Tag: alimony and taxes

Calculating Alimony with De Niro’s Dinero

Calculating alimony with Robert DeNiro’s dinero is what is turning up the heat in his divorce. His wife, Grace Hightower, is seeking temporary alimony and has asked for an emergency order to raise her monthly credit card limit from $50,000 to $100,000 – which De Niro halved.

Alimony Calculation

Raging Bull?

In their response, De Niro’s lawyers claimed that the actor’s financial status had been significantly damaged by Covid-19 after restaurants Nobu and Greenwich Hotel, which he owns stakes in, were forced to close.

The judge was told that, as well as sushi restaurant Nobu losing $4.87m between April and May, De Niro had been forced to borrow from business partners to pay investors ($500,000) because “he doesn’t have the cash”.

The actor’s lawyers said: “He is going to be lucky if he makes $7.5m this year,” adding that he would likely make $2.5m in 2020 and 2021!

Addressing Hightower, they said: “These people, in spite of his robust earnings, have always spent more than he has earned so this 76-year-old robust man couldn’t retire even if he wanted to because he can’t afford to keep up with his lifestyle expense”.

Hightower’s lawyer is calling it raging bull: “I’m not a believer that a man who has an admitted worth of $500m and makes $30m a year, all of a sudden in March he needs to cut down by 50% and ban her from the house.

Florida Alimony

I’ve written about subject of alimony in Florida. In every Florida dissolution of marriage case, the court can grant alimony to either party – husband or wife.

Not many people realize there are several types of alimony in Florida: bridge-the-gap, rehabilitative, durational, or permanent alimony.

Florida courts can also award a combination of alimony types in a divorce. Alimony awards are normally paid in periodic payments, but sometimes the payments can be in a lump sum or both lump sum and periodic payments.

In determining whether to award alimony or not, the court has to first make a determination as to whether a wife or a husband, has an actual need for alimony, and whether the other party has the ability to pay alimony.

As DeNiro’s wife is discovering, proving the ability to pay is one of the central issues in her divorce right now because DeNiro’s income, it is claimed, dropped significantly due to the coronavirus outbreak.

Typically, courts consider any type of earned income or compensation — that is, income resulting from employment or other efforts — along with recurring passive income, such as dividends on your investments, in establishing the amount of support you will be responsible to pay.

In Florida, once a court determines there is a need and the income available to pay alimony – sometimes referred to as the ability to pay alimony – it has to decide the proper type and amount of alimony. In doing so, the court considers several factors, some of which can include:

  • The standard of living established during the marriage.
  • The duration of the marriage.
  • The age and the physical and emotional condition of each party.
  • The financial resources of each party, including the nonmarital and the marital assets and liabilities distributed to each.
  • The earning capacities, educational levels, vocational skills, and employability of the parties and, when applicable, the time necessary for either party to acquire sufficient education or training to enable such party to find appropriate.

But, after establishing Hightower’s need for alimony, how much dinero is there to determine De Niro’s ability to pay?

Analyze This…

The Supreme Court justice ruled that De Niro should keep the lower credit card limit while paying Hightower $75,000 to find a summer home for their children. De Niro filed from divorce from Hightower in 2018.

Robert De Niro’s attorneys said that the actor’s finances have taken a huge hit over the course of the coronavirus pandemic. The actor is battling a divorce case against Grace Hightower, his ex-wife who he was with for 21 years, in Manhattan Supreme Court.

De Niro appeared via Skype at an emergency hearing, which was called after De Niro cut Hightower’s American Express credit card limit from $100,000 to $50,000 a month.

According to the Daily Mail, Hightower’s lawyer told the judge that she and her two children with De Niro, Harvey (8) and Elliot (21), had been banned from his New York compound, which is where De Niro has been staying during the pandemic.

However, De Niro’s lawyer, Caroline Krauss, reportedly told the judge that De Niro was forced to make this cut to Hightower’s credit card limit because his finances have been so badly affected by the pandemic.

Krauss told the judge that Nobu and The Greenwich Hotel, the restaurant chain and hotel that De Niro owns, have both been badly hit by the pandemic as they have been closed or partially closed for months with next to no income.

Krauss said that the 2004 prenuptial agreement between De Niro and Hightower means that De Niro is only required to pay $1 million a year to Hightower as long as he is making at least $15 million a year. The terms, Krauss said, state that if his income falls, hers will proportionately fall too.

