Archive for divorce

Divorce Is Different On Rough Economic Seas – How a Recession Affects Divorce

If another recession is looming in 2019, it could greatly affect decision making during a divorce.
If another recession is looming in 2019, it could greatly affect decision making during a divorce.

It has been nearly a decade since the Great Recession. Since then, the U.S. economy has rebounded and then some. Unemployment is at record low levels, and people were finally starting to breathe easier about their financial circumstances.

But economists will tell you that recessions are cyclical and follow periods of strong growth, like the one we have recently enjoyed. It is likely another recession looms ahead. It could be mild or it could be more serious.

During the last recession, so many couples came to my office making decisions about their divorce to try and avoid financial hardships.  Divorces during a recession can be different.  Here are some thoughts based on my experiences.

Financial Strains Make Decisions for Divorce During a Recession More Difficult

Unemployment puts a tremendous strain on any marriage. Often it was the catalyst or the “final straw” and divorce was the result. Divorce itself is financial straining. Add a recession to the mix,  and the circumstances were catastrophic for everyone.

First, homes and other real estate had lost value. It meant in many cases couple had negative equity – they owed more than their real estate was worth. Sometimes people could afford a buy out allowing them to keep the house if credit was available. But in the last recession, banks became stingy about lending. People simply could not get loans to refinance the house.

So there were many couples who made the decision to defer sales—meaning they co-owned their real estate until a later time. Divorcing couples might even choose to live together in the family home even after legally divorcing, because there was no other option without losing money on the sale.

If a couple couldn’t make any of these options work. the alternative was to sell the home in a bad market. When this was the last resort, there were many short sales.

Others suffered from foreclosures on their property. Often bankruptcy wasn’t far behind.

Kids Take A Financial Hit

Couples would disenroll their kids from private schools, or take them out of expensive extracurricular programs like sports or music to save costs.

Health insurance was a big deal. If a spouse lost work and lost health insurance coverage from their former employer, couples might end up bearing the cost on their own, putting strain on their family. Sometimes a spouse in the role of full-time parent was counting on healthcare coverage from the working spouse. But after a divorce during a recession, they would face being cut off.

People who divorced prior to the recession suddenly found themselves unable to pay their monthly support payments, and would fall behind. The ex-spouse and the kids suffered from losing the income. Tensions would flare and fights over money would affect co-parenting relationships.

Gray Divorce Offers Unique Financial Issues

Divorcing close to your retirement date introduces new considerations, especially in tough economic times.

For divorcing couples close to retirement, which started being referred to as  “grey divorces,” their retirement accounts including IRAs and 401(k)s tanked right before they had to count on them for income. This is hard enough when married, but when a couple splits up in their 60s or 70s, the financial hit is devastating. There wasn’t enough time to recover before retiring.

It’s hard to determine whether divorce rates increased or decreased during the last recession. One theory is that financial strains on marriages caused more couples to divorce. But it’s also possible some people chose not to divorce during a recession because they just couldn’t afford it.

Impact of Impending Recession on Your Divorce

It’s my belief recession is inevitable, and not too far off. For couples contemplating divorce during tough financial times, economic decisions will affect many aspects of their lives during a divorce.

Divorce is hard enough on a family. Divorce affected by a financial recession is even worse. If divorce during a recession becomes inevitable, people can lessen the financial burden by pursuing mediation and other no-court options.  These options give people the opportunity to divorce for less money.  They also allows couples to find creative solutions when dividing financial assets, figuring out ways to pay for their children’s education, or preserving retirement funds.

Take the Grinch Out of Holiday Shopping After Divorce

The idealized Norman Rockwell image of the nuclear family holiday shopping isn't the reality for the large number of divorced families in the U.S.

The idealized Norman Rockwell image of the nuclear family isn’t the reality for the large number of divorced families in the U.S.

Happy holiday images depict a perfect family, home and hearth. Norman Rockwell perfected this idealized holiday with a mom, dad, and those above average children gathered around the Christmas tree or lighting a menorah.  Of course there’s a nice fire crackling in the fireplace. Children are spellbound by lights, ornaments, wrapping paper, and gifts.

