Thursday, March 31, 2011

I'm Separated, Why Should I get Divorced? - Reason #4: Remarriage

Reason #4 Not to Wait: Remarriage

Almost every client who consults with us about divorce indicates they have no intention of getting remarried. And who can blame them for saying that when in the middle of a divorce? But the statistics say otherwise. Most people will get remarried after a divorce, and if you are separated and meet someone you want to marry, you will now have to wait for your divorce process to be complete. You can't simply get remarried like Richard Barton Jr. of Grand Rapids, Michigan, who was charged with Bigamy for getting remarried before being divorced (and who got caught because he was dumb enough to post his new marriage photos on Facebook).

Divorces can take years depending on how complicated the issues are and how much either party wants to fight. If you meet someone new will they want to wait that long? Will you? And how will having this third party involved in your life affect your finances (which can be discussed in court)?

If you don't want to face these problems, then consider what you are waiting for if you know your marriage is over. If there is no chance of reconciliation, then there are some pretty good reasons to move on with your life.

Wednesday, March 30, 2011

I'm Separated, Why Should I get Divorced? - Reason #3: Becoming a Legal Parent

Reason #3 Not to Wait: Becoming a Legal Parent

If your spouse is of child-bearing age and a woman, then it is possible (even if unlikely) for them to become impregnated by someone else. This is more likely if you are separated. In Massachusetts if a woman is married within 300 days prior to the birth of a child, then her spouse is legally the father of that child, whether or not he is the biological father. Being a legal parent comes with both obligations (child support, health insurance) and benefits (visitation, relationship). But if it's not your child do you want that responsibility?

It is possible to undo this legal presumption but it usually requires knowing who the biological father is and suing them. Now because you waited to get divorced you have two lawsuits instead of one and another party involved in the dispute (the biological father).

Read Reason #4: Remarriage.

Tuesday, March 29, 2011

I'm Separated, Why Should I get Divorced? - Reason #2: The Ticking Time Bomb

Reason #2 Not to Wait: The Ticking Time Bomb

Today your spouse may be a healthy self-sufficient person. They may work and support themselves today. But what happens if they become disabled. Whether or not you are separated you have a legal obligation to help support your spouse and they can enforce that obligation through a Complaint for Separate Support or a Complaint for Divorce.

And if your spouse becomes disabled during your marriage (whether or not you are separated) you will likely be obligated to support them financially. Under Massachusetts law, spousal support, especially in the case of a disabled recipient can be for life.

Even if your spouse does not become disabled, if they are a candidate for spousal support (also known as alimony) the longer you are married, the longer alimony may last. Although duration of alimony is a hotly contested issue under the current law, there is a proposed alimony bill which would link duration directly (by formula) to the length of the marriage. It would be up to a Judge whether to consider your separation part of the marriage or not.

Read Reason #3: Becoming a Legal Parent

Monday, March 28, 2011

I'm Separated, Why Should I get Divorced? - Reason #1: Cutting Financial Ties

In Massachusetts, the standard for a no-fault divorce is whether or not you subjectively believe that your marriage is irretrievably broken down with no chance of reconciliation.

If you are separated but believe that there is a chance of reconciliation, then you should not get divorced (and you do not meet the legal standard to do so anyway).

However, if you are separated and you do believe that your marriage is over, then there are some compelling reasons not to wait to get divorced. This four part post will highlight the most compelling of these reasons.

Reason #1 Not to Wait: Cutting Financial Ties

So long as you are married, you have a financial link to your spouse. In Massachusetts any property that you hold either jointly or individually can be considered marital property subject to division by the family court. This means that if you acquire financial assets after your separation your spouse may have a claim to those, even if they didn't pay a dime to help you obtain those assets.

Similarly, if your spouse incurs debt after your separation, you may have some obligation to help pay that debt. This is true even if you had nothing to do with the items purchased.

The Court does not ignore the fact of your separation, and it may have a significant impact on how those post-separation assets or debts are divided. But the separation is only one factor among many that the Court must weigh. This means that until the divorce is filed, you are financially linked to your spouse whether or not you are physically separated (and whether or not you separate your finances).

Read Reason #2: The Ticking Time Bomb.

Friday, March 25, 2011

Why are you on Facebook?

It seems like every day I read another article about how Facebook is Becoming a Prime Source for Divorce Case Evidence. Anyone who isn't aware of the risks by now is just not paying attention. But there does still seem to be a great amount of confusion over how private you can really make your Facebook page.

