claim for maintenance of a dependant or minor child and will reduce such claims proportionately.  Such a claim for maintenance only arises if the surviving spouse is unable to provide for his/her maintenance needs from his/her own earnings.

The surviving spouse shall not have any recourse against any person to whom money or property has already been paid.

A claim in terms of the Maintenance of Surviving Spouses Ac is deductible for estate duty purposes, provided that such claim is reasonable.

Factors to be taken into account

In terms of Section 3 of the Act the following factors must be taken into account when determining the reasonable maintenance requirements of the surviving spouse:

(a) The amount in the estate of the deceased spouse available for distribution to heirs and legatees;

(b) the existing and expected means, earning capacity, financial needs and obligations of the survivor and the subsistence of the marriage; and

(c) the standard of living of the survivor during the subsistence of the marriage and his age at the death of the deceased spouse.”

Other factors which can be taken into account are: the duration of the marriage, the surviving spouse’s age at the time of the deceased’s death and any other relevant factor.

Oshry NO v Feldman (401/09) 1 ZASCA 95

The parties in the aforementioned matter married later in life and it was a second marriage for both parties, with both having children from their previous marriage relationships.  The parties were married for some 18 years.

The court found in this matter that the primary obligation of support rests on a spouse, and if deceased, on the estate of the deceased spouse.  The duty of support does not rest on the Respondent’s sons, as submitted by the Appellant’s.

In was stated that the Maintenance of Surviving Spouses Act was intended to ensure that the maintenance obligation of a spouse who owed a duty of support continued after death.

In casu, the court held that the Respondent was in need of maintenance and that there was no reason why a lump sum payment could not be awarded, particularly in these circumstances, where the Respondent had not yet received any maintenance from the deceased’s estate for nearly 5 years.

The appeal was upheld and a limited substituted order put in place which recognized the Respondent’s claim against the deceased’s estate, including a lump sum payment.

Maintenance for surviving children

In terms of the 1906 matter of Carelse v Estate de Vries, it was decided that, in the absence of suitable testamentary provisions in respect of children, the minor children may have a maintenance claim against the parent’s deceased estate.  It was similarly held that major children, who are not yet self-supporting, may also claim against the deceased estate.  The major child would however have to prove that he/she requires financial support and the extent of support which they require.

A minor or dependant child’s claim for maintenance ranks preferent to all other claims against the deceased estate, with the exception of debts owed to creditors. https://za.linkedin.com/in/liesl-rae-fischer-7b287b196 

  1. 2010[]
Death, Divorce,Wills and Ex-spouse

Death, Divorce,Wills and Ex-spouse

In terms of Section 2B of the Wills Act 7 of 1953, if there is an existing will and either spouse dies within 3 months of the date of divorce, the ex-spouse will not receive any benefits allocated to him/her in terms of the will.  If, however, the ex-spouse dies 3 months after the date of divorce, the ex-spouse will receive the benefits allocated to him/her in terms of the will.

This rule is to allow divorced spouses a 3 month period within which to amend their wills.  If the will is not amended after this 3 month period, the presumption is that the deceased intended for his/her ex-spouse to receive any benefits bestowed upon her in terms of the will.

Redistribution claims by a spouse against a deceased estate

In Gunter v the Executor in the estate of the late Christian France Gunter the issue was whether the Plaintiff’s claim for redistribution in terms of Section 7(3) of the Divorce Act 71 of 1979 (hereinafter referred to as “the Act”) was extinguished by the death of her husband, prior to the divorce had been finalised, but after litis contestatio.  It was stated that divorce is a personal action which automatically comes to an end if one of the spouses die prior to the finalisation of the divorce.

Similarly, a claim for redistribution is a personal right which only a court granting an order of divorce has the discretion to consider.  It is trite that marriage dissolves upon death of one of the parties.  Similarly, any ancillary relief to a divorce would no longer be competent is the marriage relationship no longer existed.

It was held that the Plaintiff’s claim for redistribution in terms of Section 7(3) of the Act was extinguished by the death of her husband, irrespective of whether litis contestatio had taken place.

Maintenance of an ex-spouse on a deceased estate

In terms of Section 7(2) of the Divorce Act:-

“… the court may, …make an order which the court finds just in respect of the payment of maintenance by the one party to the other party for any period until the death or remarriage of the party in whose favour the order is given, whichever event may first occur.”

It is clear from the wording of the aforementioned Act that the payment of maintenance is linked to the life of the spouse receiving such maintenance, and not to the life of the spouse upon whom such obligation is placed.

Kruger v Goss and another (603/08) 1 ZASCA 105

This was an appeal case in which the question of whether an order for rehabilitative maintenance (maintenance for a specified / limited period of time) in terms of a final order of divorce is enforceable against her ex-husband’s estate.

As stated above, in terms of Section 7(2) of the Act, the payment of maintenance is NOT linked to the life of the spouse liable to pay such maintenance, but rather to the life of the person receiving the maintenance.  The court held that this decision should not be viewed in isolation and must be read with common law.  In terms of common law, the duty of support between spouses is dependent on a matrimonial relationship.  Death or divorce therefore brings that matrimonial relationship to an end.

An exception to the aforementioned rule is a provision in terms of the Maintenance of Surviving Spouses Act 27 of 1990, which allows widows / widowers to be maintained from their deceased spouse’s estate, in certain circumstances.

The provision of this Act altered the common law to a certain extent, in that, in terms of section 2(1):-

“If a marriage is dissolved by death after the commencement of this Act the survivor shall have a claim against the estate of the deceased spouse or the provision of his reasonable maintenance needs until his death or remarriage in so far as he is not able to provide therefore from his own means and earnings.”

A spouse is always free to bind his/her estate to pay maintenance post his/her death.  This can be done by either adding a provision to your will stating that your estate must pay maintenance to your ex-spouse, or such a provision should be included in a Deed of Settlement, upon divorce, which is then subsequently made an order of court.  This was not the case in the aforementioned matter.

The appeal court found that, should the First Respondent’s claim succeed, it may have “undesireable consequences” on the deceased’s estate.  Particularly in that the legitimate claims of dependants and/or minors may be diminished or excluded in light of the First Respondent’s claim.  It was also stated that it could not be that before the Maintenance of Surviving Spouses Act came into being that divorced spouses were in a more favourable position than widowed ones.

The court further found that the final order of divorce did not prevent the First Respondent from approaching the maintenance court to vary the terms of the rehabilitative maintenance order, thereby placing a greater burden on the deceased’s estate.  Furthermore, the final order of divorce did not exclude remarriage of the First Respondent.

The appeal was upheld and the original court order, ordering the executor to pay the claim by the First Respondent was set aside and dismissed. https://za.linkedin.com/in/liesl-rae-fischer-7b287b196

  1. 2009[]