This ideal is far from reality for many families after a divorce. Unfortunately, some parents make the circumstances much worse than they need to be. One child of divorce confided in me recently. She lamented years later as an adult how the holidays were the worst part of her childhood. Her divorced parents seemed to fight even more than normal.

Do you really want your kids remembering the holidays this way for the rest of their lives? Do you want your kids to celebrate all the joys of the season, or suffer through the Nightmare Before Christmas – and after Christmas, too!

One big source of friction after a divorce during the holidays revolves around buying gifts. Some folks really struggle with holiday shopping. It’s something divorced parents don’t often think about. But it is important to figure out how to coordinate presents for your kids from both of you and both sides of the family together.

Here are some tips from an experienced family law attorney who has seen divorce parents at their worst during the holidays.

Don’t turn Christmas into a competition

The holidays are meant to be a special time for families. You’re missing the point if you turn it into an ugly war between parents trying to outdo the other and literally buy your kids’ affection. If there’s a really special gift your child would like, try to agree to go in on it together and make it a joint gift. It could mean the world to your child if the tag said “from Mom and Dad.” This is the greatest gift to the child of divorced parents.

Make a list together for holiday shopping

I know, it was a monumental struggle to agree on the holiday shopping list when you were married.  How can you possibly work together now? I assure you it’s possible. Make a point before the season starts to exchange ideas about what gifts you’re going to get the kids. It will be a mess if you both buy the same things. Agreeing on a shopping list goes a long way to reduce awkward moments.

Discuss what gifts are appropriate

Try to work together within reasonable limits to make your child's holiday dreams a reality. Photo: Anna Gin/Creative Commons

Try to work together within reasonable limits to make your child’s holiday dreams a reality. Photo: Anna Gin/Creative Commons

Don’t assume you agree on what gifts are appropriate or not appropriate for your child. Talk about it. I’ve seen many occasions where one parent who wants to limit screen time is upset when the other parent bought a smartphone or Xbox for a child. In one case, a parent bought an “M-rated” video game against the other parent’s wishes. Parenting confusion with different expectations confuses kids. You may have different values, but you need to figure out a way to meet in the middle and compromise. This is hard enough for married couples!  If you get stuck and can’t agree, consider meeting with a mediator to find solutions.

Agree on a budget

I’ve seen too many co-parents compete with one another about who can outdo the other parent.  Agree on a budget and stick with it.

Consider opening gifts as a family together

Consider opening presents together with your kids.  Children appreciate time with both parents.  This might not be a choice for everyone. If it’s too difficult and you can’t keep it together, you may need to decline. There is no shame in this. But if you can pull it off and put your differences aside long enough to get through the holiday, it can really be special for your children. Many years later when they are adults, perhaps parents themselves, your kids will understand the real gift you gave them.

Holidays after a divorce blow up the images of the perfect holiday, making the painful changes in your life even harder to cope with. It’s hard for your kids, too.  But this is the season of ‘Peace on Earth.’  With some effort – maybe a LOT of effort – you can make the holidays into special memories rather than a nightmare haunting your kids for the rest of their lives.

A SMART Agreement for Holiday Co-Parenting

SMART parenting agreements can ensure happy holidays even when you’re divorced.

At Weber Dispute Resolution, we believe in crafting SMART agreements.  SMART stands for Specific, Measurable, Attainable, Relevant and Time-Bound. SMART agreements help with enforcement, and make it clear to both parties what is required for them to stay within the boundaries of their agreement.

Here’s why a SMART agreement makes things so much easier:

  • When an agreement isn’t SPECIFIC, parties become confused over exactly what they agreed on
  • Unless performance can be MEASURED in some way, it is difficult to determine where the boundaries are, and when they’ve been broken.
  • Any agreement must be ATTAINABLE – something you can easily comply with. People can’t be expected to do the impossible – it’s setting them up to fail.
  • Agreements require RELEVANCE to make sense in any particular circumstance.
  • Finally, linking the provisions to TIME-BOUND deadlines lets people know when things should happen.