Krauss said that the money De Niro has earned from last year’s “The Irishman” has largely already been paid out, meaning he will only receive $2.5 million this year.

“These people, in spite of his robust earnings, have always spent more than he has earned so this 76-year-old robust man couldn’t retire even if he wanted to because he can’t afford to keep up with his lifestyle expense.

In response, Page Six reported that Hightower’s lawyer, Kevin McDonough, told the judge: “Mr. De Niro has used the COVID pandemic, my words would be, to stick it to his wife financially.

“I’m not a believer that a man who has an admitted worth of $500 million and makes $30 million a year, all of a sudden in March he needs to cut down [spousal support] by 50 percent and ban her from the house.”

McDonough said that “the idea that Mr. De Niro is tightening his belt is nonsense.” The judge issued a temporary ruling that the credit card limit is kept at $50,000 a month, but that De Niro pays Hightower a $75,000 lump sum so she can find a summer home for her and their two children, while De Niro stays in his compound with his other three children.

De Niro and Hightower were married in 1997 but filed for divorce two years later. However, their divorce never finalized, and they patched things up and renewed their vows in 2004. They officially separated in 2018.

The Insider article is here.

Photo credit: David Shankbone – Own work, CC BY-SA 3.0

Divorce Stimulus Checks and More Good Coronavirus News

If you have not already received it (and spent it shopping), your Economic Impact Payment may be on its way. But if you’re separated or going through a divorce, your economic stimulus check may not be as stimulating as you had hoped. As always, there’s also some good coronavirus news.

Divorce Stimulus Checks

A Stimulating Divorce Issue

Since the President signed the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), the $2 trillion stimulus package to spur the economic recovery, millions of Americans have already received their Economic Impact Payments and are busy shopping.

You may be eligible to receive a payment if you are a U.S. citizen, permanent resident or qualifying resident alien, cannot be claimed as a dependent on someone else’s tax return, have a Social Security number and an adjusted gross income below a certain amount.

Qualifying single adults who have an adjusted gross income of $75,000 or less will receive $1,200. Married couples with no children earning $150,000 or less will receive a total payment of $2,400. Taxpayers filing as head of household will receive full payment if they earned $112,500 or less.

But will the stimulus funds be impacted because you are in a divorce or family law case?

Florida Divorce and Tax

I’ve written about divorce and taxes before. For example, after the new tax code changes became law, it eliminated the alimony deduction. Many people criticized the tax law change in general. For example, the decision to end the alimony deduction received a lot of criticism. Many argued it made divorce worse.

Since the change, we’ve seen that some people are not willing to pay as much in alimony. This reduction in alimony amounts being paid has disproportionately hurt women, who have tended to earn less, and are more likely to be on the receiving end of alimony payments.

Who CARES?

For everyone who has not received it, the stimulus payment checks are something being counted on every day. Fortunately, most people should expect to receive their one-time, $1,200 stimulus payment from the IRS in the next few weeks. However, some people may receive less than they expected.

For example, if you have not filed your 2019 tax return, the IRS will calculate your payment based on the adjusted gross income listed on your 2018 tax return.

Also, if you have a pending divorce case, the payment will be deposited into the bank account that was provided to the IRS on your previous tax return. So, if your last tax return was a joint return prepared with your spouse, you may have to consult an attorney to discuss your options for recovering your payment.

Don’t forget you may also receive an additional $500 stimulus payment for each qualifying child. For anyone who filed jointly with their spouse, and whose custody arrangement has changed since they last filed a tax return, the portion of the check allocated for qualified children may be impacted.

Finally, the rules for child support enforcement are still in effect. Federal law requires child support agencies to collect past due child support from federal tax refunds.

In passing the federal CARES Act, Congress did not exempt the stimulus payment checks from federal offsets for unpaid child support arrears. All or a partial amount of your stimulus check may be intercepted and used to pay unpaid child support.

Good Coronavirus News

As we enter summer, there is good coronavirus news. More and more cities have decided on timetables for reopening certain parks and recreational facilities as part of a phase of returning to normal during the coronavirus pandemic.

  • In Miami, parks, boat ramps, golf courses and other facilities will open with certain restrictions.
  • Face coverings must always be worn unless otherwise noted.
  • Social distancing must be observed, and there can’t be gatherings of 10 or more people.
  • Sadly, swimming pools are not being opened for adult lap swimming. This critical policy misstep – to open swimming pools to adult lap swimming – is a major oversight mayors around the state seem to be making, and will need to be corrected in the future.