While you are free to adjust your privacy settings any way you want, a chain is only as strong as its weakest link. Any one of your "friends" can share any information that they can see. To think of it another way: consider whether the post you are about to make is something you would be okay with every one of your "friends" repeating out loud to one other person they know (as in "look what Justin just posted!"). Chances are somewhere in that chain is your mother, grandmother, ex, or even a potential employer.

Of course, doing this every time you post may make you wonder, why am I even on facebook if it's going to be this hard?

Well, maybe that's a good question to ask yourself:

Why are you on Facebook?

If you are on Facebook to connect with old friends, then you should think about whether what you are posting is ideal for that purpose.

If you are on Facebook to connect with potential employers, then obviously you may want to post a different caliber of information.

And if you are on Facebook to try and hook up with old lovers, then don't be surprised when it comes up at your divorce trial.

Goals and motivations are important in life and your virtual life should be an extension of your real life (not an escape). Live (and post) accordingly.

Thursday, March 24, 2011

Your Mother Should Have Told You: Don't Bring Beer to Court

On March 21, a New York man facing a charge of driving a motor vehicle under the influence of alcohol (DUI in New York, OUI in Massachusetts) showed up intoxicated to a New York court for a hearing carrying an open can of beer, with four more cans in a bag. While this might be snickered at and mentally filed away under the "dumb guys in crime" category, it does highlight the issue of alcoholism and how it can contribute to a myriad of poor life decisions.

Alcoholism is a serious issue in many family court cases as well. Alcoholism can be a source of wasting assets, a reason one party has trouble supporting themselves, or worst of all, a parental fitness issue. Alcohol use and abuse is not only difficult to track (it won't show up on drug tests days later), it can also be difficult to prove and control.

But there are solutions for dealing with these issues in court, including the use of Breathalyzer technology and support programs. And oftentimes alcohol abuse can be proven through receipts and the pure volume of liquor being purchased. If alcoholism is an issue in your case make sure you consult with an attorney who is familiar with handling this type of issue.

In addition, if you or someone you know is struggling with an alcohol problem, we at Kelsey & Trask encourage you to seek help, whether through enrollment in a program such as Alcoholics Anonymous or otherwise.

Wednesday, March 23, 2011

What is Nesting and Why Would I try It?

A parenting plan which is becoming more popular among divorcing and separating parents is called "nesting."

Nesting is when the children stay in the home and the parents move in and out according to a parenting schedule (rather than have the children travel back and forth to separate homes.

The main benefits of nesting are as follows:

1. Rather than create greater stress for the children by making them travel and sleep in a new place, while they are still getting used to the idea that their parents are separating, we force this stress on the parents. Although not ideal in either situation, the argument is that if either the children or the parents are going to be inconvenienced it makes more sense for that burden to fall on the parents (at least while it is practical). After all, the parents are the ones who decided to get divorced, not the children.

2. It allows for greater flexibility in designing a settlement of a case. By not forcing one spouse out, we haven’t made any irreversible decisions about living arrangements, which more realistically should be based on who can afford the home and not on who has the most reason to leave right now. It also avoids the pain and animosity that comes with a Motion to Vacate. In situations that rise to the level of needing a Restraining Order, the first consideration should be safety. But if the only issue leading to the Motion to Vacate is tension between the parties which is affecting the children, nesting can resolve that without having to brand one party the "bad" one.

3. If parents have available temporary housing for their non-parenting nights then nesting can be cheaper than immediately having to support two full-time households.

The downsides to nesting are:

1. Since it is not a permanent solution, spending too much time working out a nesting plan could be considered wasted cost. The simple fact that it is not a permanent solution could keep the parents from moving towards final resolution.

2. If parents don’t have available temporary housing then nesting could require three households instead of two, resulting in increased cost.

IF you agree to a nesting arrangement the key is still a parenting plan that makes sense for the children and their schedules and the parties' work schedules. But if you can reach a mutually agreeable parenting plan, nesting can be a useful tool in moving a case forward with less animosity and less stress on the children.

Friday, March 18, 2011

Divorce and Taxes: Issue #6. Same Sex Marriages

Unfortunately, the current state of the law creates two classes of married citizens. Traditional opposite sex marriages are one class and same sex marriages are treated as second class by the limitations created by DOMA (the poorly named "Defense of Marriage Act"). DOMA prohibits the federal government from recognizing same-sex marriages. Although the current federal administration has indicated they will not defend DOMA in Court, it is still currently the law of the land. That means that many of the tax issues described in our last few blog posts do not apply in the same way to same-sex marriages.

