Tag Archive for: Divorce

Keeping your small business intact when your marriage dissolves

When Milwaukee couples come to a mutual decision to divorce, they might also expect to be able to reach negotiations regarding child custody and property settlements with little interference from a third party. However, when complex issues and high assets are at the center of discussion, negotiations often become very complicated.

One small business owner discovered how complex the divorce process can be after he failed to take precautionary measures before marriage to protect his firm in the event of a divorce. As a result, it took more than a year before the man and his ex-wife were able to reach a divorce settlement, and the process nearly destroyed his business.

The business owner commented that his divorce was “painful” and “costly” for many reasons. In states such as Wisconsin, a small business may be considered marital property. If this is the case, business owners risk dissolving the business by splitting the interest with a spouse, or one spouse could buy the other out. The business owner commented that so much time was spent on retaining his business in the divorce that he lost focus on his consulting firm.

In fact, he believes that his consulting firm lost more than $200,000 in potential business. Fortunately, the man was able to retain his business in the divorce and he eventually turned the company around. However, many attorneys who deal with high asset divorce cases commented that without taking certain measures to protect one’s business in the event of a failed marriage, individuals could see their businesses go under as well.

In order to prevent one from losing his or her small business because of divorce, individuals have several legal options that they can explore. Before marriage, business owners may want to consider preparing a prenuptial agreement to detail what should be considered marital assets or what each spouse agrees to be entitled to if they ever divorce.

Another option is to prepare a buy/sell agreement which helps owners create a plan regarding what should happen to their business and how ownership should be determined in the event of certain triggering circumstances such as a divorce.

Although Milwaukee couples may understand that their marriages cannot be saved, they can take precautionary measures to ensure that they don’t risk losing their business as well.

Source: Reuters, “Divorce has “immense” impact on small businesses,” Deborah L. Cohen, Sept. 28, 2011

Don’t forget about IRS when deciding divorce agreement

The IRS has some very interesting rules when it comes to reporting the income and assets of divorcing couples. To make it even more complicated, those rules are different in community property states like Wisconsin.

The first thing to know before you check the “married” or “single” box on your tax return is that the IRS wants to know what your marriage status was on Dec. 31. If your divorce became final on Jan. 1, you must check the married box. If you live in Wisconsin, the state treats both incomes as community property and you may have to include part of your spouse’s income as your own for the part of the year you were still married.

You and your ex-spouse must also decide who is going to claim head of household – and take advantage of the greater deductions – for the part of the year that you were married. Generally speaking, if you paid for more than half of the housing costs for the year, and/or lived on your own for more than six months, and/or the children lived with you for more than six months, you can claim head of household.

You must also decide who is going to claim the tax write-off for the children. Usually the parent with whom the children live with the majority of the time will take the write-off. If there is shared parenting time and joint custody, some couples take turns claiming the children every other year.

Keep in mind when determining and agreeing to alimony and child support payments that alimony is deductible by the payer and must be claimed as income by the payee. Child support is neither of those things so you must be careful how you describe certain payments in the divorce decree.

When dividing assets and property, the IRS can hit you unexpectedly. If you are awarded part of your former spouse’s retirement account or 401(k) it’s a good idea to roll over that money into a retirement account of your own so you do not have to pay penalties or fees on that money.

To avoid paying capital gains or losses on a property transfer you must complete the deal within a year of the divorce date unless the event is specifically detailed in the divorce agreement. In that which case you have up to six years for any property transfers.

Source: dailyfinance.com, “Don’t Let Divorce Destroy You at Tax Time,” Dan Caplinger, July 23, 2012

Why you need to know about your spouse’s business

Income is a key consideration in any divorce. Under Wisconsin law, both spouses’ incomes are factored into determining how much spousal maintenance or child support one spouse may be required to pay as it is a community property state wherein assets are divided equally. Substantial changes in income may warrant a post-divorce modification in alimony or child support. Given the key role income plays in family law considerations, it is important that anyone going through divorce has a good handle on what his or her spouse earns.

In most cases, a spouse’s income may be ascertained and easily determined by looking at W-2s and pay stubs. Determining income becomes trickier if the spouse is self-employed. When a spouse runs a home cleaning or maintenance business, a lawn service company, or even a bar or restaurant, much of the income will come in the form of cash, which is easily hidden and can be used to purchase a new luxury vehicle, a golf-course condo and other high-end items that significantly increase one’s net worth without ever making its way onto an income statement.

When a spouse runs a cash-based business, questions are likely to arise during divorce about how accurately the income has been reported. If one spouse knows the other spouse had underreported income in the past, there may be a presumption that current income also is being understated. If the other spouse does not have an adequate understanding of how the business operates and where to find the cash flows, the missing income may be hard to track. Options to locate income discrepancies during divorce include a lifestyle analysis tool and a forensic accountant.