The IRS economic impact payments information page is here.

 

Modification of Alimony and Support, and some great Coronavirus information

More and more of my clients are asking about modification of alimony and child support because they or their Ex has lost jobs or seen their incomes slashed. There is also a wealth of information about the coronavirus, and one video in particular is a standout.

Alimony Modification

Life in the Coronavirus Economy

We didn’t just pass a $2 Trillion aid package for no reason. Markets have suffered, restaurants, bars and other businesses across the country have closed or are limping along until the market returns.

Employers have furloughed employees or reduced staffing in order to prevent the spread of the cornavirus and manage the economic impact it has created. For many people, this impacts their bottom line.

What if you or your ex-spouse or co-parent has alimony or child support obligations that can no longer be paid as a result of reduced income? Or what if you have lost your job and need additional support?

The time to act may be now in order to get the right information, preserve your legal rights, even while you are trying to work cooperatively with your Ex for the benefit of everyone in the family.

Florida Alimony and Child Support Modification

I recently spoke at the Florida Bar Family Law Section/AAML Certification Review Course in Orlando on the topic of Modifications. There are a few reasons why alimony and child support can be modified.

Dramatic changes brought on by the Coronavirus in people’s health, inability to go back to work, substantial drops and rises in pay, big gifts or lottery winnings, loss of jobs, furloughing, and early retirement are the major forces behind alimony and child support modification.

In Florida, to modify alimony and child support, you have to show three fundamental things: a substantial change in circumstances, the change was not contemplated at the time of the final judgment of dissolution, and that the change is sufficient, material, involuntary and permanent in nature.

Florida courts have discretion to modify alimony and child support retroactively to the date of the original filing of the action to modify, or supplemental action for modification depending on the cause.

It is important to keep in mind that you have to take the initiative, a court will not increase or reduce or terminate your alimony and child support payments if you have not filed the appropriate pleadings.

Simply not paying alimony and child support could cause the court to issue sanctions, pay the other side’s attorney’s fees, have your driver’s license suspended, or possibly even jail.

Great Coronavirus Information

There’s an excellent and instructive video from Dr. David Price of the Weill Cornell Medical Center in New York City who is treating COVID-19 patients. Dr. Price shares information in a Zoom call with his family and friends on protecting yourself during the COVID-19 pandemic. Well worth a look. Some important take aways:

  • Clean your hands.
  • Wear a mask outside – not to prevent breathing in the coronavirus – but because your less likely to touch your face.
  • Stay away from people. Distance yourself from other people outside of your quarantine. Stand a 3-6 feet back.
  • Shrink your social circle. Find your isolation group and keep. It is the people maintaining large social circles who are catching and spreading COVID-19.
  • What if you catch COVID-19?

Throughout the world, the way the COVID-19 disease has been transmitted is primarily through family and your close contacts: dads and sons, husbands and wives, romantic partners, etc. If you develop a fever, isolate yourself from your family and the same rules apply: no-sustained contact to avoid picking it up. Ideally, the sick should have their own bathroom, their own bedroom, one medical mask is needed . . . on the person who is sick.

The video is here.

 

Divorce and Short Term Marriages

Baretta action star, Robert Blake, has filed for divorce from his third wife, Pamela Hudak, just a year after the two strolled into Beverly Hills City Hall to obtain their marriage license. What is the impact of such a short-term marriage on divorce?

divorce alimony

And that’s the name of that tune!

According TMZ, actor Robert Blake filed docs in Los Angeles Friday to call the relationship quits. The 85-year-old married Pamela Hudak in Spring of 2017. The couple had known each other for decades and even dated years ago. Blake was previously married to Sondra Kerry from 1961 to 1983.

Florida Divorce

I’ve written about divorce and the length of a marriage before. Florida Statutes actually define what the length of your marriage means. For example, in order to determine alimony, there is a rebuttable presumption in Florida that a short-term marriage is a marriage having a duration of less than 7 years.

Florida Statutes define a moderate-term marriage as a marriage having a duration of greater than 7 years but less than 17 years. And, a long-term marriage is a marriage having a duration of 17 years or greater.

How do you measure the marriage term? In Florida, the length of your marriage is the period of time measured from the date of your marriage until the date of filing of an action to dissolve your marriage.

