Tag Archive for: alimony

Supreme Court to address right to an attorney in support cases

This month, the Supreme Court heard both sides of the argument in a case that could have an important impact on Wisconsin child support cases. The case centers on the issue of whether poor parents should be provided an attorney in child support enforcement cases. Proponents of providing parents with attorneys in these cases note that jail time is a real possibility in these hearings, and while attorneys are provided by the state in criminal cases, they are not provided in child support enforcement cases.

During a hearing on the issue, the Justices of the Supreme Court appeared to be wary of creating a bright-line rule that would require states to provide attorneys in child support enforcement cases. Nearly every possible ruling seemed to have practical or procedural problems. Justice Anthony M. Kennedy indicated that he believes is no absolute right to provide parents with lawyers during their child support cases.

Kennedy said that it is difficult to issue a blanket ruling since there are so many child support hearings around the U.S. that all have different circumstances. However, he argued that in some situations it might be necessary.

The current case involves a South Carolina man who was jailed for not making child support payments. The man was also held in civil contempt multiple times as a result of his failure to pay child support.

While civil contempt is used as a measure of coercion and not punishment, the man said that since he was too poor to pay what he owed in child support, his incarceration was turned into pure punishment. He believes that if he had been provided with legal representation during the support cases that he could have avoided jail time.

Some justices expressed concern over the tremendous impact that this ruling could have, as it might also affect alimony cases.

Currently federal laws allow legal representation to be provided only for poor individuals involved in criminal proceedings. However, a majority of states do provide lawyers to individuals in child support cases.

The ultimate question that the Supreme Court will need to address is whether the courts should provide legal representation as a part of due process protections of the U.S. Constitution. A formal decision is expected in June.

Source: The New York Times, “Justices Grapple With Issue of Right to Lawyers in Child Support Cases,” Adam Liptak, 3/23/2011

How alimony payments affect taxes

People who are going through a divorce in Wisconsin might be interested to learn how alimony will affect their taxes. The Internal Revenue Service requires all people who pay or receive alimony to report the payments on their taxes. Recipients of alimony must count the payments as income, and payers of alimony may deduct the payments from their yearly income.

For tax purposes, ex-spouses with an alimony order in their divorce decree must share their Social Security numbers with one another. If an individual fails to provide their ex-spouse with a Social Security number, the IRS may require them to pay a fine of $50. Spouses who are receiving alimony are required to report the full amount of alimony that they are receiving as income on Form 1040.

It is important for divorced people to understand what the IRS considers to be alimony payments. In order to be counted as an income deduction, alimony that is paid must be required by a court order. Voluntary payments and payments that are made to divide marital property are not alimony, according to the IRS. Further, the person who is paying alimony must not share the same household as the recipient, and the payments must be made in the form of cash, checks or money orders.

A person who is going through a divorce and seeking alimony payments might want to speak to a family law attorney. An attorney may be able to represent the lower-earning spouse’s interests at negotiations and court hearings. In some cases, the fact that alimony is deductible can help ameliorate the financial consequences to the payer.

Tony Parker Files for his own Divorce from Eva Longoria

Actress Eva Longoria and San Antonio point guard Tony Parker had what was characterized as a fairy tale wedding in a French castle in 2007. Unfortunately, their marriage was not to last. Earlier this month, Eva Longoria filed for divorce from Tony Parker. Shortly thereafter, Tony Parker filed for a divorce of his own.

Although they were married, the couple spent much of their time apart. Most of the time, Eva lived in Los Angeles and Tony lived in Texas. Amidst rumors of illicit text messages and a possible affair, Eva decided to file for divorce in California. Although Parker and Longoria had a prenuptial agreement that precluded alimony, she reserved the right to seek alimony in her divorce filing. Alimony can be a scary word, and that may have been what caused Tony Parker to file for divorce in Texas a few days later.

