Tag: Divorce Timing

Divorce Time Flies

Posted by Ron Kauffman on

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.

 

Divorce to Save Money?

Posted by Ron Kauffman on

The Hill reports that a Texas couple may divorce to save money in order to pay for their daughter’s rising health-care costs. There are times when people have divorced “on paper” to save money, but is this a good reason and does it work?

Divorce save money

Health Care Scare

Can you divorce to save money? Jake and Maria Grey may try. They told NBC’s “Today” that Brighton, the older of their two daughters, has Wolf-Hirschhorn syndrome, a developmental disability that requires 24/7 care.

“We shouldn’t have to make that sacrifice to get our child Medicaid!”

They said they spend thousands of dollars annually out of pocket, even though Jake Grey has private health insurance. The couple added that they are considering divorcing to save money so that Maria Grey can qualify for Medicaid as a single, unemployed mother.

Divorce to Avoid Penalties

I’ve actually written about a similar issue, namely: divorcing to save money on taxes by avoiding the marriage penalty tax. Back when the 2012 American Taxpayer Relief Act was passed, it raised taxes on couples making more than $450,000, and individuals making more than $400,000. As it turns out, some couples found out they could save over $25,000 a year if they divorced.

Think about that for a second. If you could save over $25,000 a year in taxes, you could take a couple’s trip to Italy, ski Deer Valley, put a little cash away for college, and still have some mad money to spend just by divorcing and turning your marriage into a long-term relationship.

Divorcing on Paper

There are a lot of risks though, known and unknown to divorcing on paper but staying together. I would encourage anyone considering a “divorce on paper” to think about a few things:

  • The impact on your relationship. I don’t know of a good way to ask for a divorce: “Honey, I want a divorce. No, no wait, come back, it’s to save big bucks . . . really!”
  • There is no fake divorce. Once the court signs the final judgment of divorce, you are divorced. Once you’re divorced, your Ex may find someone who thinks marriage is more valuable than 5% adjusted gross income.
  • IRS rules regarding your filing status have something to say. IRS publication 504 warns that if you obtain a divorce just to file as unmarried with the intent to remarry the next tax year, you have to file as married individuals.
  • State law. All no-fault states have minimum requirements for getting a divorce. Florida, for instance, requires at a minimum that your marriage be irretrievably broken before you can get a divorce.
  • In addition, there are estate planning issues, retirement and social security complications, and many other issues besides the mere tax savings.

Most people who marry do so forever, and with the sincere intention of honoring their vows. Is the money worth it?

Jake Grey’s $40,000 salary is too much for the family to receive Medicaid, and Maria Grey said they are No. 60,000 on the list to receive state assistance.

It’s drowning us to try to keep up with her medical expenses. We’ve done everything we can do to try to keep her afloat, and we’re going to reach a point where we can’t do it and we won’t have another option. We don’t know what to do.

The Hill article is here.

 

What if a Spouse Dies During the Divorce?

Posted by Ron Kauffman on

Well this is a gloomy post: it’s about death and divorce. In November 1789, Benjamin Franklin wrote: “In this world, nothing can be said to be certain except death and taxes.” If roughly half of marriages end in divorce, there are some odds that a spouse will die during the divorce case. What happens legally and emotionally when a spouse dies during the divorce?

Emotional Roller Coaster

As the Washington Post reports, a couple of years after a wife and husband separated — but before he reached a divorce settlement — he died of a heart attack at age 57.

Overnight, the wife went from almost-ex-wife to widow. But, nearly six years later, I still feel as if I was widowed on a technicality. A real widow doesn’t have a divorce lawyer and a Match profile. A real widow is pining for her spouse, inconsolable.

Sometimes she calls herself a “partial widow.” To make her point, she mentioned a friend whose fiancé died three weeks before their wedding. “She doesn’t get to call herself a widow and I do?” “That’s ridiculous.”

Misplaced Emotions

“It’s called disenfranchised grief,” and it is also referred to as the grief that has no voice, because it’s a grief that our society typically does not recognize.”

It occurs in situations that fall outside the norm and might also include, for example, mourning the death of a former spouse or an extramarital lover. A widow who was about to be divorced has no defined place in society, so we often don’t know what we’re supposed to do.

Even responding to condolences can be awkward because there’s an element of not wanting to accept sympathy for something that is a misconception on their part. Others feel for the surviving spouse in a way that doesn’t feel accurate to the experience. It’s a different kind of pain than they’re assuming.

Legal Implications

I’ve written about divorce problems before. When a spouse dies during a divorce, the death of the spouse can have major legal implications that extend far beyond the mixed feelings you may have about losing your soon-to-be ex spouse.

Divorces are unlike other civil cases. It is true that in ordinary civil cases, the death of a party does not deprive a court of the power to enter a judgment after the death of a party. This means a court can still rule. This happens frequently in breach of contract actions, and especially in personal injury cases.

