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Wednesday, May 23, 2018

How to be Divorced by the End of the Year

How long it takes to get divorced can be divided into three stages: 

Stage 1: How long does it take you to start your divorce process?  This is completely up to you and your spouse.

Stage 2: How long does your divorce process take?  This can depend significantly on the type of process you choose.  Mediation is typically faster than going to court, for example. 

Stage 3: How long does it take for a divorce to become final once filed with the court?  In Massachusetts, once a divorce is finalized by approval of an agreement by a Judge or by a judgment after trial, there is still a waiting period before the divorce is final.  This is called the Nisi period.  In a Joint Petition for Divorce this waiting period is 120 days.  In a Complaint for Divorce this is a 90 day waiting period (though it's also important to note that a Complaint cannot go to Judgment until at least six months after the date of service). 

Given this 120 waiting period if you're looking to figure out how long it takes to get divorced you have to count back from the date you want your divorce to be finalized.  That waiting period can be calculated back to August in order to be divorced by the end of the year if you are proceeding by (or hoping to proceed by) agreement.

Often times, clients are prepared for finalization but do not anticipate the inevitable waiting period. It is important to know the steps so that couples are aware of the time it takes and what will be expected of them.

Here are our steps we recommend taking at Skylark to assure a completed divorce by the end of the year:

Step One: Schedule a Mediation with us!

The full mediation process typically takes from 3-6 months from start to finish. We recommend jumping on that early on so that you are fully prepared for the steps ahead.  Schedule online here.  If you are in full agreement on all issues then you can skip to Step Two:

Step Two: Drafting the Court Documents

Upon completion of a mediation process, the agreement, joint petition and other court documents need to be drafted before you can file for divorce.  At Skylark we prepare these documents for our clients as part of the mediation process, or if you mediated elsewhere or started out with a full agreement then you just need it to be written into the legal format.  We can be hired to prepare these documents on a flat fee basis as outlined on our pricing page.  The preparation usually takes 2-4 weeks depending on how quickly our clients provide all the documentation and review the draft for accuracy.

Step Three: Book and Attend a Hearing

So now you are at the point where you are ready for Step Three and fully prepared to attend your hearing. This part of the process varies by county.  In some counties you can get a hearing immediately, and in others you may have to wait 30-60 days for a hearing date once your paperwork is filed.

Step Four: Divorce Finalization

While there is a 120 day waiting period, there is no further action required to finalize your divorce during that time period.  Your agreement may require additional steps be taken to complete your agreed upon division of assets (such as completion of a QDRO), but these steps will not change the final divorce date.

Calculating Backwards:

The 120 day waiting period is not always exactly 120 days as explained in this prior post: When does 30 + 90 not equal 120? In Divorce Court!

For 2018, the calculation would work like this:

December 31, 2018 - Divorced by: In order to be divorced on December 31 of 2018, you would need to have the Judgment of Divorce become final on that date.  A Judgment of Divorce Nisi in Massachusetts becomes final on the first business day 90 days after it issues.  Since December 31, 2018 is a Monday, the last date that divorces can be final in 2018 is Monday, December 31, 2018.  So we count back 90 days from December 31, 2018.

December 31, 2017 - Final Divorce Date: 90 days prior to December 31, 2018 is Tuesday, October 2, 2018.

October 2, 2018 - Nisi Date:The Judgment of Divorce Nisi date has to be a business day as well.  Since this is a Tuesday it can be the Nisi date.

August 31, 2018 - Last Hearing Date: In order to have a Judgement of Divorce Nisi issue on Tuesday, October 2, 2018, the Joint Petition must be approved 30 days prior to that date.  30 days prior to October 2, 2018 would be Sunday, September 2, 2018 which obviously wouldn't work for a hearing because the court is not open on Sunday.   Therefore, the latest day you can have a hearing on a Joint Petition in Massachusetts in 2018 and still be divorced by the end of the year would be Friday, August 31, 2018.