So, unless your agreement is a SMART agreement, there is a good chance you will be facing problems down the road.

This is especially true when we are talking about holiday co-parenting.  People can become emotional during the holiday season. It’s understandable and predictable. Holidays are all about family.  Not having your children with you and with your extended family during the holidays can be hard to cope with.

Because people are so emotional about the holidays, parenting decisions about holiday traditions and practices can become a significant source of conflict.  When I used to litigate family law cases in courtrooms, unfortunately for my clients, they paid me a good amount of money to sort out holiday schedules and last-minute misunderstandings.

With a SMART holiday co-parenting agreement, you can avoid big emotional blowouts AND writing big checks to lawyers. Here’s how.

SMART – Specific

When crafting holiday orders and agreements, make sure you are very specific about what the schedule is.  Just saying that the

Put your mediated agreement in writing if you intend it to be legally binding. Photo: Antonio Litterio/Wikimedia

SMART agreements are specific. Photo: Antonio Litterio/Wikimedia

kids are with mom on Christmas in even-numbered years and Dad in odd-numbered years is a start.  But it is not very specific.  Get into the weeds about when exactly Christmas starts and ends.  Where will the kids be delivered or picked-up.  I have even seen people get specific about whether a joint present opening time would happen and how it would go.  The more specific your agreement is, the less likely there will be misunderstandings.

Another example is with New Year’s Eve and Day.  When talking about New Year’s Eve and Day and odd years versus even years, which year counts for odd or even?  Is it New Years Eve, which falls in one year, or New Years Day, which falls in the following year?  This kind of lack of specificity can lead to confusion.

A colleague of mine recalled a poll on a local list serve account for family law attorneys.  She learned that when confronted with the question of which day, New Year’s Eve or New Year’s Day, counts for purposes of even and odd, roughly half of the respondents thought it was New Years Eve while the other half thought it was New Years Day.  Get clear, and you can avoid trouble.

SMART agreements are timebound.

 

SMART – Measurable and Time-Bound

When talking about parenting schedules, measurable and time-bound tend to go together. It’s good practice to have a clear start and end time when describing holiday periods. A common provision is  “The child shall spend Father’s Day with the father every year.” This is too vague.

Much better and a more effective provision: “The child shall be with father on Father’s Day every year from 8 a.m. the morning of the holiday until 8 a.m. the day after the holiday.”

SMART – Attainable

It seems like a no brainer an agreement or order should be attainable. But sometimes, people don’t realize a provision is unattainable. In a recent case, the court order described as written the children would be with Mom on Christmas Day at 10:00 a.m. and returned to Dad at 10:00 a.m. the next morning. However, the parties lived more than 3,000 miles apart! These parents could not possibly make this work from any practical standpoint.

In another case, the children were to alternate between mom’s house and dad’s house during the holidays for overnight visits in an even and odd patterned schedule. The problem? One of the parents was incarcerated.

So it’s important to avoid these kinds of attainability problems by making sure the agreement’s boilerplate language is customized to you and written to fit your unique circumstances.

SMART – Relevant

SMART agreements must be relevant to your circumstances.

Holiday co-parenting orders should be relevant to your situation. In one of my cases, Family Court Services made Christmas co-parenting recommendations. The parties only celebrated Jewish holidays. Clearly, something lost in translation was missed.

As practitioners, it’s tempting to fit people neatly into nice little boxes. But it makes little sense to force parents to observe a holiday schedule for holidays the parties don’t even celebrate. In another case, attorneys included a provision for Fourth of July. The parties didn’t celebrate Fourth of July and weren’t concerned about having the kids on Fourth of July.

The SMART Approach to Happy Holidays When You’re Divorced

 Filling a holiday co-parenting agreement with irrelevant provisions does nothing but confuse things, and clutter up your case with unhelpful rules. To say nothing of having an agreement that falls into the “TL; DR” category (that’s Tool Long, Didn’t Read).

