Posts

Temporary orders for money in divorce

Temporary orders are usually issued regarding child custody, child support, spousal support and use or possession of assets. They cover the time period between the time that the divorce petition is filed and the time that the judgement of divorce is issued. Orders of any type are legal matters requiring the attention of legal counsel. Wellspring Divorce Advisors requires all of our clients consult with legal counsel to make sure they understand their legal rights and obligations.

Divorce is not a fast process. It is a legal, emotional and financial process often lasting years from the date a petition for dissolution is filed. Because of the often long periods of time passing between petition and judgment the court is often asked to make temporary orders on certain pieces of the case. Temporary Orders are important from a financial perspective because they are designed to protect the parties from risks that appear during pending dissolution proceedings. Risks might include a full time mother and homemaker being cut off from family bank accounts and by extension unable to pay bills. They may be entered for the sole purpose of providing clarity and guidelines to parents as to their obligations to support minor children. There may also be reasons to make orders for a party to continue supporting the costs of a marital asset in order to protect credit scores. Temporary orders could also be used in situations where extensive financial data gathering is under way and the court simply lacks complete information to make longer term decisions.

Following are some examples of temporary orders related to finances we have seen in our practice. We have provided links to California self help websites where possible.

  1. Order for Temporary Alimony or Spousal Support – A temporary order for alimony is often entered to ensure both parties have the ability, to the extent possible, to maintain the marital standard of living they enjoyed during marriage. At the very least the temporary order is put in place to provide necessary funds to a non-working or lower earning spouse to support themselves during pending litigation or settlement discussions. In California the amount of temporary alimony will usually be calculated by a computer program called Dissomaster based upon historical and current incomes of both parties. Note: Temporary spousal support is almost always higher than long term spousal support in our experience.
  2. Order for Temporary Child Support – A temporary child support order provides necessary funds to a non-working or lower earning spouse to support the expenses necessary to support minor children. The amount of temporary child support will be based upon the incomes of both parties as well as the needs of the children. If, for example, the children have special needs or attend private schools, orders may be entered to cover the associated expenses of specific items.
  3. Order for Sole Use and Possession of the Marital Residence – In more contentious cases parties may argue over who should move out of the marital residence during the pending litigation. It may be necessary in this case to grant one party sole use and possession of a marital home on a temporary basis while litigation or settlement discussions proceed.
  4. Automatic Temporary Restraining Orders – in most jurisdictions the filing of a petition for marital dissolution in accompanied by temporary orders restraining either party from selling, encumbering or otherwise disposing of an asset. The orders may also restrict you from changing beneficiaries on insurance or retirement funds.

 

How does a payment qualify as spousal support or alimony?

Just because a payment is called “spousal support” or alimony does not mean that the IRS will view is that way.  The following requirements must be met for a payment to qualify as spousal support. We call them the eight D’s of alimony.

1) Dollars must be received by or on behalf of a spouse

2) Documented by a divorce or separation agreement

3) Designation of payments: cannot opt out of §71 or §215

4) Distance: couple cannot live in the same residence

5) Dependents cannot change alimony

6) Dual returns: separate tax returns must be filed

7) Dumping: front-loaded payments are not allowed and may subject the payor to alimony recapture

8) Death of the recipient must end payments

What if spousal support is payable for 6 years, but one spouse dies?

Spousal support must cease upon the death of the recipient in order for it to be considered spousal support for tax purposes and tax deductible to the payor. Spousal support can be paid after the death of the payor, typically from their estate in some form, but most settlement agreements and divorce decrees state that it will stop upon the death of either spouse.

We suggest the payor spouse be required to carry a life insurance policy to cover the lost cash flow for the payee spouse in the event of premature death. If this isn’t required in your settlement you should ask for it to be added. In the event the agreement can not be modified you should consider buying the policy on your former spouse yourself. You will have to pay for it but the peace of mind is worth the cost.

In order to determine the death benefit amount needed you would do a present value calculation on the stream of cash flow from the spousal support payments.

A $5,000 per month spousal support payment payable for 10 years would have a present value of $471,540. Call us if you need help determining the right amount of life insurance.

No matter the route you take for insuring the payments make sure you, the support recipient, are both the owner and beneficiary of the life insurance policy. Losing the cash flow from spousal support can have devastating affects on your ability to maintain your lifestyle.

California Divorce Myths

Everyone has a friend or family member who has been divorced. Many will have heard horror stories or received tips about what they should do or what they should expect. I have heard “Mom always gets the kids” and “I earned the pension so it’s mine” People also make up there own expectations like “I made all the money, so I’ll get all the assets” or “I’ll get half of everything”. Here is a list of the top 11 Divorce Financial Planning Myths that come to my mind.

 

1. “I made all the money, so I’ll get the assets”
2. “Dad has to pay for college”
3. “Mom always gets the kids”
4. “Child support will take care of us”
5. “My spouse charged up the credit cards- they are not my debts”
6. “I’ll always get spousal support”
7. “We have small kids, so Mom gets the house”
8. “I earned the pension so it is mine”
9. “The courts will take care of me”
10. “I’ll get half of everything”
11. “We have no fault divorce in California so it must be easy”

Are More Women Paying Child Support and Spousal Support?

The quick and easy answer is yes. Both in statistics as well as our experience.

The American Academy of Matrimonial Lawyers (AAML) released a statement with a rather catchy opening sentence. “This Mother’s Day, it appears that an increasing number of mom’s will be setting aside time to sign child support and alimony checks.”

The key to note is that they are signing the front of the check, not the back. 56% of the AAML fellow attorneys said they have seen an increase in mothers who pay child support and women in general paying spousal support.

As our society progresses the social norms are changing and stay-at-home fathers are becoming more common. I personally support the family’s right to choose what is best for them and whoever is more inclined to be in the work force should be. It is encouraging to also see income in-equality becoming less of a concern as well.

I have seen an increase in women writing the support checks in my practice too and I am here to report the female support check writer is every bit as troubled about writing the child support or spousal support check every month as her male counterpart. In fact I might say even more troubled by having to write that check every month. Maybe this piece of the social norm shift hasn’t caught up yet. The stigma on men receiving spousal support or child support payments seems to be alive and well.