Thursday, March 29, 2012

Child Support v. Alimony - What happens when the non-custodial parent needs support?

We received the following question as an Anonymous Comment on our previous post: Alimony Reform and Child Support: What will Change?

How will you calculate child support in a case where the dependent spouse does not have physical custody and the incomes of the parties are grossly disparate?

With the new Alimony Reform in Massachusetts taking effect on March 1, 2012, we have been hearing this question a lot.  Although it is an unusual situation to have the custodial parent also be the higher earning spouse, it does happen.

Under the new Alimony statute:
"For purposes of setting an alimony order, the court shall exclude from its income calculation:
(1) Capital gain income and dividend and interest income which derives from assets equitably divided between the parties under Section 34; and
(2) Gross income which the court has already considered for setting a child support order whether pursuant to the Massachusetts Child Support Guidelines or otherwise; provided that nothing in this section shall limit the court’s discretion to cast a presumptive child support order under the Child Support Guidelines in terms of unallocated or undifferentiated alimony and child support."
Since the Massachusetts Child Support Guidelines presumptively apply up to a total gross income of $250,000, this section means that cases where the total gross income does not exceed $250,000 there won't be any income leftover to calculate alimony (absent some deviation factor).

While this could mean less overall support for cases where the custodial parent is also the lower wage-earner, the impact is even more significant when the non-custodial parent is the lower wage-earner.  While the non-custodial parent who earns less gets a break on child support, it seems unfair to say they never qualify for alimony if the total gross income of the parties is less than $250,000.

For example, consider the following sample case:

Mom has been the primary care parent and is a doctor who owns her own practice and has reasonable control over her hours and earns $200,000 per year.  Dad is a CNA who works odd hours and therefore has not spent as much time with the children.  He earns $35,000 per year.  The parties have been married for 15 years and have two children, ages 4 and 5.

The Massachusetts Child Support Guidelines will require that Dad pay Mom $94 per week in child support (approx. 14% of his income).

Since all of Mom and all of Dad's income were used in calculating child support a pure reading of the statute leaves nothing left to calculate alimony.  However, if there were no children this would clearly be an alimony case.  One argument in favor of this reading is that Mom who is the custodial parent in this case will be able to provide a better household for the children based on her higher income and no alimony.  The counter to that argument, though, is that keeping the Dad from having a similar lifestyle could damage his ability to spend time with the children and their desire to spend time at Dad's house, thereby encouraging Dad to be less involved rather than more involved in the children's lives.

It is unknown at this point how the trial courts and the appeals court will read this section.  Many practitioners that we have spoken to believe Judges will look to find a way around this "unfair" result, and use deviation factors to allow them to award alimony to the lower-earning spouse in a case like this (or at least reduce or eliminate child support).

The problem with these cases is that they are often not as clear cut as the example above, and often will involve prejudicial judgments made about the low-earning father or the non-custodial mother (i.e. assuming something is wrong with them).  Until the Appeals Court or SJC rules on this type of case we won't know for sure how this case will be dealt with, and we expect that the lower courts will vary in their application of the statute to these types of cases.

Thursday, March 22, 2012

Divorces with Disabled Spouses or Children: How a Special Needs Trust Can Help!

Guest Post Introduction: When a divorce case involves an incapacitated spouse or child, there are unique issues regarding the availability or qualification of that disabled individual for public benefits. When these issues arise it may be necessary for your divorce attorney to also consult with an expert in the area of special needs. Neal A. Winston is a partner at Moschella & Winston, LLP who has been practicing in the areas of special needs and public benefits law for over 30 years. Neal wrote the following guest post for us regarding:

How a Special Needs Trust Can Help in cases with a Disabled Spouse or Child!

Spouses and children receiving court-ordered support may also be eligible for needs-based public benefits such as MassHealth (Medicaid) and Supplemental Security Income (SSI). Both programs are income sensitive, and support that is directly received, including child support to the custodial parent, can cause these benefits to be reduced or terminated. However, if a Court orders the support to be paid directly into a Special Needs Trust (SNT) drafted with certain provisions, then the support would not be countable as it goes into the trust. Distributions from the trust can then be structured in such a way as to have minimal or no effect whatsoever on public benefits received by the beneficiaries.

In a recent case, in which Kelsey & Trask and I share a client, a severely disabled woman in her late 30s, required a Personal Care Attendant through MassHealth to remain in her home. I created a SNT for her, and Attorney Kelsey obtained a Court order for the alimony to be paid directly into the SNT. To our surprise, MassHealth then rejected the procedure.