Your agreement should be meaningful, with SMART rules that make sense for you and your family alone. Work with someone who will listen to your needs and get you know you, your co-parent, and your kids, and create something that fits. You won’t be fighting against it and arguing about it, which doesn’t help anyone.

Want to clean up your holiday co-parenting schedule BEFORE the holidays get here? Would you like to avoid those frantic last minute calls to a lawyer to fix your holiday parenting schedule? Contact Weber Dispute Resolution now, and you can have truly happy holidays without a care. Isn’t that the holiday gift all families wish for?

 

 

 

Why Waiting Can Cost You: Racing the Clock to Keep Your Alimony Tax Deduction

The deadline to preserve your alimony tax deduction in California before the end of 2018 is fast approaching.

by Mark Hill, CFP, CDFA and Shawn Weber, CLS-F

With the passage of the Tax Cuts and Jobs Act of 2017 (TCJA), the deductibility of alimony or spousal support on federal taxes is set to sunset on December 31, 2018. If you plan to divorce or are in the process of a divorce that will not be completed before the end of 2018, this could cost you a lot of money.

Spousal support used to be deductible under previous law

Under the previous law, spousal support (or alimony) is deductible from income for the support payor and taxable to the support recipient.  This let parties save money on Uncle Sam’s dime. Typically, the support payor would be taxed at a higher rate than the support recipient because of the disparity of income. By transferring the tax burden from the support payor to the support recipient, the support payor had higher net spendable income and could afford to pay more. This usually ended up in a win-win circumstance for the parties.

Changes to spousal support deductions under the new 2019 law

Commencing on January 1, 2019, spousal support paid under new orders will not be deductible to the support payor and will not be taxable to the support recipient. This rule will apply to alimony payments required by “divorce or separation instruments” executed after December 31, 2018.

A “divorce or separation instrument” as defined by 26 U.S. Code § 71(b)(2) “means –

(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

(B) a written separation agreement, or

(C) a decree (not described in subparagraph (A)) requiring a spouse to make payments for the support or maintenance of the other spouse.”

Example from a higher income case

In negotiations husband and wife had agreed that spousaI support would be set at $12,000 a month. Because husband will be in the combined 46.3% tax bracket post-divorce, the after-tax cost to him will be $6,444. However because wife will be in the combined 34.3% bracket she will net $7,884 after tax.  When the new law is in force and husband can no longer deduct his payment it would cost him $1440 more to get her the same amount of spendable money. The differential will be even greater if wife goes ahead with her plan to buy a condo next year and thus receive the deductions for mortgage interest and property taxes.

Of course the reality of divorce is that there is rarely enough money to go around and the result of this change is going to be that payors will end up paying more and payees will end up receiving less.

An additional impact of this change that we believe is not well understood is that because in California the software that calculates child support uses after-tax income as the input number used for income available for support, child support numbers will also be reduced.

Is your divorce grandfathered into the new 2019 rule? Maybe not!

However, a divorce or separation instruments in place before January 1, 2019, but modified after this date, will remain under the current rules allowing for deductibility.  They would only be subject to the TCJA, if the modification expressly provides for the TCJA to apply.

What does this mean for people in the midst of a divorce today?  To preserve the possibility of the alimony payment tax deduction, you MUST have a divorce instrument entered by a court before the end of 2018.

Your judgment MUST be entered in 2018 to be deductible.

Although it is unclear exactly how the IRS will interpret this rule, we believe it is crucial that the divorce instrument be entered before the end of the year to preserve deductibility forever (or at least until the rule is changed again).

A huge concern is that the courts are very much behind in the processing of judgments of divorce or legal separation.  Time is of the essence.  If a couple does not have a completed judgment to submit prior to middle of November 2018, there is a very strong likelihood that it will not be accepted by the court in time.  Thus, the parties would lose the benefit of deductibility because there divorce or separation instrument would not be enterd before 2019.