The Length of your marriage is very important when it comes to determining the kind of duration of alimony payments. For example, permanent alimony is generally for longer term marriages if the statutory criteria are met.

In shorter term marriages and for moderate term marriages, permanent alimony may be considered, but the burden of proof is much higher.

Conversely, bridge-the-gap alimony is generally awarded to allow a person to transition from being married to being single. So, bridge-the-gap alimony is designed for short-term needs. In fact, the length of an award bridge-the-gap alimony may not exceed 2 years.

Durational alimony helps provide a person with economic help for a set period of time after short or moderate length marriages or following a marriage of long duration if there is no ongoing need for support on a permanent basis.

The length of your marriage also factors in to property divisions. When a court divides the marital assets and debts, the court begin with the premise that the distribution should be equal. One of the factors a court can look to in justifying an unequal distribution includes the duration of the marriage.

Don’t do the crime if you can’t do the time.

Blake was accused of murdering his second wife, Bonnie Lee Bakley. Blake was her tenth husband. Bakley was fatally shot while sitting in Blake’s parked car outside a Los Angeles-area restaurant in May 2001.

In 2002, Robert Blake was charged with Bakley’s murder, solicitation of murder, conspiracy and special circumstance of lying in wait. In March 2005, a jury found Blake not guilty of the crimes.

Seven months later, Blake was found liable in a wrongful death lawsuit brought against him by Bakley’s children. Officially, Bakley’s murder remains unsolved.

The TMZ article is here.

 

Divorce Time Flies

The New York Times is the latest media outlet noting that a new tax law – that took effect in January – has added a new urgency for many Americans contemplating divorce. Why would a new tax law have such an impact on divorce?

divorce time

Beat the Clock

As the New York Times article notes, several key changes in the tax law may determine whether it is better to complete or update a divorce agreement by Dec. 31st or wait until the new year.

One of the biggest changes affects alimony, which will not be a tax break for Americans after this year. The new tax law is also causing parting spouses to look more closely at benefits for their children and the values of privately owned businesses and partnerships.

In the Nick of Time

I’ve written about the area of divorce and taxes before, but the Times article notes four areas that couples considering a divorce should examine before the end of the year:

Alimony

As many people have heard, the tax law is going to turn the calendar back on alimony. 77 years in fact. That was the year the Revenue Act of 1942 first made alimony deductible for the spouse paying it and taxable for the spouse receiving it.

The new tax law could become a problem in divorces settled after December 31, 2018, because under the new law, the alimony payer will be taxed on the full amount while the recipient will pay no tax on it.

Prenuptial Agreements

It is common in prenuptial agreement to have language calculating alimony payments based on years of marriage, and a clause saying alimony payments are deductible for one spouse.

In the absence of guidance from the I.R.S., a document calling for deductible alimony might not be honored if alimony is no longer deductible.

Business Valuations

Business valuations have always been an important component of divorce. The new tax law increases the cash flow of certain pass-through entities — businesses where the taxes are picked up by the owner, not the company — in a way that raises their value.

However, a higher cash flow – because of the change in the tax law this year  – may not be known until the business owner files a tax return next year.

Other Assets

Should you ask for the house or retirement? The new tax law, particularly in states where deductions for high state and local taxes have been capped, may make the home less valuable than a retirement account with a similar value.

Spouses who get the retirement account will not be able to draw down on it until age 59½, but they will have a more solid financial base in their later years. And by opting for the retirement account over the house, they can avoid paying those property taxes.

The New York Times article is here.

 

Alimony Modification

Florida law allows you to lower what you pay in alimony each month, increase your alimony payments, or terminate alimony payments altogether. A recent Florida case is an interesting example why alimony modification is a hot issue.

Alimony modification

Florida Alimony Modification

There are a few reasons why alimony can be modified. Dramatic changes in health, inability to go back to work (due to disability, injury, etc.), substantial raise in pay, big gifts or lottery winnings, loss of job, and of course, retirement are the major forces behind alimony modification.

I’ve written about alimony modification before. In Florida, to modify alimony, the payor has to show three fundamental things: a substantial change in circumstances, the change was not contemplated at the time of the final judgment of dissolution, and that the change is sufficient, material, involuntary and permanent in nature.

The Supreme Court of Florida has addressed the impact of retirement on support obligations in Florida. To determine whether a voluntary retirement is reasonable, courts must consider, in part, the payor’s age, health, and motivation for retirement, the type of work, and the age at which others engaged in that line of work normally retire.