August 24, 2018 - Safe Hearing Date: It is usually a good idea to give yourself an extra week in case anything goes wrong at the hearing, so that brings us back to Friday, August 24, 2018.

June 22, 2018 - Safe Filing Date (depending on county): This part of the process varies by county.  In some counties you can get a hearing immediately, and in others you may have to wait 30-60 days for a hearing date once your paperwork is filed. Check with a professional on the likely timeline in your county.

May 22, 2018 - Hiring Date for Agreement drafting:  It is a good idea to give at least 2-4 weeks for drafting and revisions of the document, even once a full agreement is reached.

January 1, 2018 - Hiring Date to begin Mediation: Unless you've already begun a mediation and are moving along successfully, it is unlikely you will be able to complete all the necessary steps described above to complete a divorce in 2018.

If you have completed these steps on time, your divorce should be finalized by the end of the year.  If not, your divorce will not be finalized until 2019, which affects your tax filing status for 2018.

The process obviously varies depending on your needs as a client but it is part of our job to time manage and make sure we are on task. We feel it is beneficial though for you to know on your end the lengthiness of the process and your necessary steps!

Friday, May 18, 2018

Child Support Guidelines Update: Fixing the Double Counting of Health Care and Child Care Credits

Today, May 18, 2018, the court announced at the MCLE Family Law Conference that a new child support guidelines worksheet will be effective as of June 15, 2018. The new worksheet is available here.  While the base Guidelines themselves have not changed, the language will be updated to reflect the changes to the worksheet (the new guidelines are expected to be released on May 22, 2018).

The updates to the worksheet solves a few issues that arose from the use of the original worksheet.   There have been a lot of changes to support, both spousal and child support, in the last few months. While everyone is still picking over exactly what the implications of the new Tax Cuts and Jobs Act are for alimony, we wanted to take time to review the current situation under the 2017 Child Support Guidelines.  Divorcing parties and practitioners alike should be mindful of these issues, even though a new form has been issued, because any cases for which child support was set from September 15, 2017 to June 15, 2018 may now be modifiable.

The first issue involving the Table B was addressed in our previous post.  The next issue we will address is the additional credit provided in the 2017 guidelines for the health care and child care costs:

Health Insurance and Child Care Expenses:
Extra Credit in the 2017 Child Support Guidelines Update

On September 15, 2017, the Chief Justice of the Massachusetts Trial Court implemented new Child Support Guidelines which include numerous changes from the previous update in 2013.  One of these updates created an additional adjustment for the payment of child care and health care costs by either parent.  This additional adjustment fits squarely within some of the principles established by the 2017 Child Support Guidelines Task Force which call for “recognizing the monetary and/or in-kind contributions of both parents in addition to the child support order; and recognizing the importance, availability, and cost of health care coverage for the child.” Child Support Guidelines, Paula M. Carey, Chief Justice of the Trial Court, July 18, 2017 (eff. Sept. 15, 2017). 

Unfortunately, as with many one-size fits all adjustments, there are cases in which this adjustment results in a counter-intuitive result. 

The Old Adjustment for Child Care and Health Care Costs:

First, let’s clarify the impact of child care and health care costs on child support prior to the implementation of the 2017 guidelines.  Under the 2013 guidelines, there was a small credit provided to a parent who paid for child care or health care.  The 2013 worksheet included a deduction to gross income equal to the weekly cost of health care or child care expenses which reduced the available income used to calculate child support.  However, while the full cost was used to reduce available income, the impact to child support did not show the same dollar-for-dollar reduction because available income is only proportionally related to the final child support figure and therefore the reduction in income resulted in only a modest credit.

In practice, this meant that under the old guidelines a significant change in the out-of-pocket child care of health care costs might only result in a small or nominal change to the child support amount.  It also meant that a parent could have a child care or health care cost that used up a significant portion of their income, and which child support might not even fully cover. 