Alimony goes by several names. We call it maintenance in Wisconsin. In Texas, it is referred to as maintenance as well. Alimony or maintenance obliges a spouse to continue to pay for the other spouse’s living expenses after divorce. Although we have a different name for the concept than California, alimony in Wisconsin and California works much the same way. Whether to award maintenance is largely a matter of judicial discretion. Family law judges consider a variety of factors including the length of the marriage, the income and earning power of both spouses and the health of the spouses.

Even though Texas and Wisconsin both call it maintenance, Texas maintenance law works differently in significant ways. In Texas, family law judges have less discretion to award maintenance. In fact, Texas only allows maintenance in a few specific situations including that the spouses need to be married for at least 10 years. Since Eva Longoria and Tony Parker were only married for three years, Eva Longoria would not be eligible for maintenance in a Texas divorce.

Source: Los Angeles Times: Tony Parker files for divorce from Eva Longoria, Texas-style; Christie D’Zurilla, 11/22/2010

Wisconsin Supreme Court to Decide Important Divorce Issue

How professional goodwill should be considered by a court when it is calculating spousal maintenance and marital property division is one of the more hotly debated issues in family law. Courts across the nation have come to different conclusions on the issue. Some courts will count professional goodwill only once for either maintenance or property division. However, other courts will use goodwill to determine both property division amounts and again for calculating spousal maintenance (sometimes called alimony.) At least one Wisconsin Court of Appeals has decided that business goodwill can be counted twice.

This last July, the Court of Appeals decided the case of McReath v. McReath, which allowed business goodwill to be counted twice. This month, the Wisconsin Supreme Court accepted review of the McReath case.

This case will have important ramifications for divorcing professionals throughout Wisconsin. Goodwill is a concept that broadly encompasses the intangible assets of a business, including customer loyalty. Even though goodwill is relatively hard to define with precision, Wisconsin courts will include it when dividing marital property.

In the McReath case, the husband is a dentist with an orthodontics practice. The McReaths were married for 20 years, and he had acquired the practice early in their marriage. In the marital property division contest, the trial court accepted the wife’s valuation of the practice at $1.058 million and it granted her half of that amount.

The trial court also awarded the wife $16,000 per month in maintenance for twenty years. The husband argued that this amounted in a double counting of his professional goodwill, and therefore requested that the property division amount be adjusted downward. The court of appeals rejected this argument, but did note that Wisconsin law is somewhat ambiguous on this subject. By accepting the McReath case, the Wisconsin Supreme Court has the opportunity to resolve the uncertainty in Wisconsin property division and maintenance law.

Sources:

State Bar of Wisconsin, “Wisconsin Supreme Court adds eight cases to docket, including high-capacity well dispute,” 12/16/2010

McReath v. McReath, 789 N.W.2d 89 (Wis. App. 2010)

Wisconsin Court Deciding Whether Alimony “Floors” are Enforceable

The Wisconsin Supreme Court will answer the question of whether a court-ordered minimum on spousal maintenance is enforceable according to public policy. The question is related to case of an ex-husband who asked the court to change his alimony order after he lost his job.

According to a recent article from the State Bar of Wisconsin, the court ordered the man to pay his ex-wife $1,203 per month for no less than 33 months. After 17 months, about halfway through the term of the order, the man lost his job. He asked the court to adjust the length of the order downward so that he would not have to continue paying the maintenance.

The court denied his request and the ex-husband appealed. The appeals court, finding uncertainty in the Wisconsin law on the subject, certified the question of whether a maintenance “floor” like the one in this case is enforceable.

Under Wisconsin law, maintenance “ceilings,” or a maximum that cannot be adjusted upward as circumstances change, is not enforceable. But up to now, state courts have not conclusively addressed maintenance “floors,” which prevent downward adjustments.

State appeals courts have held that floors are against public policy if the court does not include a time limit on the floor or at least an opportunity to review whether circumstances have changed since the ruling. But in a 2007 case, the Wisconsin Supreme Court mentioned in a footnote that maintenance floors are good for public policy because they ensure that the divorced couple’s children received a certain minimum of financial support. That comment was not part of the holding of the case, so it does not have the force of law, but it may indicate the court’s thinking on the question.