Let Weber Dispute Resolution and Pacific Divorce Management help you keep your alimony tax deduction into 2019,

To help parties maximize what they have to spend for themselves and their kids after divorce, Weber Dispute Resolution is teaming up with Pacific Divorce Management to offer an expedited to process.

Pacific Divorce Management, one of the premier advising firms in San Diego for financial issues in divorce, will work with parties to gather financial data to complete the State mandated Declaration of Disclosure Forms.

Weber Dispute Resolution, a leader in divorce mediation and legal dispute resolution, will prepare the necessary forms to open a divorce case and will work hand in glove with Pacific Divorce Management to prepare the necessary divorce or separation instrument necessary to satisfy the IRS requirements for deductibility.

If it is impossible to conclude the entire divorce prior to 2019, the parties could enter into a partial stipulated Judgment for spousal support that would meet the requirements for the alimony deduction.  The couple would then have the following options:

  1. Work with Pacific Divorce Management and Weber Dispute Resolution in an out-of-court alternative dispute resolution setting to complete their divorce or legal separation (for example, mediation or collaborative practice).
  2. Work with other professionals in an out-of-court alternative dispute resolution setting to complete their case.
  3. Litigate their divorce or legal separation with other professionals.

Whether you choose to complete your divorce with us or choose to go another way, we want to help all parties involved in a late 2018 divorce be aware of this change, and take advantage of the tax laws for deductibility of spousal support payments before it goes away forever.

Don’t delay – contact us today to save your alimony tax deduction:

Weber Dispute Resolution: 858-410-0144

Pacific Divorce Management: 858-509-2330

 

 

 

 

 

 

 

 

I Have An Alimony Order in California – What is a ‘Gavron Warning’?

What is a Gavron Warning?

Paper family split between broken dollar heart with Alimony text

What is a Gavron Warning?

The idea of the “Gavron Warning” came from the case In Re Marriage of Gavron, (1988) 203 Cal.App.3d 705, 250 Cal.Rptr. 148. In this case, the parties separated in 1976 after a 25 year marriage. Subsequently, the court ordered the husband to pay $1,100 per month of alimony. He did so until 1981, when he asked the court to reduce support to $550 and then terminate entirely after one year. This initial request was denied.

However, the husband tried again in 1986. This time the court ordered that support would continue for five months and then terminate. The wife appealed and reversed the trial court’s order. The appellate court held that because the wife was not warned in prior orders to become self-sufficient, she could not be penalized years later because the court did not tell her to make efforts. In essence, as the court argued, the failure to focus her on the expectation to become self-sufficient meant that the court could not cut her support now.

Because of this case, the courts will frequently issue a warning to the supported spouse. Here is an example of a Gavron Warning:

“NOTICE: It is the goal of this state that each party will make reasonable good faith efforts to become self-supporting as provided for in Family Code section 4320. The failure to make reasonable good faith efforts may be one of the factors considered by the court as a basis for modifying or terminating spousal or partner support.”

Supporting Spouses will want the Gavron Warning included

So, the lesson for support payers is to make sure that the court includes such language in the spousal support order. If it is not, it may be harder to reduce income later if the supported spouse refuses to make good faith efforts to become self-sufficient. When I am representing a support payer, I always ask the judge for a Gavron Warning and I almost always include it in written stipulations. I will also sometimes simply file and serve a written Gavron Warning to the supported party myself at the beginning of the case so that there is no question that the supported party has been warned.

The supported spouse will likely rather not have the Gavron Warning included, but it is hard to oppose it

When I am representing a supported spouse, naturally I will not bring the Gavron Warning up. However, if opposing counsel wants it in an order, there is no legal basis to resist it. The moral for the supported spouse is not to count on the alimony as a permanent means of support.