The changes made under the 2017 Guidelines are intended to correct these issues by adding a new adjustment.  But before we get to that, in order to fully understand the impact health care and child care costs have on the final child support order, it’s important to clarify that the old credit is still there too.  The 2017 child support guidelines still direct the parties to reduce their available income in the income section of the current worksheet by the child care and health care costs. 

The 2017 Adjustment for Child Care and Health Care Costs:

In addition to the remaining available income adjustment, the 2017 Guidelines require a second adjustment to be made to the presumptive child support order to account for the significant impact these costs can have on a family.  Specifically, Section II.E. Child Care Costs and Section II.H. Health Care Coverage contain the following language respectively:
"The guidelines worksheet makes an adjustment so that the parents share the burden of the cost proportionately. The adjustment involves a two-step calculation. First, a parent who is paying the child care deducts the out-of-pocket cost from his or her gross income. Second, the parties share the total child care costs for both parents in proportion to their income available for support. The combined adjustment for child care and health care costs is capped at fifteen percent of the child support order.” Id.
and the mirroring section in Section II.H.
“The guidelines worksheet makes an adjustment so that the parents share the burden of the cost proportionately. The adjustment involves a two-step calculation. First, a parent who is paying the health care deducts the out-of-pocket cost from his or her gross income. Second, the parties share the total health care costs for both parents in proportion to their income available for support. The combined adjustment for child care and health care costs is capped at fifteen percent of the child support order.” Id.
The proportional sharing of these costs relative to the parties’ available income helps to apportion these costs between the parents.  However, the Task Force maintained a 15% cap on this adjustment to avoid these expenses overtaking or eliminating the support order.  This means that whoever pays for child care or health care costs will still not get a dollar-for-dollar credit in most cases, but the adjustment will typically result in a more significant change than under the 2013 guidelines.

This cap means that in may cases, if the child support recipient cares for the children 2/3 of the time or more and pays for health insurance or child care, their household is not going to have the same available resources as the payor’s household even if they have the same gross income.  This is because they are not fully reimbursed for a share of the child care or health care costs, unless the incomes are high, because the cap will limit the proportional sharing.

The Task Force clearly made an effort to balance the impact of this additional adjustment while not creating an adjustment that was too significant.  In this effort to apply one formula, and one cap, to all adjustments there are two issues that arise which require, in some cases, deviation from these guidelines and the current worksheet in order to reach common-sense results. 

Issue # 1: Ambiguity in Applying the Health and Child Care Adjustment in Equal Parenting Cases

One of the issues created by the new adjustment arises in cases where the parents are also adjusting the child support in accordance with Section II.D. Parenting Time, which states in pertinent part:
“Where two parents expect to or do share equally, or approximately equally, the financial responsibility and parenting time for the children, the child support order shall be determined by calculating the guidelines worksheet twice, first with one parent as the recipient, and second with the other parent as the recipient. The difference in the calculations shall be paid to the parent with the lower weekly support amount.” Id.
Calculating the guidelines worksheet twice, as directed, means running the Section 4 adjustment twice, which results in a double-counting of the adjustment under the worksheet available from September 15, 2017 to June 15, 2018. 

This result is not consistent with the principles described by the Task Force in the preamble, and just isn’t a common-sense result.  It was possible to manually calculate this 15% cap, but the current worksheet doesn’t provide this calculation and therefore violates the 15% cap language in the Child Support Guidelines when applying the requirements of the Parenting Time section. 

Under the new worksheet taking effect June 15, 2018, the split and shared parenting time calculations are built into the worksheet to avoid this double-counting.  We expect the language of the guidelines will also be updated to note that running two guidelines sheets will no longer be necessary.  Of course, this may raise modification issues for any cases where guidelines were run between September 15, 2017 and June 15, 2018 unless this issue was adjusted for manually.