Issue #6. SAME SEX MARRIAGES: Below we have described the numerous ways that DOMA changes how same-sex marriages are treated when it comes to taxes:

MARTIAL STATUS: For Federal tax returns, same sex married couples cannot file under married status. Therefore, their tax status upon divorce does not change on their federal returns.

ALIMONY: Because same-sex former spouses cannot be considered spouses for federal tax returns, they cannot take a tax benefit associated with a former spouse. Therefore, alimony payments made to a same-sex former spouse do not qualify as tax deductible income to the payor and cannot be categorized as alimony payments for federal tax purposes.

PROPERTY TRANSFERS: Because same-sex spouses and former spouses cannot be considered spouses for federal tax purposes, the exemption on capital gain realizations for transfers between spouses does not apply. Similarly, the transfers of retirement accounts allowed by QDRO between former spouses is not permitted between same-sex spouses. The inability to transfer retirement assets without tax implications can severely inhibit the ability to divide marital assets sensibly.

These limitations imposed by DOMA create extra considerations that must be made in dealing with same-sex divorce cases.

Click here to read Divorce and Taxes: Issue #1. Marital Status.

Thursday, March 17, 2011

Divorce and Taxes: Issue #5. Joint Tax Liability

Issues 1 through 4 all focus on the tax liabilities created post-divorce. But what about tax liability incurred during the marriage?

Issue #5. JOINT TAX LIABILITY: The Court has the power in a divorce case to assign both assets and liabilities, including tax liability incurred during the marriage. If there are joint tax returns filed during the marriage for which taxes are still owed, that liability is owed by both parties to the taxing authorities. The Court may assign that debt to one party by order or agreement, but that doesn't always satisfy the taxing authorities.

Unless you file an innocent spouse application with the IRS (and the IRS makes an innocent spouse determination in your favor), they will still consider a joint debt owed by both parties until satisfied. A probate court order allows you to collect against your former spouse but does not prevent the IRS from collecting against you. Therefore, if there are any assets available for the payment of tax debt at the time of divorce, paying the debt off immediately is recommended.

We also recommend including language in any settlement agreement to deal with the possibility of an audit that assigns debt on a joint return that was previously considered satisfied:

"For the years of the marriage (__________ to __________), if there is a deficiency assessed in connection with any joint federal or state income tax returns heretofore or hereafter filed, or if any other notice is received by either Party relating to any Federal or State tax, interest or penalty claim, the Party notified thereof shall forthwith notify the other Party immediately in writing. Each Party, on account of whose net income a deficiency is assessed, shall pay the amount ultimately determined to be due thereon with respect to his or her net income, together with interest and penalties, and shall pay as well any and all expenses that may be incurred if he or she shall decide to contest the assessment.

In the event that the deficiency is assessed with respect to joint income, each shall pay the deficiencies and expenses in the same proportion as each Party actually received the said gross income for the calendar year in which the deficiencies and expenses are assessed. For purposes of this EXHIBIT “gross income” shall be defined in accordance with the applicable provisions of the Internal Revenue Code of 1986 and in accordance with the applicable provisions of the Massachusetts Child Support Guidelines.

Each Party shall keep the other fully informed of any and all steps taken by him or her with respect to any deficiency assessment. The Party whose actions are responsible for the deficiency, if any, shall in all respects indemnify the other against and hold him or her harmless from any deficiency assessment or tax lien arising out of any joint return heretofore or hereafter filed by the Parties, as well as any damages and expenses whatsoever made in connection therewith including reasonable attorney's fees and costs."

Click here to read Divorce and Taxes: Issue #6. Same Sex Marriages.

Wednesday, March 16, 2011

Divorce and Taxes: Issue #4. Property Transfers

In any divorce where the parties own assets of value, there will likely be some transfer of assets between the parties as part of the divorce settlement. Assets that could be at issue range from tangible personal property (i.e. the pots and pans) to bank, investment and retirement accounts. In addition, the most valuable asset in many marriages is the marital home (and/or other real property). Although generally tax implications in spousal transfers are minimal there are some issues to look out for.

Issue #4. PROPERTY TRANSFERS: Because some assets are post-tax (such as bank accounts) and some assets are pre-tax (such as retirement accounts or capital gains), it is important to understand the tax implications in dividing them. If you trade a pre-tax asset for a post-tax asset of equal value without taking into account the resulting tax liability then you've lost the value of the tax liability. Therefore it is important to understand which assets have tax liability associated with them and whether there are any tax liabilities created through transfer.