I frequently refer the supported spouse for vocational counseling to assist with re-entering a career. I get as much alimony as I can, but encourage the prudence of planning for self-reliance. After all, no one knows for sure what the future holds. Not only could the support payer try to reduce alimony, it could simply terminate by means of death. Any changed circumstance such as unemployment or disability could force a reduction or termination in support too. The best advice is to use the support as a life preserver to stay afloat in the short run, but take steps immediately to be ready for when the support may no longer be available.

Further reading:

How California Spousal Support Works

What does California Child Support Cover?

 

 

Is Divorce Mediation Legally Binding?

Divorce mediation can provide a useful alternative to working with attorneys, but there are some details you need to know to make it legally binding. Photo: MrHayata/Creative Commons License

Divorce mediation can provide a useful alternative to working with attorneys, but there are some details you need to know to make it legally binding. Photo: MrHayata/Creative Commons License

Legally Binding Agreements Are Possible with Divorce Mediation

Frequently someone will tell me a particular family law case is not appropriate for mediation because they don’t believe they will get a legally binding agreement out of the process. This frustrates me, because it is so far from the truth.  Let’s explore the key question: is divorce mediation binding?  The short answer: yes.  There are easy ways to make sure your divorce mediation is binding. Let’s talk about them in more detail.

Be sure you understand the limitations of a handshake agreement in mediation.

Handshake agreements are NOT binding

Often, parties to a mediation will make small agreements, or “handshake” agreements.  These type of agreements will not be binding on anyone if they end up being fought over in litigation.

There are times when people mutually agree on a handshake to seal a deal to make it enforceable. Mediators sometimes employ simple handshake agreements in divorce mediation.  Perhaps two parents want to agree in good faith they will pay for a child’s college tuition. But they don’t want to put themselves in a position of violating a court order if for some reason anything changes due to loss of employment or an expensive medical emergency, which would make paying for college impossible. These folks will agree in principle — or morally — they will work cooperatively to pay for college.  However, such moral or handshake agreements are NOT binding.

Put your mediated agreement in writing if you intend it to be legally binding. Photo: Antonio Litterio/Wikimedia

Put your mediated agreement in writing if you intend it to be legally binding. Photo: Antonio Litterio/Wikimedia

To make divorce mediation legally binding, get it in writing

When you are ready to sign off on an enforceable agreement, get it in writing. Most attorney mediators will create the legal document for you to sign. If you are working with a non-attorney mediator, he or she will probably prepare a memorandum of understanding. You can then take this paperwork to an attorney to draft a binding document. Once all parties sign, the agreement is binding like any other contract.

Follow the Code of Civl Procedure to ensure agreement enforcement

The California Code of Civil Procedure (CCP) section 664.6 provides a way for agreements reached pending settlement to be enforced by the court.  Section 664.6 provides:

“If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.”

Sometimes when parties reach an agreement during their divorce mediation, I will write up the notes of the settlement on a legal pad and note it is a binding agreement pursuant to CCP 664.6. When the parties sign, the agreement is binding and the Court will enforce it.

Have your attorney review your mediated agreement

Before anyone signs on the dotted line, I always advise parties to have a lawyer review their agreement. As the mediator, I have to be neutral like Switzerland. This means I can’t advise you about your legal rights or your best interests without violating legal ethics. Parties should have a lawyer who can review documents and provide the necessary legal advice before signing.  This reduces your risk, and guarantees everyone is making informed decisions.

Only a judge can ensure your mediated divorce settlement is legally binding and enforceable under the law.

Only a judge can ensure your mediated divorce settlement is legally binding and enforceable under the law.

Only a judge can make your agreement legally enforceable

It is your option to send your mediated agreement to a judge for signature. This is particularly common when you use mediation to create a final marital settlement agreement for your divorce. The mediator sends the signed agreement to the Court for the judge’s signature. Once the judge signs, the agreement becomes an order of the court.  This means it is enforceable just like any other order of the court. This is the only way you can turn to the legal system in the future if someone violates any portion of the agreement.

 

Does mediation sound like the right process for you?  Call us at 858-410-0144 to make an appointment with San Diego Divorce Mediator Shawn Weber today.

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