Issue # 2: The Double Impact of an Agreement to Share Health Care and Child Care Costs

Apart from the cross-guidelines double-counting issue of the original 2017 worksheet, there is a different issue created when parties agree to share the child care or health care costs directly or through reimbursement. 

Taking income disparity into account, many couples reach an agreement to split health care or child care costs before calculating child support.  These services benefit the entire family and it is reasonable for parents to share costs that benefit them both in most circumstances.  If parties agree to split these costs directly, it isn’t clear from the guidelines or the worksheet how the parties should report this split on the current worksheet.

When the parties are agreeing to split the expenses outside the child support calculation the only way to avoid double-counting is to exclude the child care and health care costs from the worksheet altogether.  This has the negative effect of losing the first adjustment to available income as well (which happens in the income section of the worksheet), but that impact is much smaller than the impact of double-counting by splitting the amounts and then crediting again in the calculation. 

Conclusion

Thoughtful practitioners can approach these issues with common sense solutions when the adjustment is in violation of the cap, or results in a double-counting.   These shouldn’t be considered deviations from the guidelines, but rather deviations from the worksheet when the formula is inconsistent with the principles of the guidelines.  Unfortunately for many, the worksheet is the only part of the guidelines they may read, and many parties and attorneys will surely continue to lament the inconsistencies and “fairness” of the form.  It is an impossible task to create a one-size fits all formula that considers all the unique circumstances of every family, but at least the new form makes an effort to be more consistent with the listed principles.

Recognizing the imperfections in such a formula can be an exercise in criticism, or an opportunity to see the importance of thoughtful conflict resolution in every case.  I encourage practitioners, parties, and court personnel to look past the face-value numbers in every case to help families determine how the individual needs and costs of their family can be fairly divided with a long term and sustainable solution.  The presumption of a guideline is useful to force the hand of parties who cannot reach reasonable settlement on their own, but it shouldn’t be used to hamstring those who can. 



Child Support Guidelines Update: Fixing the Table B Problem

Today, May 18, 2018, the court announced at the MCLE Family Law Conference that a new child support guidelines worksheet will be effective as of June 15, 2018. The new worksheet is available here. While the base Guidelines themselves have not changed, the language will be updated to reflect the changes to the worksheet (the new guidelines are expected to be released on May 22, 2018).

There have been a lot of changes to support, both spousal and child support, in the last few months. While everyone is still picking over exactly what the implications of the new Tax Cuts and Jobs Act are for alimony, we wanted to take time to review the current situation under the 2017 Child Support Guidelines.  Divorcing parties and practitioners alike should be mindful of these issues, even though a new form has been issued, because any cases for which child support was set from September 15, 2017 to June 15, 2018 may now be modifiable.

The first issue involves the original worksheet Table B, multiple children calculation. This issue was first shared with us by Professor Benjamin Bailey of the Department of Communication at UMass-Amherst, and his wife Attorney Julia Rueschemeyer.

The guidelines typically assume that a parent should pay more support the more children he/she has, however the original 2017 Guidelines worksheet did not do this in all situations. When parents have a mix of children under and over age 18, the Guidelines lead to some strange and counter-intuitive results, where having fewer children could result in your paying more support. The problem is with Table B of the Child Support Guidelines Worksheet:

As you can see, in Row 1 the numbers are increasing, so that a parent with two children over 18 will pay more support than a parent with only one child over 18. This makes sense, if the intention is that more support should be paid for more children. But the numbers do not increase consistently across the rows for the rest of Table B. For example, in Row 3, a parent with two children under 18 and two children over will pay less support than a parent who earns the same income with two children under 18 and three children over 18. In this and in a number of other situations, Table B results in what seem to be inconsistent results.

The Task Force originally responded to this alleged error in Lawyers Weekly by indicating that it recognizes that Table B produces seemingly inconsistent results in some situations, but that this was its intention for various other reasons.  Professor Benjamin Bailey proposed an alternate table that should be used instead to avoid inconsistent and counter-intuitive results, and to correctly encapsulate the intentions proposed by the Task Force.