PERSONAL PROPERTY WITHOUT CAPITAL GAINS: The transfer of personal property and bank accounts is simple. These items do not typically have any tax basis or capital gains upon transfer or sale because their value is either minor, depreciated, or, in the case of bank accounts, the appreciation is minimal.

PERSONAL PROPERTY WITH CAPITAL GAINS: Similarly, the transfer of property assets with capital gains implications is relatively simple. Pursuant to § 1041(a) of the Internal Revenue Code transfers to a spouse do not result in a gain or loss. This is also true for transfers to a former spouse if the transfer is incident to a divorce. This means that a stock transfered to a spouse or former spouse will maintain the same capital gains characteristics (and tax liabilities) as it would have had in the original spouse's possession. This is also true for an investment account, collectible, or house.

RESIDENTIAL REAL PROPERTY: In the case of residential real property there is a potential benefit to selling the house while still married instead of transferring it between spouses. There is a capital gains exclusion for profits realized on the sale of a residence and it is doubled for spouses. If the parties divorce and one party transfers their interest to the other, and that former spouse then later sells their interest in the residence they will only have the single capital gains exclusion. Of course, this only matters if there is significant equity in the residence.

RETIREMENT ACCOUNTS: Retirement accounts are not typically transferable between anyone, even spouses, without tax consequences. In order to transfer funds held in a retirement account the owner must first remove them from the retirement account, which, if allowed by the rules of the plan, will result in taxable income and, prior to retirement age, tax penalties. However, in the event of a divorce the IRS allows a one-time transfer by Qualified Domestic Relations Order (also known as a "QDRO"). A transfer of retirement account between former spouses pursuant to a QDRO results in a new retirement account held in the name of the other spouse in the amounts and per the terms specified in the QDRO. The retirement income paid from said account will be taxable income upon receipt just as it would have been to the original owner.

Click here to read Divorce and Taxes: Issue #5. Joint Tax Liability.

Tuesday, March 15, 2011

Divorce and Taxes: Issue #3. Child Dependency Exemptions

In any divorce case involving children, child support is not the only financial issue to be determined. Children's health insurance, medical expenses and sometimes extracurricular activity expenses will be determined by the Court. In addition, the Court can determine (or the parties can agree) on who may claim the child dependency exemptions on their income tax returns.

Issue #3. Child Dependency Exemptions: According to IRS Publication 504 you can claim a qualifying child as your dependent if the following are true:

"1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.

2. The child must be (a) under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), (b) under age 24 at the end of the year, a full-time student, and younger than you (or your spouse, if filing jointly), or (c) any age if permanently and totally disabled.

3. The child must have lived with you for more than half of the year.

4. The child must not have provided more than half of his or her own support for the year.

5. The child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund)."

There is an exception for section 3 for divorced or separated parents (or parents who live apart). A child of divorced or separated parents can be claimed if the following four statements are true:

"1. The parents:

a. Are divorced or legally separated under a decree of divorce or separate maintenance,

b. Are separated under a written separation agreement, or

c. Lived apart at all times during the last 6 months of the year, whether or not they are or were married.

2. The child received over half of his or her support for the year from the parents.

3. The child is in the custody of one or both parents for more than half of the year.

4. Either of the following applies.

a. The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later.

b. A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2010 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2010." See Child support under pre-1985 agreement

There are more specific examples discussed in the publication, but the simple explanation is that a custodial parent with more than 50% of parenting time will have the right to claim the child as a dependent unless they voluntarily (or by order of the court) transfer that right to the other parent. If you receive an agreement that one parent is not going to claim the child dependency exemption you should also obtain a Form 8332 Release confirming said agreement.

The reason the exemption matters is because the standard deduction per child for tax year 2010 is $3,650. This means that every child you can claim as a dependent reduces your adjusted gross income by $3,650, which could have a significant effect on your overall tax liability. It is important, therefore, to discuss these tax exemptions when negotiating child support and other financial issues, because they may have significant value (and in some cases more value to one party than the other if you are in separate tax brackets).

Click here to read Divorce and Taxes: Issue #4. Property Transfers.

Monday, March 14, 2011

Divorce & Taxes - Issue #2. Child Support v. Alimony

Obviously not every case has alimony and child support issues, but those divorce clients that do should be aware of some basic income tax issues related to support.