Source: State Bar of Wisconsin, “Case may clarify the enforceability of child support agreements that set minimum standards,” Joe Forward, January 11, 2011

Tax Considerations When Preparing for Divorce

Although taxes may not be the first thing on the minds of many people going through a divorce, divorce has significant tax consequences that are worth considering.

Firstly, your marital status on December 31 determines a taxpayers filing status for the year. If you are divorced as of December 31, then you will generally be considered single for that year for tax purposes. If you are married as of the end of the year, you either will be considered as married filing jointly or married filing separately. Generally, the most beneficial classification is married filing jointly. Because of the way the tax code operates, it can often be financially beneficial to wait until the new year to seek a divorce.

Secondly, children are another important tax consideration. In order to determine child tax credits, tax forms ask about the number of children who lived with you during and after a divorce or separation. Most of the time, the custodial parent is entitled to child tax credits. However, divorce decrees can specify that a noncustodial parent can claim the tax deduction for the children. Depending on the income of the spouses, this can be beneficial for both divorcing parents.

Lastly but importantly, the tax code treats alimony and child support very differently and it is important to consider the distinction between the two when structuring a divorce settlement. Generally, child support is not considered to be taxable income nor is it a deductible expense. This means the spouse who pays child support cannot deduct this from his or her income, and the receiving spouse does not pay taxes on child support received. Alimony is deductible for the paying spouse, and the spouse who receives it will be taxed on the amount received.

Source: Personal Finance Bulletin, “Divorce and Income Tax: Untying the Knot and Counting the Cost,” Susie Bayer, 1/6/2011

When are lifetime alimony awards appropriate?

Alimony, or spousal maintenance as it is called in Wisconsin, is one of those concepts of family law that has been around for quite some time. In law in general, and in family law specifically, some of the oldest concepts are the slowest to change. With that in mind, we would like to tell you about a recent alimony case that has made all the way to the Supreme Court of Tennessee.

The Supreme Court of Tennessee is now considering making changes to the state’s alimony award by putting an end to lifetime payments. Some attorneys are supportive of the change stating that lifetime alimony payments discourage individuals to remain married. The case that has reached the Supreme Court involves a couple that had been married for more than 20 years.

The wife was an information technology employee who made more than $70,000 per year. The husband was a controller at a large company, making nearly $140,000 per year. Their two children were grown so there were no child custody issues. The divorce began in 2007 and was appealed after a trial. On appeal, the state Court of Appeals ordered the man to pay his ex-wife a monthly alimony of $1,250.

The ex-wife claimed that, early in their marriage, she had helped put her husband through college and that he would not be earning such a high yearly salary without her previous support. She also claimed that her ex-husband had initiated the breakup, entitling her to alimony.

The husband denies that he caused the divorce and does not agree with the court’s ruling. He has said that he should not have to pay alimony since his ex-wife is educated and employed and will have no difficulty maintaining her previous lifestyle.

This type of alimony has become less common over the past few decades and this couple’s situation particularly seems to be an unlikely candidate for lifetime alimony. Lifetime alimony awards are generally reserved for an older individual who had been married for an extended period of time and had sacrificed a career for the marriage. Nevertheless, trial judges still have discretion in the amount of alimony, if any, they order. Oral argument in the case is scheduled for later this spring.

Source: The Tennessean, “TN Supreme Court considers change in alimony payments,” 3/10/2011

Divorce and income taxes in Wisconsin

We are all used to tax day being April 15. But this year, the federal tax day is April 18 because a Washington D.C. holiday will many keep government offices closed on April 15. Even with tax day delayed three days, many of our readers have questions about how divorce can affect their income taxes.

Divorce can have a tremendous effect on income taxes, and some of the most impactful items in a divorce may not be obvious to the untrained eye. Because of this, it is very important to work with an experienced family law attorney who can tailor divorce documents to your specific situation. However, there are some tax and divorce basics we would like to share with you.