Now that the Probate Court has issued corrections to the Child Support Guidelines the Table B issue is now resolved by having two separate calculations. These are listed in Table B and Table C in the new worksheet, separating the increase for multiple children and the decrease for any child over 18:


This resolves the inconsistency created by the original Table B, but raises three additional issues tied to the fact that this approach significantly reduces the impact of the 25% discount.

Issue 1:  Because this approach reduces the impact of the 25% discount, anyone who obtained a child support order between September 15, 2017 and June 15, 2018 may have a lower child support amount in place than the new worksheet will produce.  The difference may be small, but could lead to a need for modifications to match the new worksheet.

Issue 2:  Any parent who has a child over 18 that is also in college may want to consider whether a deviation from the worksheet amount is appropriate to take into account contributions to college expenses.  The guidelines still provide for this to be taken into account, and that issue may become more important since the impact of the discount has been lowered by this new worksheet.

Issue 3:  Finally, the Task Force may have originally intended this discount to have a bigger impact.  If that's the case, then when the task for reconvenes (likely in 2021), this could lead to a greater discount in the next Child Support revisions.





Thursday, May 17, 2018

Improving Negotiations using Collaborative Values: A Checklist of Tools

Improving Negotiations using Collaborative Values: A Checklist of Tools

by Beth Aarons, JD, MSW, Jody Comins, MSW, and Justin Kelsey, JD

On April 27, 2018, we presented to the Massachusetts Collaborative Law Council’s annual forum at a workshop entitled: Using Collaborative Values to Shift Parties from Litigation to Cooperation. The theme of this workshop was to take collaborative values and discuss how we can use these tools in all of our cases: negotiated, litigated, or mediated.

This is not a unique idea. David Hoffman has spoken and written about “cooperative negotiation” and Lainey Feingold has written and practiced “structured negotiation,” both of which share many overlapping tools that are used in the official Collaborative Law Process, with slight exceptions. In fact, we would argue that these negotiation processes have more in common with Collaborative Law than they do with litigation or more traditional attorney negotiation.

This leads us to the question that we brainstormed with our audience:

What are the Values used in a Collaborative case?

The list below is what we came up with together, and which we believe can be used in any case where both sides agree to commit themselves to these values. Using even one of these tools can improve the negotiation process by reducing conflict and finding solutions more efficiently.

The Collaborative Value Checklist:

  • Non-Adversarial
  • Interest-Based Negotiation
  • Identifying Goals
  • Seeking Solutions that are Mutually Advantageous
  • Active Client Participation in Joint Problem Solving
  • Hiring Neutral Experts
  • Transparency of Neutrals
  • Transparency of Information: Sharing Relevant Information
  • Structured Decision-Making Process
  • Disqualification Clause: Focused Representation as Settlement Counsel Only

In the Collaborative Law community, we often discuss the difference between a big “C” Collaborative case and a small “c” collaborative case:

  • A big “C” Collaborative case is used as shorthand to describe a case where all of these values are agreed to in a process agreement at the beginning of the case,
  • A small “c” collaborative case describes a case where we agree generally to work together towards settlement outside of court, but often don’t define exactly what “collaborate” means.

The problem with this shorthand is it encourages us to think of cases that aren’t committed to all of these values as similar, but not in a way that is clearly defined, enforceable, or universally understood.

Instead of relying on vague assurances, we encourage you to be specific when agreeing to a small “c” collaborative process. Have a conversation to determine which of these values you are committing to, and why. Use this checklist if it helps. It is important to recognize that each of these values brings something helpful to a case.

You may also want to consider bringing a collaboratively trained coach into each case to help facilitate this conversation. As professionals trained in particular skill sets, we may not have all the knowledge necessary to facilitate every conversation effectively or to work with our clients on all of their communication or financial issues. Collaborating with neutral professionals and being thoughtful about each of these values is in the best interest of our clients.