In Florida there’s been a debate about whether these reasons for modifying alimony have to be “unanticipated” or can they be reasons everyone knew about. That dispute was recently settled here.

Retirement Accounts

In a recent Florida case, the trial judge and the spouses did not take into consideration the eventual income that the former wife would receive from her retirement and annuity accounts without penalty, once she reached retirement age when they drafted their settlement agreement more than 10 years ago.

Her former husband asked the court for an alimony modification – even though he had not retired and had the ability to pay the required alimony – because the former wife’s retirement accounts had appreciated, and she had reached the age of 59 ½, so she could take distributions without penalty.

The family court judge agreed to grant an alimony modification, and the former wife appealed. The former wife argued that her ability to access the retirement accounts without penalty was not an unanticipated change in circumstances, and alimony may not be modified in Florida for anticipated changes in circumstances.

The appellate court, agreed with the former husband, and sustained the alimony modification. Given that their agreement was silent as to what would happen once the former wife could access the funds in retirement accounts, the retirement accounts had not been taken into consideration to determine the former wife’s income.

The appellate decision is here.

 

The Alimony Race

Yet another news outlet is reporting on the 2018 Alimony Race. NPR weighs in on why people are rushing to finalize divorces this year: so they can deduct alimony payments before the new tax law kicks in.

alimony race

On Your Mark

As NPR reports, divorce lawyers and accountants have been advising many of their wealthier clients to hurry up and get divorced, like, now or at least before the end of the year because under the new tax law starting in 2019, a generous tax break for alimony payments will be gone.

The New York Times’, Jim Tankersley, who covers tax and economics stories, had a few things to say:

TANKERSLEY: So right now, if you get divorced – let’s say you’re a husband who is paying alimony to your ex-wife. You can deduct that, if you so agree with your spouse in the divorce settlement, from your taxes. But what’s going to happen is you won’t be able to anymore.

CHANG: OK, so spouses who will be on the hook for alimony payments will be eager to get their divorce settlements finalized this year but also, I can imagine, spouses who will be receiving the alimony payments because I would think that my soon-to-be ex would have more of a reason to give me more alimony if he or she gets a bigger deduction out of it this year.

TANKERSLEY: Yes, but it affects different couples differently. For couples who make essentially the same amount of money, if they’re in the same tax bracket, this is just an accounting shift. The same total amount of money changes hands.

TANKERSLEY: But for couples who make different amounts of money and are in different tax brackets, what they basically got before was a subsidy from the government for their divorce…

CHANG: What do you mean?

TANKERSLEY: …Because the higher-earning spouse was able to pass on income that would have been taxed at a really high rate but then instead was getting taxed at a low rate.

TANKERSLEY: So that difference between the tax rates was just free money from the government. Now that goes away. So, if you’re the husband, for example, who earned more and is paying that alimony to a wife, now you have to pay the taxes at the higher rate. That free money disappears, and so you are probably going to say to your ex-wife, sorry, there’s no more money; I’m not going to give you even more than I was originally thinking I was going to have to pay. And so, you the ex-wife end up with less money overall. And in between, the government gets more money.

CHANG: And I can imagine most couples that have severely disparate incomes – it’s usually the woman who earns less. So, this tax law change will probably have women bearing most of the cost.

TANKERSLEY: That’s what divorce lawyers and tax professionals and financial planners have been telling me – is that, yeah, it’s largely women who receive alimony. And particularly with wealthy couples, it’s largely women who leave the labor force to take care of kids or for whatever reason. And women earn less in the economy for the same work than men do. This is a potentially big loss for women…

Why it Matters

Spouses negotiating alimony payments may try to pay less when the change takes effect because there will be no tax savings.

The deduction is a big deal to couples negotiating their divorce because if someone who earns, say, $250,000 agrees to pay $4,000 per month in alimony, it really costs the person about $3,000 after taking the deduction into account.

Without the break, many people will agree to pay only what would have been their after-tax amount. It is feared that more couples will end up fighting in court because they won’t be able to agree on alimony.

2019 Deadline

The alimony deduction repeal doesn’t take effect immediately and won’t kick in until 2019. That is why lawyers are advising clients to file for divorce now.

However, meeting the 2019 deadline won’t be easy.

Some states have mandatory “cooling-off” periods, others states have residency requirements. So, you can’t just file for a divorce today, and expect that you’re going to be divorced tomorrow.

The NPR interview is here.