However, the general principle does not apply to divorce actions since the death itself has already terminated the marriage.

In Florida, the general rule for divorce is that there can be no judgment of divorce rendered after the death of either of the parties, since that event of itself terminates the status of marriage.

This immediate stopping of the divorce when a spouse dies during the divorce process can cause a lot of problems. This is especially true in divorce cases in which the parties are elderly, or sick, and death is a very real possibility. In those cases, the parties should seriously consider ways to avoid the court losing jurisdiction because of death.

The Washington Post article is here.

 

Chris Rock’s Divorce Tips

Posted by Ron Kauffman on

Chris Rock has headed out on his newest “Total Blackout Tour” in February, marking his first full-scale world tour in nine years. He also recently divorced his ex-wife, Malaak Compton-Rock in 2016. What Chris has said about his divorce experience may surprise you.

Chris gave an interview to Rolling Stone magazine recently, and though he jokingly calls his latest tour his “alimony tour,” he gets serious when talking about life after divorce.

“Getting divorced, you have to f–king start over,” he said. “You get to reset. It’s not a breakdown, but something in your life broke down.”

Communication between Ex-Spouses

However, instead of blaming his ex-wife – like he used to in some of his older comedy shows – he claims now that he has changed his mentality.

There are several reasons Rock has toned down the negativity when it comes to discussing his divorce and ex-wife.

For one, he said, “I asked myself, ‘Do I want to be angry for a year?’ It’s not a cool place to be. It’s not healthy.”

Secondly, he claims it’s not fair that he can go out and bash his ex, but that his ex doesn’t have a platform to defend herself. “It’s not fair”. “I have a mic, she doesn’t. God forbid people are bugging her in the supermarket. That’s not cool. I’m going to have to see her at weddings and graduations.”

Custody Battles

Rock, like other fathers going through divorce, had a rough time dealing with custody issues. Not just the battles with his ex-wife, but with himself and the children too.

For example, he spoke candidly about his emotions, that he cried once, “during the custody battle” over  his two daughters, Zahra and Lola Rock.

In order to be a more involved father, he moved closer to his children.

“All my friends assume I moved into the city after my divorce, away from my girls. When I say I bought a house around the corner, it blows their minds.”

Rock also spoke about the angry feelings his children express. In fact, at one point in the Rolling Stone interview, rock got candid and admitted: “My own daughter has blocked me on Instagram. They grow up so quick.”

I’ve written about Chris Rock’s divorce before, because his comments on his divorce have been both funny and surprising. For example, while his divorce was a custody battle (he claimed that his ex-wife had “repeatedly refused to permit him normal and usual access to the children) he also said:

“When you see me on ‘Dancing With the Stars’ . . . I’m not on crack, that’s just alimony!”

The Rolling Stone article is here.

 

Divorce Timing

Posted by admin on

On behalf of Ronald H. Kauffman, P.A. posted in Divorce on Thursday, July 10, 2014.

Timing is everything they say. The right thing at the wrong time is the wrong thing. If so, is there a right time to divorce? The Wall Street Journal’s Market Watch seems to think so.

Right thing to do at the wrong time.

Say you’re hedge-fund billionaire Dave Tepper, and just separated from your wife after 28 years. Your net worth is about $10 Billion. Timing is definitely a factor in your decision to divorce.

If the Tepper divorce goes ahead today, it would very likely be less expensive if it happened before the 2009 financial crisis. A lot of stock traders were panicking in 2009. But Tepper bought shares of troubled banks and took in nearly $4 billion for himself.

Divorce timing isn’t limited to stock market booms and busts either. Consider whether you would want to divorce if you know your company was about to go public. What if your spouse was about to receive a huge bonus, or a big inheritance? If any of those apply to you, waiting may be the right move at the right time, or the right move at the wrong time, or, well you get the point.

I wrote an article about dividing property in divorce when the value of the home is underwater – where the mortgage is worth more than the property. This may be the time to put off the divorce decision.

As the Wall Street Journal reports:

During the housing market meltdown, there were often no liquid assets to distribute. The share of underwater mortgages fell to below 20% in the first quarter of 2014 for the first time in four years and it’s expected to fall to 17.2% by the end of this year, according to real-estate website Zillow. That gradual rise in house prices will help unhappy couples to live happily ever after financially.

There are also practical and emotional issues to consider. Do you want to get divorced a week before your daughter’s wedding, or your son’s bar mitzvah or an in-law’s funeral? How about when your kids are taking their SATs, EOCs, or FCATs?

Having a plan is meaningless. Planning is everything. (Dwight D. Eisenhower said that) If so, once you’ve decided to divorce, carefully planning comes into play.

The Market Watch article is available here.