This methodical approach to defining the parameters of every case will lead to better informed clients, better settlement processes, and greater collaboration. If we try, we can make every case a collaborative one.

Wednesday, May 16, 2018

Avoid Delays in Retirement Division with this QDRO & DRO Checklist

This is a guest post from Justin L. Kelsey's consulting business, Gray Jay Endeavors LLC.  Gray Jay provides QDRO and DRO preparation, and education and consulting services relating to retirement division in divorce.  Gray Jay has been working on resources to assist attorneys, mediators, and parties in this process, such as the following checklist:

Download the Retirement Division Checklist

Retirement Division Basics:

In order to divide retirement as a part of a divorce, there is a one-time exception to the normal tax implications for withdrawals from retirement.  This exception allows a non-taxable transfer to a spouse's or ex-spouse's retirement account.  This can include the division of pensions, 401ks, IRAs and other types of retirement.  The document required to complete this transfer is usually called a Qualified Domestic Relations Order (“QDRO”) or Domestic Relations Order (“DRO”) depending on the type of retirement plan.

Most attorneys and mediators recommend hiring an expert to prepare the QDRO or DRO to ensure that it is prepared properly.  Gray Jay Endeavors LLC offers flat fee preparation of QDROs and DROs, and also offers hourly consulting services to ensure that divorce agreements contain the necessary language for the proper division of a retirement account.

Proper Preparation to Avoid Delays:

Incomplete divorce agreement drafting is the primary reason for a delay in completing a QDRO preparation and implementing the transfer of funds.   Too often divorce agreements contain only partial information needed to divide a retirement account.  When the information is incomplete in the agreement, the QDRO preparer can either make assumptions about the intent of the parties, or can ask the parties or professionals to clarify.  If the QDRO preparer doesn't ask these questions and just makes assumptions, then they could potentially be deciding significant financial decisions for the parties without their knowledge.  We strongly recommend working with QDRO preparers who ask the right questions, and don't make assumptions.

Unfortunately, the right questions can sometimes lead to disagreements over the details of the division.  One example of this type of disagreement arises when an agreement gives a date of valuation for the account, but doesn't indicate whether market changes (gains and losses) from the date of valuation are to be shared or not.  The QDRO takes time to prepare and implement so the market changes can be significant.  While most parties intend to share in the gains and losses, we never assume that is the case.  If this wasn't addressed in the agreement, we ask, and if the parties disagree, then the time it takes to reach agreement or obtain a new court order can cause a long delay.

In order to avoid these types of delays we recommend including all the necessary details in the divorce agreement.  To assist parties and professionals in knowing what those details are for each type of typical retirement plan, we have created a Retirement Division Checklist.  The checklist helps ensure that all of the necessary issues are addressed prior to finalizing your agreement.  If you are unclear about any of the required information and where to obtain it, we recommend contacting a QDRO preparer before finalizing the Agreement.  Many, like Gray Jay, will also assist in drafting Agreement provisions related to retirement.

Guest Post from Gray Jay Endeavors, LLC


Monday, April 30, 2018

What is a "Reasonable Period of Time" for Alimony to Continue, when the Law Changes?

Alimony cases come with their complications, and the Alimony Reform Act raised may questions for people who already had alimony orders prior to 2012. As with any other element of domestic law, it truly runs on a case by case basis. To give you an idea, we will dive into two alimony cases that resulted in significant decisions for the parties involved.

But before you head in full force, why don’t we take a moment to go over The Alimony Reform Act of 2011; it’s important to the story trust me. Though the act did not alter the definition of alimony, it did make adjustments to specific aspects such as the durational limits. In the act, it was decided that if a marriage lasted less than 20 years, there may be an option to terminate payments at a certain point.

