What are Benefits of Divorce Financial Planning?

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You will learn about the ramifications of complex subjects such as separate vs. community property, valuing and dividing property, retirement and pensions, spousal and child support, the family residence, tax ramifications and insurance. You will

    • Understand the difference between separate and community property;
    • Understand how personal property, intangible and illiquid assets are valued and divided;
    • Understand Defined Contribution versus Defined Benefit plans versus Deferred Compensation plans and how they are valued and divided;
    • Understand the tax ramifications of Spousal and Child support including recapture and Child Contingency rules;
    • Understand the importance of security for support payments.

What is No Fault Divorce?

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No-fault divorce refers to a divorce in which the granting of a dissolution of marriage does not require  a showing of wrong-doing of either party. It is therefore not necessary for one party to produce evidence that the other has committed a breach of the marital contract. In other words. You do not have to prove that your spouse cheated or misrepresented themselves in order to seek a divorce.

“No-fault” divorce in the United States originated in the state of California effective January 1, 1970, in a bill signed by then governor, Ronald Reagan. In August of 2010, New York governor, David Paterson, signed “no-fault” divorce into law, and since October 15th, 2010 no-fault divorce has been legal in all 50 U.S. states.

Prior to no-fault rules, a divorce could only be obtained through the showing of fault of one of the parties. Unfortunately it wasn’t just about proving the other party didn’t love you anymore. Instead you had to prove one party had breached the marital contract through adultery, abandonment, felony or other culpable acts. In circumstances where there was no party at fault and the couple simply wanted to dissolve their marriage a couple might arrange for what New York practitioners called “collusive adultery”. A pre-arranged time would be set by mutual agreement for Wife to return home to find Husband with a mistress. This finding would offer the evidence of adultery necessary to obtain a divorce.

These types of arrangements were common along with black mail through unsubstantiated accusations of fraud, cruelty and criminal behavior.  I am told by attorneys in New York and Connecticut that black mail and other legal fictions were common for divorces in New York state until the 2010 adoption of no-fault laws.

The opposing party would often not contest pleadings or do so only sparingly as a token for the courts. Ultimately judges and some lawyers began to recognize the affect these legal fictions could wind up having on the judicial system considering the dissolution proceedings were started with lying under oath.

The term no-fault may eventually fall out of the vernacular of the American people as no-fault laws have now been adopted by all states in the union. I was asked to explain what it meant recently and imagine it will take time with television representations like the 1960’s  divorce played out in the AMC series Mad Men. The DVD for Mad Men Season 4 contains “Divorce: Circa 1960s” – A three-part documentary about divorce during a time when the traditional family was the core of American society. I have not seen it yet but friend and colleague, Constance Ahrons, has had good things to say.

 

 

Celebrity Divorce Lawyers

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These “celebrity­” Divorce Lawyers aren’t the only ones billing out at $600 + per hour. Keep in mind that price is only an issue in the absence of value. I do not have personal experience with any of these attorneys but imagine they bill out at such a high rate because they deserve to do so based on experience­, knowledge and skill. I would pay to spend a day in court with each of them to watch how they operate.
Read the Article at HuffingtonPost

Alimony Taxation – Part 8

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Alimony, also known as Spousal Support in California, is GENERALLY deductible to the payor and taxable income to the payee. I highlighted the word generally because the mere use of the term Alimony or Spousal Support in a settlement agreement does not affect the tax consequences of payments. Internal Revenue Code Section 71 contains eight requirements that must be met for a payment to be considered taxable to the recipient and tax deductible to the payor. I will review all eight in the coming weeks.

REQUIREMENT # 8 – CHILD SUPPORT PAYMENTS CANNOT QUALIFY

I.R.C. 71(c)(1) provides that a payment is not includable in the payee’s gross income or deductible by the payor spouse, to the extent that “the terms of the divorce or separation instrument fix (in terms of an amount of money or part of the payment) as a sum which is payable for the support of children of the payor spouse.”

CHILD CONTINGENCY RULES

(2) For purposes of paragraph (1), if any amount specified in the instrument will be reduced — on the happening of a contingency specified in the instrument relating to a child (such as attaining a specified age, marrying, dying, leaving school, or a similar contingency), or at a time which can clearly be associated with a contingency of a kind an amount equal to the amount of such reduction will be treated as an amount fixed as payable for the support of children of the payor spouse.

Taxation of Alimony – Part 5

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Alimony, also known as Spousal Support in California, is GENERALLY deductible to the payor and taxable income to the payee. I highlighted the word generally because the mere use of the term Alimony or Spousal Support in a settlement agreement does not affect the tax consequences of payments. Internal Revenue Code Section 71 contains eight requirements that must be met for a payment to be considered taxable to the recipient and tax deductible to the payor. I will review all eight in the coming weeks.

REQUIREMENT # 5 – SPOUSES MAY NOT BE MEMBERS OF THE SAME HOUSEHOLD AFTER THE FINAL DECREE OF LEGAL SEPARATION, DIVORCE OR SEPARATE MAINTENANCE

I.R.C. § 71(b)(1) provides that the “term alimony or separate maintenance payment” means any payment in cash if —

(C) In the case of an individual legally separated from his spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made.