An experienced family law attorney can help ensure that all income be accounted for during a divorce, and he or she may also assist in assembling a team of financial experts to track down hidden cash.

Source: Forbes, “What A Divorcing Woman Needs To Know About Her Husband’s Cash-Based Business,” Jeff Landers, Jan. 30, 2013

After missing domestic violence class, Whitefish Bay man charged with battery

Police in Whitefish Bay believe that a man committed battery against a woman after she became upset with him for missing a domestic violence prevention class.

That someone who should be going to a domestic violence prevention class (but evidently isn’t) would once again hurt someone shows just how difficult it can be for domestic abusers to change their ways. That fact means it is sometimes necessary for abused partners to divorce and/or otherwise leave the abusive situation.

The woman — her relationship to the man has not been made clear – told police that when she began to talk to the man about missing his class and not taking his medication, he became angry and slapped her across the face three times.

The man has now been charged with one count of disorderly conduct domestic abuse and one count of battery. If he is convicted, he could spend up to a year in prison.

Any person in the Milwaukee area who has been hurt by a spouse or partner needs to be very careful that they do not let the fact that they have strong feelings for the abuser cloud their judgment. It can be hard when you love someone, but if you are being abused or hurt, you absolutely must remove yourself from the situation. Of course, that can be easier said than done, especially when you have children together, own a home or have mingled your finances. Even so, all it takes is some work with an experience family law attorney to get those issues sorted out.

Source: Whitefish Bay Patch, “Whitefish Bay Man Misses Class on Domestic Violence Then Gets Charged With Domestic Violence,” Joe Petrie, June 21, 2012

Domestic violence a problem that perpetuates

Domestic violence is something that can happen to anyone. Statewide, there have been 25 deaths and another 26 near-fatal incidents due to domestic assaults this year in Wisconsin. Two-thirds of the deaths are attributed to stabbings and firearms. The vast majority of victims are women. The abusers tend to have a need for control, with the methods often getting more severe over time, and also have trouble controlling their anger.

Anyone can be the victim or aggressor when it comes to domestic violence as it strikes all economic strata and types. The Family Center in Wisconsin Rapids has provided help to those who are victims of domestic violence for more than 30 years, averaging 60 families every year. Domestic violence may also be a learned behavior, meaning that abusers may have grown up in living conditions where violence occurred. Abusers may have been victims of violence themselves or seen violence often. Also, being under the influence may contribute to the problem as a person who is drunk or high may have less control of his or her violent impulses.

Domestic violence can involve physical, emotional or sexual abuse, and it can be the root of future issues for victims. Effects from domestic violence could include physical, psychological and social problems that may be difficult to overcome. The importance of detecting and dealing with the underlying quickly cannot be overstated given the risks to all of those involved. Once it has been recognized as a problem, therapy can begin, as well as solutions to the problem itself, such as separation or divorce.

Source: Wisconsin Rapids Tribune, “Domestic violence — it’s closer than you think,” DaNita Carlson, Oct. 1, 2012

Did lax enforcement of laws contribute to deaths?

The Brown Deer, Wisconsin, police department has come under fire following an incident that left four people dead at a Brookfield salon in October. Law enforcement experts say the department’s lax enforcement of domestic violence laws may have contributed to the incident, during which a man killed his estranged wife and two others before killing himself. The police department declined to arrest the man in connection with two prior incidents of domestic assault against his wife, one occurring just weeks before the deadly shooting. Experts say the department’s failure to enforce Wisconsin’s mandatory arrest law put the public at risk.

Wisconsin has one of the most comprehensive domestic violence laws in the nation; while domestic incidents are sometimes intertwined with divorce issues, many victims of domestic violence end up telling police that nothing is wrong. Pursuant to state statute, police must arrest domestic violence suspects even if the victim is uncooperative. Victim rights advocates say mandatory arrest laws are important because victims of physical abuse often fail to cooperate with police out of fear of their abuser and to protect themselves from further harm.

The Wisconsin law also requires local departments to have a written policy on how to handle domestic violence and to file reports in cases where no arrest was made to explain why. An official from the district attorney’s office in Milwaukee County said his office has not received any such reports from Brown Deer. Lawmakers are now looking at ways to add more accountability to the current laws to better protect victims of domestic violence.

If a person has experienced spousal abuse, including physical abuse, stalking, or emotional abuse, they should seek legal help. An experienced family law attorney can help an abused spouse get out of the situation and obtain a restraining order against the abuser.

Source: Milwaukee Journal Sentinel, “With no oversight, police can ignore domestic violence laws,” Gina Barton and John Diedrich, Nov. 3, 2012

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)

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