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ALIMONY IN CONNECTICUT — ARE EARNINGS AND EARNING CAPACITY THE SAME THING IN A BAD ECONOMY?

A new Connecticut Appellate Court case provides us with a window into what  may be a shift in judicial attitudes on the issue of whether to look at earning capacity vs. actual or reported earnings in alimony and support cases.

In 2009 when Sandy and Scott McRae — both small business owners — were divorced, the trial court entered an alimony award based not on  the couple’s respective financial affidavits, but instead on what the court estimated their real earning capacities to be — a higher number for both  husband and wife.  Based on those assumptions, the court entered an order that, in theory at least, equalized their incomes.

Mr. McRae wasted no time petitioning the court to reduce the award.  On his third attempt in 2011, he finally met with success. Judge  Trial Referee  Herbert Berall reduced Mr. McRae’s weekly alimony obligation from $250 to $150 per week. Better still, from Mr. McRae’s point of view, the court allowed one half of that amount, $75 per week, to be treated as payments toward a substantial arrearage Mr. McRae had accumulated by unilaterally reducing his alimony payments without the benefit of a court order.  At that rate,  Mr. McRae’s arrearage would not be fully paid for approximately 7 years and, meanwhile,  even the remaining $75 — the new current order — would drop  away before long under the terms of the original decree.

Sandy McRae appealed the order on a number of grounds.  The question that interests us the most was whether the court erred by comparing apples to oranges — 2009 earning capacity to 2011 reported earnings.   The court made it clear on the record that it  considering Mr. McRae’s financial affidavit and tax returns in deciding whether to modify the  2009 alimony rather than looking beyond  those numbers as the first court had done to consider, instead, Mr. McRae’s earning capacity.

The point is a technical but important one.  Under Connecticut law and the law of most other states as well, courts cannot modify alimony without first finding, as a matter of fact, that there has been a substantial change in the financial circumstances of one or both of the parties.  There were two sides to Ms. McRae’s argument.  If the trial judge had looked at earning capacity rather than his actual reported earnings, then the judge hearing the motion for modification should have done the same thing.

Conversely, she argued, if the  court was considering Mr. McRae’s reported income in 2011, it should compare  it, not with his 2009 earning capacity, but with what he had reported his real earnings to be in 2009 — about  the same number he reported in 2011.   Effectively, her argument was that if the court had compared apples to apples — reported earnings with reported earnings — it should not have modified her alimony because Mr. McRae was reporting about the same level of income in 2011 that  he had reported in 2009.

The appellate court disagreed even though the judge who modified the  order clearly said that he was basing the new order on Mr. McRae’s financial affidavit and recent tax returns.   The judge said this about the 2009 finding that Mr. McRae had higher earning capacity than his real earnings suggested:  ” Well reality set in … [s]o much for predictions.  I will tell you, this court, certainly in the last year and a half, has made no decisions finding people’s earning capacity.”

The appellate court rejected Ms. McRae’s arguments finding essentially that the modifying judge based his decision on an assumption that Mr. McRae’s earnings and earning capacity were one and the same so the order was still based on a comparison between past and present earning capacity.  This despite the lower court judge’s own words.

So what does all this mean?  In part that depends on how many other judges agree that lower incomes are more likely to be the result of economic reality than of divorce game-playing.  The case-law in Connecticut makes it clear that courts have the right to consider a person’s earning capacity if  they believe that the individual is under-employed.  We often encounter clients who insist that their spouses are deliberately under-reporting income or keeping his or her earnings artificially low in order to achieve better results in divorce court.  Now it seems, convincing the court of  that may be harder  in a bad economy than it has been in years past.

This does not mean that earning capacity is lost as a concept in divorce law, but it does mean that the standards of assembling proof, including the use of expert witnesses where appropriate, are higher than ever.

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WHO PAYS THE PRICE WHEN EX-SPOUSES CAN’T — OR WON’T — CO-PARENT THEIR CHILDREN?

We see it all the time — divorced or divorcing parents who see every compromise on issues of visitation or custody as a loss and who return to the courts time and again to settle everyday disputes.

In a case to be released next week, Lori Hibbard vs. Tony Hibbard,  the Connecticut Appellate Court upheld the decision of a trial court to pick a side in such a case, and to do so in a big way.

The couple divorced in 2007 returning in less than a year with disputes about money and visitation.  In the next 4 years, the parties filed a total of 30 post-judgment motions between them.  According to the appeals court, the disputes increasingly involved access to their daughter –only two years old at the time of the divorce.

Initially, it appears from the decision that the plaintiff mother had a fair amount of success managing to limit the defendant father’s access more and more.  At various points, this even involved requiring that visits be supervised and that overnight visits be suspended.

By the time they returned to court to litigate their last set of four motions — two filed by each party– visitation by the father had been whittled to one weekday afternoon and two 7-hour weekend visits every other week together with some specified holidays and birthdays.

The mother’s two motions sought further restrictions on the father’s access, the father, for his part, asked that the mother be held in contempt of court for failing to allow him several scheduled visits and –more importantly –asked that custody of their child be granted to him.

The mother defended against the contempt motion claiming that although she had not allowed the visits it was because her daughter had reported being touched inappropriately by a friend of the father during an earlier visit.

The trial court did not find the mother’s  claim to be credible noting in a detailed 20-page decision that, in the past, the mother had made various other unrelated claims that had not been substantiated by investigators or by the child’s therapist.  She had argued that the child was afraid of her father, but again was not backed up the child’s therapist.  The judge further noted that the mother had terminated therapy for the child when the therapist asked to meet with the father and had terminated longstanding daycare arrangements after a worker shared information about the child with the father’s current wife.

Concluding that the mother’s strategy was to eliminate the father from their child’s life, the judge awarded sole custody to the father, granting the mother visitation rights.  Considering that she had originally been awarded custody and had historically succeeded, at least  to some extent, in controlling the father’s access, it is a fair guess that this was an unexpectd result.

The mother appealed  and lost.

In this blog, we have commented before about  the toll  that contentious and protracted custody and visitation litigation takes on families, and especially on children.  The adverse effects of serious and prolonged  parental wrangling on children — not just while it is happening but well into adulthood — has been amply documented.

For most families, the financial toll taken by the cost of serial court appearances makes a difference in the quality of life of the entire family and colors the attitudes of the adults towards each other.  This, in turn, makes it even less likely that the children who are at least the official subject of the fighting, can enjoy a carefree, guilt-free and happy childhood.

We do not claim to be in position to judge  or evaluate the merits of Ms. Hibbard’s attacks on Mr. Hibbard’s parenting.  What we can say, however, from many years of experience, is that once custody and visitation issues have been  addressed and decided  — whether  by  agreement  or  by trial — future efforts to change the deal become subject to increasing skepticism. As lawyers, we must always respect the obligation of parent’s to do what they believe to be in the best interest of their children. At the same time, however, we must always counsel our clients — as the experienced lawyers in this case no doubt did — to consider at every step, whether they are motivated by genuine concern for their children or by relationship issues between the adults.  At a minimum, they should be made aware that this will be a question that the court will consider in every instance.