The agency first claimed that the trust had to be a Medicaid “payback” trust, which is not required by the law or regulations. I took the matter to a Fair Hearing, and the agency then changed its position and claimed that the Court does not have authority to order the alimony to be paid into a trust in order to be exempt as income for MassHealth eligibility. The Hearing Officer rejected all of the agency’s arguments, determined that Court-ordered alimony into a properly drafted SNT would not be countable as income, and reversed the benefit termination decision.

We are increasingly hearing that the MassHealth agency is being very aggressive in attempting to force extra-regulatory restrictions on the use of trusts under these circumstances. This case had a fortunate outcome, and it is important that if others face the same trust counting challenge by the MassHealth agency, that they not necessarily accept the agency’s decision as being right or legal. However, sometimes the client would feel it more helpful and less expensive to comply rather than appeal. The pros and cons of that option should be analyzed in each individual case.

A copy of the hearing officer’s decision is available here.

Tuesday, March 20, 2012

How are Charitable Contributions treated in a Divorce?

In any divorce case in Massachusetts, whether contested or uncontested, you are required by Massachusetts Supplemental Probate Court Rule 401 to file a Financial Statement.

The form of the financial statement which each party must complete is dependent upon his or her income. A party whose income equal or exceeds $75,000.00 must complete the long form financial statement. A party whose income is less than $75,000.00 must complete the short form financial statement.

The long form is 9 pages long and requires more details than the 4-page short form.  The long form includes a line-item for Charitable Contributions deducted directly from your paycheck (on page 2) and a line-item for Charitable Contributions paid as part of your regular Weekly Expenses (on page 4).  If you make regular contributions that are deducted from your pay then those should be entered on page 2.  If you make regular contributions from your take-home income we suggest that you average those contributions over a year, divide by 52 and enter them on page 4.

Even if you are required to fill out the short form you can include any such charitable contributions in the "other" line-items on page 2.

Unless these amounts are significant, they are unlikely to have a major impact on your divorce case.  If, however, you are claiming that you do not have enough money to pay your household bills when arguing for or against support, your ability to pay for non-essential items such as charitable contributions could be used to argue that you have a reduced need for support.  I seldom see this issue raised however, as the amounts are usually minimal and even divorce attorneys are not likely to argue that charitable giving should be punished.

For more information about divorce contact Attorney Kelsey or call 508.655.5980.

Also, if reading this post put you in a charitable mood we invite you to donate to the One-Mission Buzz-Off, which is a charity to benefit Children's Hospital Boston and the vital programs and services they provide to help kids beat cancer.  In support of this charity Attorney Kelsey will GO BALD on June 3, 2012 at their annual Buzz-Off.

Thursday, March 15, 2012

Should I pay for my divorce with a Credit Card?

Whether or not your divorce attorney accepts credit cards, you should consider whether it makes sense in your case to take advantage of that option.

In many cases when a client pays with a credit card it just a matter of convenience or adding to their "miles".  However, in some cases, it is because they have no other option.  Going into debt to pay for your divorce attorney's costs should be done very cautiously.  While we believe that an attorney can provide a great benefit to parties in a divorce case, that benefit must be balanced against the cost of those services.  You don't want to end up figuratively paying for your divorce because you didn't get advice, or got bad advice, but you also don't want to literally being paying for your divorce for years if you can avoid it.  Here are some basic tips to avoid going into debt for your divorce:

Try to Keep Costs Down

You can assist your attorney in many ways, for instance by providing them timely with documents and information they request.  The better and more efficiently you communicate with your attorney, the lower your overall bill will be.

Make Business Decisions

While some decisions in a divorce are not financial, such as deciding on a parenting plan, most of the decisions that must be made do relate to your assets, debts, expenses and income.  Be conscientious of the fact that every dollar you spend on your attorney is one less dollar left in your marital estate.  If you can limit the issues in your case to less than you will spend on your attorneys to fight, then you should be able to settle quickly.  We call this making a "business decision" rather than an emotional one because in business we often must make choices that are not perfect but make financial sense.

Even in cases that involve non-financial issues, there may be cheaper more efficient ways to reach a settlement, such as using a parent coordinator or mediator to settle a parenting plan rather than taking your custody fight to trial.

Make a Plan for the Future

Finally, one of the most powerful ways to get over the emotion of a divorce and reduce the cost is to think about what you want your life to look like 1, 2 or 5 years from now.  Making a plan for the future, will help you decide on the best settlement of your case, and will require you to consider how the cost of your divorce will affect that plan.

Credit Cards can be a tool to help you move on with your life, but stay mindful of how you use them and make sure that the costs you are agreeing to pay fit into your budget.

At Kelsey & Trask, P.C. we do accept credit card payments with one exception (debtors in a bankruptcy case cannot pay for our fees by using their credit card).