Now, let’s give some background on the couples shall we? Our first case, featuring Joanne M. Popp and Robert L. Popp, centers around a change in alimony payment due to cut wages. A huge factor in this case is the duration of their second marriage to one another. You heard it right, they were married and divorced twice from one another. Our second case, is about the Arsdales. William Van Arsdale and Susan Van Arsdale were married for less than 20 years. During that time, they had two children. So here, the potential for child support comes into the picture as well.

We will start with Joanne M. Popp and Robert L. Popp, our twice married couple. Joanne and Robert married in 1988 and divorced in 1994. They rekindled their marriage in 1996 and later divorced in 2011. Robert was ordered by the judge to pay Joanne alimony of $12,000 a month.  In 2014, Robert reopened the case and requested that the alimony be modified, as his income had significantly dropped. He was awarded this claim and the judge, using the Alimony Reform Act as reference, determined that his alimony obligation would cease in 2020.

Robert was satisfied in the decision but Joanne claimed the judge had abused her discretion and did not consider all the necessary factors when using the act’s durational limits. Joanne believed that the judge failed to take into account her “ability to maintain marital lifestyle and lost economic opportunity as a result of the marriage”.  The SJC disagreed with Joanne, upholding the trial judge's decision based on the factors listed in the judgment.

Joanne also argued that the retroactive application of the durational limits was unconstitutional, but the SJC had already addressed the constitutionality issue in the Arsdale case. So we will leave Joanne Popp and Robert Popp for a moment, shifting over to the Arsdales.

Originally, William was set to pay Susan $3, 333.33 a month until Susan either got remarried or died. In 2005, William came back to court and submitted a complaint of modification to his alimony payments. It was later agreed upon that he would stop paying child support and rather increase his alimony to $7,571.26 a month.

Ten years later, William came back for more, filing a complaint for an additional modification to his agreement. This time he wanted a termination under the durational limits outlined in the Alimony Reform Act of 2011. This occurred in the wake of his retiring.  Susan filed a counterclaim stating that William was obligated to pay her alimony and continue to pay her life insurance.

The judge sided with William, stating that Susan did not show enough evidence that justified going against the limits outlined in the act. The judge also stated that Susan should not have expected infinite payments of alimony.

Susan appealed stating the applied durational limits were “unconstitutionally retroactive”. The establishment of the act came after the divorce date and the agreement of separation. Susan proposed that the application of the act in this circumstance is unjustified.

In terms of retroactivity the court stated, “When a party argues that a statute is impermissibly retroactive we first "must determine whether the law . . . has a retroactive effect. If not, and assuming the law is otherwise constitutional, no further inquiry is necessary."  If the statute is determined to be retroactive we must ask two more questions: "whether the Legislature clearly intended it to be retroactive" and "[w]here it so intended, . . . whether retroactive application is constitutional."

To answer the first question, the SJC applied the "new legal consequences" test as articulated by the United States Supreme Court in Landgraf.  The SJC though it was important that Susan had an opportunity to show that the durational limits should not apply to her, and only created a presumption.  The SJC indicated that applying a presumption does not attach new legal consequence to the prior events and therefore does not violate due process.  "Thus, the act compels no new legal consequences to the bargains struck by parties in merged alimony agreements entered into prior to the act's effective date."

Both couples dealt with the Alimony Reform Act and both cases were affected by the new duration limits that stripped the obligation for alimony after a period of time. Though the definition of alimony still requires that the party with an ability to pay may be required to support the spouse with a need, these durational limits directly enforce the language added to the alimony definition by the Alimony Reform Act: "for a reasonable period of time."

Written by Justin Kelsey & Patricia Cordischi

Tuesday, April 24, 2018

The Tax Cuts & Jobs Act of 2017 Includes a Divorce “Penalty”

Guest Post from Julie Tolek*

Divorces are difficult, over all, but add to them the stress of trying to understand tax law, and the road ahead looks even darker. One bright spot in the tax laws (pre 2018) was that a tax benefit existed in cases involving alimony. Under the IRS tax rules before 2018, alimony was tax deductible the payor, while being taxable to the recipient. But this has changed under the Tax Cuts & Jobs Act of 2017.

