Blog | Jessica Langley Lowe, P.A. | Winter Garden and Orlando Mediation Law

WHAT YOU NEED TO KNOW ABOUT THE CHANGES TO THE TAX IMPLICATIONS OF ALIMONY

March 5, 2018 By Anthony Fernandez No Comments

Tax implications must be considered when contemplating the finances of a divorce. Currently, alimony is generally an “above the line” deduction for an alimony payor (the person paying) and is included as income for the payee (recipient of) alimony, subject, of course, to certain limitations (for example, the parties must file separate returns, live separately, etc.).

Changes to this law will go in effect beginning January 1, 2019, at which time alimony will no longer be tax deductible for the payor or includable as income to the payee. Alimony will work like child support, it will not be part of taxable income to the recipient, which means that the person paying cannot deduct it from his or her income. 600,000 people currently use the alimony deduction and 800,000 couples divorce each year, so the impact of this law will be widespread. It is important to note that this law is not in effect yet, and alimony payments will still be deductible for any divorces finalized prior to January 1, 2019.

Hypothetical:

Say the alimony payor makes $300,000 and is in the 25% tax bracket (we are using round/general numbers for the sake of example). Say the payor pays the ex-spouse $90,000 per year in alimony. This makes the payor’s taxable income $210,000 per year- 25% being $52,500 year in taxes. Meanwhile, the payee is paying taxes on the $90,000 being received in alimony. Under the new law, the payor would pay taxes on the full $300,000 BEFORE deducting the $90,000 in alimony- 25% being $75,000 per year in taxes.

We believe that there will be changes in the way that alimony awards are negotiated. Because the alimony payee will be receiving a post-tax award, it is likely that agreed-upon amounts will naturally be lower than what we have seen in the past, to account for the tax adjustments. It is unknown whether judges will take the tax implications of alimony into account when ordering an award, but it seems that, in the interest of equity, they would be cognizant of these changes as well.

If you are contemplating a divorce and feel that you may be paying alimony to your spouse, it may be wise to try to finish your case before the end of 2018 to be sure that you can deduct any alimony payments. If you feel you may be the recipient of alimony, some may argue it could be worthwhile to wait until after the end of 2018 to ensure a post-tax alimony payment. However, additional food for thought may be how the new law will impact the actual amounts of alimony awards, for example, in 2019, will alimony obligations trend downward? Only time will tell. Alimony reform has been a hot-button issue for many years and we forecast that more changes could be coming our way in the future. We will keep you posted!

Divorce 101

Divorce 101: Timesharing for Families who are Divorcing with at Least One Child

December 12, 2016 By jess8215 No Comments

This blog post is the second in the series on Divorce 101. This post will focus on timesharing for families who are divorcing with at least one child.

Timesharing is the new age term for what we used to describe as “custody.” Nowadays, neither party is awarded “custody” of the child. Absent very serious circumstances, instead, each parent retains full parental rights and responsibilities and a piece of the child’s time. It is important to remember that most parents are awarded equal rights to his or her child(ren) in a divorce- this is called “shared parental responsibility.” However, the statutory factors govern the amount of time the child(ren) have will each parent- this is called “timesharing.”

As you learned in the first blog post of this series, statistically speaking, most divorces are settled outside of court. Usually the parties wish to decide how to divide their assets and liabilities as well as decide on the appropriate timesharing schedule for their children rather than have a judge decide.

Once timesharing is determined, then the child support guidelines can be run. As you learned in the first blog post, child support is determined by inputting the parties’ incomes, amount of overnights, health care and child care amounts into a Florida Child Support Guideline calculator.

Common Timesharing Schedules

In a settlement scenario, the timesharing schedule is completely decided upon by the parties but below are some examples of some common schedules we see:

70/30

A common 70/30 split is demonstrated below. This is generally better for younger children or for a parent who does not live close to the child’s school.

Example:

Alternating weekends (Friday- Monday morning).

Alternating/shared holidays and two weeks of summer vacation.

Parent A: Every other weekend and every Wednesday night.

Parent B: All other time.

Monday	Tuesday	Wednesday	Thursday	Friday	Saturday	Sunday
B	B	A	B	A	A	A
B	B	A	B	B	B	B

50/50

Many families prefer the 50/50 split demonstrated below for school age children. Father and Mother alternate having 5 overnights with the child which means less transition. Also, most of the school days remain consistent. This helps the teacher and student stay organized.

Example:

Alternating weekends (Friday- Monday morning).

Alternating/shared holidays and two weeks of summer vacation.

Parent A: Every Monday and Tuesday.