In many of the divorces we handle, the issues of child support and alimony come up. Many divorcing spouses understand that child support is a payment from one spouse to the other meant to pay for the costs of raising a child. Similarly, alimony is payment from one spouse to the other to help the receiving spouse maintain his or her standard of living after the divorce. In some people’s minds, this might make alimony and child support relatively interchangeable.

Nothing could be further from the truth, especially from a tax perspective. This is because of the way the tax code treats alimony and child support. Child support is considered tax neutral. This means that the spouse who pays child support cannot take the amount paid for child support as a deduction. On the other side of that coin, the spouse receiving child support will generally not be required to pay income taxes on it.

Alimony is different. If certain conditions are met, alimony is deductible for the spouse who pays and the spouse who receives will generally pay taxes on it. In a high assets divorce, the difference between child support and alimony could amount to thousands of dollars at tax time.

Source: Time Magazine, “Divorce and Taxes: Five Things You Need to Know,” Kelly Phillips Erb, 4/6/2011

Lifetime alimony lost due to Facebook flub

In the past, we have written about the use of Facebook evidence in divorce cases. The use of Facebook evidence to resolve disputed claims in a divorce is becoming increasingly common. A recent divorce case illustrates how impactful Facebook evidence can be.

A family court judge recently sided with an ex-husband on the issue of alimony after seeing evidence from a social networking site that the man’s former spouse was not disabled as she had claimed, but was actively working as a belly dancer. The ex-wife had claimed to be disabled in a car accident and was requesting $850 per month in alimony from him for the rest of her life.

Despite her claims of being disabled, she apparently spent several hours a day performing as a belly dancer. She also spent many hours each day posting about her belly dancing on the Internet. The posts made their way into court as evidence on the issue of her need for alimony.

The belly-dancing woman told the judge that the reason she belly danced was for physical therapy reasons, as a way to recover from injuries she had received in a disabling car accident in the mid-1990s.

The court did not find the woman’s testimony credible compared to the evidence the ex-husband presented clearly showing the effervescent blogs of his ex-wife’s belly dancing activities. The judge took a dim view of the woman’s claim and ordered that her requested $850 monthly spousal support for a lifetime be reduced to $400 each month for limited time of two years.

In addition to cutting the amount and the time limit on the spousal maintenance owed to the ex-wife, the judge in the case also decided that the ex-husband should receive 60 percent of the proceeds of the sale of the couple’s home and that the woman should pay thousands of dollars for her ex-husband’s legal fees.

Source: New York Post, “‘Disabled’ woman seeking alimony revealed to be belly dancer,” Dareh Gregorian, 4/16/2011

Alimony changes with the times

The traditional view of alimony in Wisconsin is that of an ex-husband paying an ex-wife. However, incomes between spouses have begun to even out over the years. In many cases, women’s salaries exceed men’s, clearing the path for divorcing husbands to receive spousal support.

Alimony has never been just a one-way legal street for females, although most courts today grant more women post-marital support than men. Marriages have evolved from the days of single income households, when men were the only wage earners and women contributed to marriage by forfeiting paychecks to stay at home and raise children.

Women have moved into the workforce and increased their personal earning power. Research on gender job income among married couples in 2002 revealed that in as many as one in three marriages, wives made more money than their husbands did.

The research found that when both spouses worked, nearly one-fourth of women earned more. Another 6 percent of married women were breadwinners by default because their husbands were unemployed.

Family law judges began to notice the financial impact of married women’s incomes in the 1970s and began to take that into account during divorce settlements. Income is not the only criteria courts consider. The ages of both spouses, educational backgrounds, current occupations and health conditions factor in to a judge’s alimony decision.

Alimony is designed to help divorcing spouses continue the financial lifestyle each had during marriage. Laws pertaining to alimony have long been gender neutral and based on an income disparity between spouses. For high-income women in unhappy marriages with low-income spouses, it is more likely today than it has ever been that a husband’s request for alimony will be considered.

Source: Huffington Post, “Women Increasingly Pay Alimony,” Lili A. Vasileff, 6/9/2011