Alimony and Taxes
The issue of alimony is more common in divorces where there is a significant difference in income as opposed to where the parties’ incomes are similar. Where a high income earner is paying alimony they are usually in a higher tax bracket, so the tax deductibility of the alimony can save the payor - and even the family unit as a whole - a significant amount of money. This savings is sometimes so important that parties with potential alimony payments will build all other financial aspects of the divorce around alimony, and calculate which scenario will give the best tax break or keep the most money in the family over all.

The Tax Cuts & Jobs Act of 2017– A Divorce “Penalty”?
Among other changes, under the new tax law, even though the recipient would take the alimony tax free, the total tax bill per family will go up. The payor would pay alimony with post-tax dollars and would no longer have the benefit of that alimony tax deduction. The recipient’s net income would increase, which in this case would be a benefit to the recipient, if the alimony order stayed the same. However, the payor’s detriment will result in a higher tax payment overall for the family and likely lead to lower alimony orders.

Two Classes of Divorced Couples 
Under the new tax law, the change to alimony tax deductibility doesn’t take effect until January 1, 2019, and doesn’t apply to alimony agreements entered before that. This means that people divorced prior to December 31, 2018 will continue to have their alimony payments deductible to the payor and taxable to the recipient (benefiting from the tax bracket differences). Meanwhile, those divorced after December 31, 2018 will not get that benefit (unless the law changes again).

What happens when the alimony payor or recipient wants to modify the alimony order? 
Generally, alimony orders are modifiable when there is a material change (though this is not the case for survived orders). The difference in taxes resulting from the new plan would certainly be considered such a change, except that the provisions don’t apply retroactively to old agreements. So this tax law won’t result in a change that causes the need to modify the order. If other changes occur and the parties are looking to modify their alimony order, the new tax law allows them to keep the tax deduction unless they opt out in their modification agreement. It’s not clear how court orders will be treated until the IRS writes regulations on this issue.

If your divorce takes place after December 31, 2018, how will this tax change affect you?
There are some important things to consider if your divorce is taking place in this new tax scheme:

First, educate yourself about the details of alimony in Massachusetts. The Alimony Reform Act contains language limiting the amount and duration of alimony, as well as defining multiple types of alimony. You can learn more about The Alimony Reform Act and subsequent case-law here: Skylarklaw.com/alimony  The new tax law means that these payments will not tax deductible to a payor for post-2018 divorces, nor will the income be taxable to the recipient.  This may affect how the Alimony Reform Act caps are enforced, but we won't know for sure what the court will do until there is new case law. 

Second, if you intend to obtain an alimony order through agreement, pay attention to the details in the language that will be part of the order or agreement! Remember, survive means that an agreement cannot be changed by a court in the future. So if you have alimony surviving, consider carving out circumstances under which you would want flexibility to modify the order, such as if there is a change in the tax law. If the tax law changes back and alimony becomes tax deductible again, it may make sense to adjust your order. Overall, orders and separation agreements as part of divorces should be written specifically enough to be clear, while at the same time being flexible enough to allow for modifications in extreme or unpredictable circumstances such as changes in the tax law.

Finally, before you file for divorce, consider out-of-court dispute resolution before resorting to litigation. Mediation and Collaborative Law are voluntary processes that give you and your spouse control over your divorce and its terms. Mediation and Collaborative Law allow you to discuss all aspects of your divorce, go over different options, and decide what is best for you and your family. Armed with the knowledge gained from discussion, you can easily write terms that work for you and give you carve outs and flexibility when and where you want it.

*Julie Tolek is an Associate at Skylark Law & Mediation, PC and runs her own practice, Think Pink Law.  Julie's practice includes family law & divorce representation, prenuptial agreements, mediation, firearms licensing & NFA trusts, estate planning & probate, and adoptions.
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