Child Support is the amount of money paid by the non-custodial parent to the custodial parent for the support of the children. In Massachusetts, Child Support is calculated using a formula called the Massachusetts Child Support Guidelines. Child Support is NOT taxable income to the recipient, and is NOT tax deductible to the payor.

Alimony, also called spousal support, is paid by the wage-earning spouse (the spouse who has traditionally earned the majority of the income during the marriage) to the non-wage-earning spouse to allow the non-wage-earning spouse to continue to live in the lifestyle to which he or she has become accustomed during the marriage assuming their is enough income to do so. Alimony is income to the recipient and should be included as taxable income on the Recipients state and federal income tax returns. Alimony is tax deductible to the Payor, and sometimes even payments made on behalf of an ex-spouse, such as health insurance payments may also be tax deductible. You should consult with an attorney to discuss the specific facts of your case if you think you might be making other payments which could be tax deductible as well.

What happens when a case warrants both alimony and child support?

Just as there is no formula for calculating alimony in Massachusetts, there is also no bright-line rule for breaking down how much of an order should be alimony and how much should be child support when a case warrants both. The interplay of these two figures can be very complicated because the tax effect to both the payor and the recipient is very different depending on how a support order is broken down. For more information about the possible ways of dividing support orders review our blog post: How can I calculate Child Support AND Alimony?

Click here to read Divorce and Taxes: Issue #3. Child Dependency Exemptions.

Sunday, March 13, 2011

Family Court not fit for Fido

A recent article published in Massachusetts Lawyers Weekly discussed a case in Middlesex Probate & Family Court where an attorney in a divorce case asked the judge to order one spouse to pay "pet support" to the other spouse to care for the couples' two dogs. The judge immediately refused the request. The article noted that the judge had just heard a series of cases that involved foreclosed houses and parents losing their jobs.

This illustrates an issue that many divorcing couples face when going through the court process. Courts usually only have the time and resources to deal with the "big" issues -- alimony, child custody and support, and property division. That doesn't neatly fit for families that have a variety of other issues, such as pet support or visitation, property sharing, and care taking approaches unique to a child's specific and unique needs.

The best way to address these issues is to come to an agreement on the issue and include the resolution in a separation agreement which can then be presented to a judge. Many couples choose to do this by hiring their own attorneys to work out a negotiation with the other spouse's attorney. An increasing number of couples are also choosing to hire a mediator to meet with both spouses and discuss the questions and concerns that each individual has with the intention of facilitating an agreement.

Attorney Kelsey has been advocating on behalf of clients for years as a family law trial attorney, and is also a trained family law mediator in Massachusetts. Should you have any questions about individual representation or mediation, contact Attorney Justin L. Kelsey, or call 508.655.5980 to schedule a one hour initial consultation.

The Massachusetts Lawyers Weekly article referenced in this post can be found with a subscription at www.masslawyersweekly.com.

Special thanks to Christopher Boylan of Walter A. Costello, Jr. & Associates for his assistance in this post.

Saturday, March 12, 2011

Divorce and Taxes: 6 Issues to Be Aware of - Issue #1. Marital Status

There are two certainties in life: Death and Taxes. We've already written about how divorce and estate planning are interrelated, but what about divorce and taxes?

In all cases a divorce will affect some part of your tax return. In most cases there will be numerous changes in your income tax liability after your divorce and you should give consideration to what changes will take place because this could be a factor in determining the best divorce settlement for you. In some cases these changes may be complicated enough that your attorney should involve an accountant or certified financial planner to help analyze the different options. Our next five blog posts will explore the various issues raised by the interrelation of divorce and taxes so that you are at least aware of the issues to be on the lookout for.

Issue #1. MARITAL STATUS: The most obvious way that a divorce will affect your taxes is by changing your marital status. This is a change to your federal income tax return that will happen after every divorce case.

In Massachusetts, after the expiration of the Divorce Nisi waiting period (90 days from the issuance of the Judgment of Divorce Nisi) when the Judgment of Divorce becomes final you are officially divorced and you are no longer qualified to file a tax return as "married, filing jointly" or "married, filing separately". The key date for determining your tax year marital status is December 31. If your divorce nisi period crosses December 31, then you are technically still married in that tax year and must still file under a married status.

Obviously, marital status has a significant affect on your income tax liability and if you are scheduling an uncontested divorce hearing in the Fall you might want to consider whether it makes sense to schedule it early enough to change your status by December 31, or wait.

Click here to read Divorce & Taxes - Issue #2. Child Support v. Alimony.

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