If you are going through a divorce in California and spousal support is on the table, you should understand what a Gavron warning is. Whether you expect to pay support or receive it, this concept affects how long support lasts and what the court expects from each party.
Where the Gavron Warning Comes From
The term comes from a 1988 California appellate case, In re Marriage of Gavron (203 Cal.App.3d 705). The facts were straightforward. The couple separated in 1976 after a 25-year marriage. The court ordered the husband to pay $1,100 per month in spousal support. Five years later, he asked the court to reduce support and eventually terminate it. That request was denied.
He tried again in 1986. This time the trial court ordered support to continue for five more months and then end. The wife appealed, and the appellate court reversed. The reasoning: because no prior order had told the wife she was expected to become self-supporting, the court could not penalize her for failing to do so. She had never been put on notice.
That case created the rule. If the court wants to hold a supported spouse accountable for becoming self-sufficient, it first has to tell them that is the expectation.
“When making an order for spousal support, the court may advise the recipient of support that the recipient should make reasonable efforts to assist in providing for their support needs, taking into account the particular circumstances considered by the court pursuant to Section 4320, unless, in the case of a marriage of long duration as provided for in Section 4336, the court decides this warning is inadvisable.”
Two things to notice in that language. First, the statute says the court “may advise,” not “must advise.” The Gavron warning is discretionary. The court does not have to include it. Second, the statute specifically recognizes that in long-duration marriages (generally ten years or more), the court may decide the warning is not appropriate at all. An older spouse who left the workforce decades ago may not realistically be expected to become self-supporting. (That said, in 25 years of practice, I have never seen a court decline to give a Gavron warning when requested.)
What the Gavron Warning Means in Practice
For the spouse paying support, the Gavron warning creates a foundation for a future request to reduce or end support. If the warning is in the order and the supported spouse does not make reasonable efforts toward self-sufficiency, the paying spouse can later go back to court and point to that failure as grounds for modification.
Without the warning in the order, that argument is harder to make. The Gavron case itself established that principle.
For the spouse receiving support, the warning is notice that the court expects action. That does not mean support ends immediately. It means the supported spouse should be taking steps toward financial independence, whether through employment, education, training, or other efforts appropriate to their circumstances.
What counts as “reasonable efforts” depends on the facts of the case. A spouse with a professional degree and recent work history is in a different position than a spouse who has been out of the workforce for twenty years with no college education. Courts evaluate this on a case-by-case basis.
How This Comes Up in Mediation
In mediation, the Gavron warning is a topic both spouses should understand before they finalize a support agreement. The mediator does not advocate for either side, but the mediator can make sure both parties know what the warning is, how it works, and what the implications are of including or excluding it from a stipulated agreement.
In my practice, I raise the Gavron warning as part of the spousal support conversation so that both spouses can make informed decisions. If the parties agree to include Gavron language in their settlement agreement, the supported spouse knows what is expected. If they agree to exclude it, the paying spouse understands the tradeoff.
I also frequently refer supported spouses to vocational counseling. A vocational evaluation can assess earning capacity and help develop a realistic plan for re-entering the workforce. This serves both parties. The supported spouse gets a concrete path forward. The paying spouse gets confidence that support is being used for its intended purpose.
A Practical Note for Both Spouses
Regardless of which side of the support equation you are on, do not treat spousal support as permanent income. Support can be modified or terminated based on changed circumstances: job loss, disability, retirement, remarriage, or death of either party. A Gavron warning adds another basis for modification, but circumstances can shift regardless.
The supported spouse should document efforts toward self-sufficiency. The paying spouse should ensure the support order addresses the Gavron warning clearly.
And both spouses should consult with their own attorneys during the mediation process. A mediator works for the process, not for either party. Individual legal advice ensures that each spouse understands their rights and the consequences of the decisions they are making.
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) 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:
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).
Work with other professionals in an out-of-court alternative dispute resolution setting to complete their case.
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:
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) 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:
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).
Work with other professionals in an out-of-court alternative dispute resolution setting to complete their case.
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:
The general rule is that divorce is a personal expense and is not deductible as a business expense. United States v. Gilmore (Gilmore I) (1963) 372 U.S. 39. So the short and easy answer is, “No.”
However, don’t despair. There are still some ways you can get a break from some of those fees.
Here are some exceptions to the general rule:
Fees to obtain alimony or taxable pension distribution.
If you are a spousal support or alimony recipient, you can deduct those fees relating to obtaining taxable spousal support or a taxable pensions distribution. (See I.R.C. 212(1); Treas Reg. 1.262-1(b)(7); Wild v. Commr. (1964) 42 T.C. 706. So, those fees that you spend with your attorney to get spousal support from your ex can usually be deducted. Don’t forget, the fees for getting your share of a pension distribution may also be deductible.
Tax planning or advice.
The costs of tax planning or advice are deductible. I.R.C. 212(3). We family lawyers tend to shy away from giving anyone tax advice because we are, for the most part, not tax attorneys or CPAs. There are plenty of sites such as can be found at https://www.taxrise.com/free-tax-consultation/ that offer you a free tax consultation if needed. However, there can be certain occasions as you are planning your divorce or legal separation that your attorney is able to give you some tax advice. (For example, tax advice about dependency exemptions, deductibility of spousal support payments, post-divorce real estate transfers, etc.) When that happens, the associated fees can be deductible.
Capitalize.
Even if the fees for your divorce lawyer aren’t deductible, expenses can often be capitalized. Serianni v. Commissioner (11 Cir 1985) 765 F.2d 1051, 1985 CFLR 2892. Talk to your CPA about how this can be done.
Below the line.
Now these aren’t the greatest of deductions because they are below the line. But every little bit helps… right?
Talk to your lawyer early!
If you are interested in deducting some of your legal fees on your taxes, it is important that you have a conversation with your family law attorney early so that (s)he knows to keep track of your fees and what portions may be deductible. Typically, your attorney can give you a letter at the end of the year indicating what portion of your fees was, for example, associated with the collection of alimony. Usually, this so-called “allocation letter” sent by the attorney to the client will suffice as sufficient proof of the deduction to satisfy the IRS. Goldaper v. Commissioner (1977) T.C. Memo. 1977-343, 36 T.C.M. 1381, 1979 AFLTR 1110. However, if your attorney doesn’t know that you will want to claim this deduction, you will put him in the difficult and awkward position of trying to recreate his records. It’s better that he knows from the outset so that (s)he can keep better track.
As with every tax question, it’s a really good idea to talk it over with your CPA. The rules can be complex and there are limitations. However, with a little diligence, you may save some money at tax time.