Monday, March 12, 2012

Reaction to Editorial claiming "New alimony law is bad for women"

Wendy Murphy, an adjunct professor at New England School of Law and a former prosecutor, wrote an editorial at CNN.com entitled New alimony law is bad for women.  The article so poorly misstates what the law was in Massachusetts before The Alimony Reform Act of 2011 (which took effect on March 1, 2012), that I felt compelled to respond:

New Law does not Eliminate Lifetime Alimony in all Cases.

Ms. Murphy argues that the the new alimony law is unfair to women who are overwhelmingly the majority of alimony recipients because it limits the duration of alimony orders based on a formula.  She claims that the formula is arbitrary and that alimony "won't last a lifetime."  She admits that this is an oversimplification of the law, but it goes farther than that.  This is a misstatement of the new act because there are circumstances in which Judges can still order lifetime alimony, and in any marriage over 20 years the alimony order would be indefinite.

Under Old Law, Lifetime Alimony was the Default, not "rare".

Ms. Murphy correctly points out that the outcry which was partly responsible for passing of the new law surrounded primarily men (and/or their second wives) who were upset about lifetime alimony awards.  However, she claims that under the old law "Lifetime alimony, in such circumstances, is terribly unfair. But it's also rare, especially these days", and that "Lifetime alimony has been a problem, but the system mostly self-corrected when judges stopped routinely ordering it."   This is a gross misstatement of the previous law.

Under the old alimony law lifetime alimony was the only option for judges to order.  Although the orders were technically indefinite because Judges were not allowed to order duration limits, an indefinite endpoint meant that orders were for a lifetime unless there was a future change in circumstances.  This was the same for marriages of 5 years and 20 years.  Whether you look at the law from the perspective of women or men, treating marriages of 5 years and 20 years the same is unfair.

Unknown Effect of new Law on Stay-At-Home Mothers

The other inaccuracy in this editorial, is that Ms. Murphy assumes she knows how this new law will be enforced by Judges. The statutory changes include the ability for judges to take alimony orders into account when making property divisions. So a financially disadvantaged spouse (such as a stay-at-home mom) who has given up job prospects for the marriage might have limited alimony, but could also argue for a greater share of the assets. We don't know yet how this brand-new law will play out and whether or not it will be unfair to women or men, or neither, because we don't yet know how the Judges and the Appeals Court will interpret and enforce the various provisions as a whole.

Conclusion: Some Perspective is Important

While Ms. Murphy's effort to criticize the new law goes too far because of her failure to understand the old law, it is important to recognize that her conclusion might still be correct.  Because we don't yet know how the courts will interpret this new law, we don't know if it will have a greater negative impact on women, as she assumes.  If it does have a such a strong negative impact then perhaps some changes might be needed again in the future.

The history of alimony and divorce is traditionally unfavorable to women.  Until 1870 women couldn't own property in most circumstances and even after that alimony was typically used as a property substitute, and usually only awarded in cases where wrongdoing by the husband was proven.  For women who were unable to earn the same way as men, and much more likely to be stay-at-home mothers, this was truly unfair and unreasonable.  In Massachusetts, a more specific law requiring an alimony evaluation based on need and ability wasn't entered until 1974 along with no-fault divorce.  This law finally recognized the realities of a divorce, and the needs of the disadvantaged spouse.

But a lot has changed since 1974 and it is the job of the law to evolve with society.  The Alimony Reform Act of 2011 was a reaction to an unfair situation created by the blanket lifetime alimony ordered under the old law.  To ignore the fact that the old law was archaic and downplay lifetime alimony orders is just as ridiculous as suggesting that women still shouldn't be able to own property.

On a personal note:

As a Father, I recognize that even though my wife went back to work after both of our children were born, the time she lost for maternity leave and the time she misses work when the children are sick negatively affects her career path.  Having children hasn't had the same impact on my career being self-employed. I don't know if there's a fair or perfect way to compensate her for that other than appreciating her and telling her that I appreciate her. This article looks only at the narrow idea of compensating mothers for this loss with alimony orders in a divorce.

The reality is that society as a whole could do a better job of recognizing the value of motherhood and compensate women better for this service they provide to society, instead of only giving them an advantage if they get divorced.  Since 1974, I think American society has gotten better at recognizing the value of motherhood and women in society, and the greater likelihood that both parents work is something the law must evolve to recognize.  Because of that, I think The Alimony Reform Act of 2011 is a step in the right direction and contrary to Ms. Murphy I think we should keep moving forward instead of looking back.

Thanks to Amanda Glinski for bringing this editorial to our attention.

Related Posts Plugin for WordPress, Blogger...