Saturday, February 10, 2018

Who Gets the Pets in a Divorce?

Animal lovers may be aghast, but warring parents are often so busy fighting over their two legged offspring that the courts simply don't have the time nor inclination to consider the best interest of Sparky.

A beloved cat, a pampered pup--who gets Mr. Dribbles when mom and dad are breaking up?  Do courts consider the best interest of the pet (or the owner) when making that call?

In some families pets are treated as children.  Particularly when the couple has not conceived or adopted their own.

Not in divorce court.  Michigan judges are required to treat pets as personal property.  Like the coffee table.

Reasonable couples may agree among themselves to share custody of a pet.

The courts cannot order puppy visitation, but some divorce decrees do contain  voluntary provisions--which may be enforceable. 

If Sir Grand Rudolph III is a highly decorated show dog, the court might consider an appraisal by a valuation expert when awarding the little champ to either party--but it's a balance sheet item, not an emotional determination.  Same goes for farm animals.  God's creatures are not treated the same as humans by the court--no matter their place in the household.

What if Chip's strongly attached to his beloved lemur Lexx?  Does the court consider this relationship in deciding which parent will house Lexx?  Not officially, but in some families, the pet may travel back and forth with the child.  This makes sense particularly if the child is responsible for the care of the pet, or the parent who does not have custody at that time works extended hours during her noncustodial time. 

How about his and her pets?  Animals chose their person, so what happens when their persons no longer chose each other?  Should they be split up?  The couple should consider the impact of separating their pets. Will the fur kids get lonely without each other?

What will the new living arrangements be for the divided family?  Will there be a yard?  Will one spouse be working long hours?  Travelling? 

The best advice is to never leave this decision to the court's discretion.  It's not that the judge doesn't care, but she cannot, under the law, consider the welfare of your pet.

Show compassion when making this call.  Don't use the poor dog as a bargaining chip, and don't be cruel.

Buddy just wants his pack back. 


Who Gets the Harley?

Ten Things Your Lawyer Will Never Tell You

Tuesday, January 9, 2018

Alimony and the New Tax Law

The new tax law is about to have an effect on the pocketbook of divorced or legally separated couples beginning January 1, 2019.  Whether it's positive or negative depends on if you're writing the check--or cashing it. 

After seventy five years, alimony will no longer be deductible by the payor spouse, nor taxable to the payee--a dramatic change which will have a significant impact on divorcing couples and their ability to negotiate a fair settlement.

Alimony or spousal support in varying terms and amounts is not uncommon in divorce or legal separation when the marriage is of significant length, or where there's a substantial discrepancy in income and/or education, health issues or aging parties.  It's also not unusual when a couple has preschool children, and a stay-at-home parent who cannot reasonably balance the cost of childcare with earnings. 

Attorneys have used alimony tax treatment as a favorable method of equalizing household income in order to avoid impoverishing either side.  Deductibility of spousal support was one of the few incentives counsel could use to entice a reluctant spouse to financially assist a lesser earning ex-partner.  Payments to third parties such as mortgage or insurance will no longer be treated as support.

This may seem like good news to the receiver of spousal support, but it's likely the courts will take the lack of deductibility into account when awarding alimony.  Certainly mediators and financial experts, who typically "tax effect" support payments, will do so.  The net effect will be that there will be less income to spread amongst two households. 

Called the Tax Cuts and Jobs Act of 2017, perhaps the new law should named the Better Get a (Second) Job Act.  Either the payor is going to need some extra income, or the recipient will need to supplement--or both.

Under the prior tax law, income in a divided family could be shifted to the lower income spouse who would likely be in a lesser tax bracket.  The net tax effect would have reduced the overall tax burden.  This was handy, as two households can never survive as cheaply as one.

Beginning in 2019, alimony will be treated the same as child support--nontaxable to the recipient.  The tax treatment of child support will not change.

This seems to contrary to the theme of "Tax Cuts." So what was Congress' rationale? The House Ways and Means Committee termed the alimony deduction a “divorce subsidy.” “A divorced couple can often achieve a better tax result for payments between them than a married couple can.” 

To counterbalance, family law practitioners may try to negotiate a reallocation of the Child Tax Credit.  The Act provides for a temporary increase to $2,000 per qualifying child as well as a $500 nonrefundable credit for qualifying dependents other than qualifying children. 

So, if it looks like you are about to pay alimony, hope that
your decree is signed before the end of 2018 or that your lower earning spouse hits the lottery.

December's going to be very busy.


The Cost of Divorce

It's Not About the Money!


Thursday, May 4, 2017

Getting Those Ducks in a Row ~~ And Other Ways to Prepare for Divorce

When the call comes in, the innuendo's always the same.  How to minimize the financial harm of divorce before filing? The caller's usually looking for a sketchy solution.  But most lawyers are only inclined and able to give out legitimate legal options. 

A good forensic accountant once told me "paper never lies."  So if there's a depository bank or brokerage account that holds the family fortune, missing funds can be traced and/or accounted for--but at great expense. 

Quick transfers of real estate fall in the same category.  If it's to a friend or close relative, they can be added as parties to the action in many states if the judge feels there's possible fraud (piling up the fees.)

Baby ducks swim in a row behind their mother.  If one strays, the mama scurries back to corral the straggler. 

Above all, pick a good leader.

Here's a few more tips:

1.   Pay off debts and minimize credit card balances.  Generally debt gets spread evenly unless there's special circumstances like one-sided gambling debt or a Rolex purchased for the pool guy.  If that's the case download and save statements.

2.   Create a realistic standard of living:  This doesn't mean moving your spouse to a hovel, but if the two of you are in over your heads in real estate, consider downsizing to a home that either of you can afford on your own.  The most difficult (and expensive) divorces are those where the economic bubble must be burst in the middle of warfare.

3.   Spend more time with your kids.  If a parent is heavily trekking on the work treadmill in order to float the family boat, the opportunity cost with children is high--especially if they are going to be living with you part-time. 

4.  Go to counseling with your spouse.  You may not be able to save the marriage, but you could salvage the relationship.  Navigating your kids' minority years is far easier on them (and you) if you can learn to co-parent with civility.

5.  Establish independent credit.   Credit scores are the new black.  Check your score and work to improve it, if needed.

6.   Educate your spouse about the family finances.  Show him a monthly balance sheet.  Give her a realistic picture of the inflow and outflow each month.  It may be scary, and there may be some resistance, but be mindful that ignorance is never blissful in a divorce.

7.  Start gathering documentation.  In states where separate property is acknowledged, it's typically considered with appropriate and clear documentation.  This takes time.  So pull together those retirement account statements from the wedding year, or get in touch with the company to track your rollover documents.   This can provide your with lawyer better information when she is assessing potential outcomes.

8.  Look for a decent job or freshen up your degree/training.  It's always better (and less frightening) to be financially independent and emotionally engaged in productive work.  Spousal health benefits rarely last a lifetime.  One of the greyest areas in family law is determining how much income to impute to one side or the other.  So long as the job suits your qualifications, that issue is defined.  Just because a spouse has taken a job doesn't mean the other won't be required to assist with spousal support.  Other factors include discernible discrepancy in income, length of the marriage and age/needs of children.  The judge will respond best to a realistic plan.

Make a trusted work mentor aware of what you're going through.  Find an outlet such as exercise to work off stress. 

Above all, get yourself as mentally and physically healthy as possible.

There's a tough road ahead.