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.
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.
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.
Kate and William have no prenup! I don’t know how things work in Britain, but according to California law, any assets currently owned by William or later to be inherited would be his separate property and not subject to division in the event of a divorce anyway. Perhaps William simply doesn’t need it. Of course, alimony is a whole other story. Read the Article at HuffingtonPost