Parent B: Every Wednesday and Thursday.

Monday	Tuesday	Wednesday	Thursday	Friday	Saturday	Sunday
A	A	B	B	A	A	A
A	A	B	B	B	B	B

These are just some common examples of timesharing plans. Many parties alter these plans to better suit their needs. Sometimes one party does not have a consistent schedule (i.e. a firefighter or work travel). You may decide it is best to have a timesharing schedule where the parties discuss the schedule on the 1st of each month and decide how to share the time. For example, one parent is entitled to two weekends each month and 5 other overnights. Then the parties determine which days are best.

Alternating or Shared Holidays

There are many holidays throughout the year and most timesharing schedules account for these special days. Having a schedule determined prior to the holiday allows each party to plan accordingly. Some timesharing schedules alternate the holidays each year. For example, one party gets Thanksgiving and one party gets Christmas. The next year the parties alternate. Some parties wish to split the actual day. Remember, your timesharing schedule is unique to your particular case. Your attorney will help create a plan that works for your family.

Child Support Calculations

After the parties determine the timesharing schedule, the attorney will run some child support numbers. To start, the net monthly income of each party is determined. Some monthly deductions do not count like voluntary retirement plans. Your attorney will help you determine the correct income to use for calculating child support.

Your attorney will also input the health care and child care monthly cost. Lastly, the attorney inputs the amount of overnights per party.

Here are some examples:

One child

Parent A: $5,500 monthly net

Parent B: $3,000 monthly net

Health Care Costs: Parent A $50 per month

Child Care Costs: None

50/50 Split: Parent A pays Parent B $275.50.

70/30 Split (Parent A has 70%): Parent B pays $123

70/30 Split (Parent B has 70%): Parent A pays $674

Summer

Many parties allow for up to two weeks of uninterrupted timesharing over the summer. This can be used consecutively or nonconsecutively, depending on the parties’ wishes. It may be a good idea to designate which party picks first each year if you think it may be a problem. One party can have first choice on even years, and the other on odds years.

Extras

To facilitate timesharing, some of our clients have used apps to help the stay organized and communicate. A simple Google search provides a variety of options.

If you are in a period of separation with your spouse, it is a good idea to keep a log of the timesharing schedule you are following. This can be a base to determine your final timesharing schedule and if your case goes to trial, the Judge may want to know the current timesharing schedule. Furthermore, if you are entitled to child support retro to a specific date, your attorney will need the timesharing schedule to calculate the arrears.

In Conclusion

One of the most important factors to a successful timesharing schedule is amicable communication, honesty and flexibility. Both parties should understand the schedule may change from time to time, emergencies happen and people are late. Our hope is to provide our client with a timesharing schedule that is fair and works. We would be happy to discuss your options and provide a plan for your case. Contact us today for more information!

Divorce 101

Divorce 101: The Basics and Child Support

April 11, 2016 By Anthony Fernandez No Comments

Perhaps you are considering a divorce. Some scary thoughts might enter your head:

How often will I get to see my children?
How will I pay my bills?
Will I get child support?
Would I be entitled to alimony? Would I have to pay alimony?
How could I ever afford to pay child support and alimony and still move forward with my life?

These are some of the first questions we get during our consultations. Understandably, a divorce is a life changing decision and not knowing what your financial status will look like can be terrifying. After all, you’ve worked hard to get to your current salary, right? Or perhaps you have given up your career to stay home and care for the children. What will you do now?

This blog is the first in a series to help you understand the basics of a dissolution of marriage. Outlined below are some basic facts and frequently asked questions regarding child support. If you have further questions feel free to post in the comment section or schedule a consultation at our office.

Divorce Proceedings

Most clients want a simple divorce and do not want the court to force them to do anything. Coming up with your own agreement and settling before reaching your trial date is the best way to make this happen. If you cannot settle on an agreement the Judge will make the decisions for you at trial. Most divorces settle for this exact reason.

You may settle at any time from the start of interaction with your attorney up until trial. The courts actually want you to settle and mandate (or highly recommend depending on the county) every divorce proceeding go to Mediation. Mediation is just a fancy name for an official day (or a few hours) that is set aside to meet and discuss potential settlement options with the other party (and his or her attorney), a certified mediator, and your attorney (if you have one). Hopefully, by the end of Mediation, you will walk away with a signed agreement. But again, you may settle any time prior to, at, or even after Mediation.

If the parties cannot settle at Mediation, or any time before or after, the case will move forward to trial. At trial both sides will present their testimony regarding what they believe is in the best interests of the children. Both parties will submit more financial information and the Judge will determine the amount of child support, alimony, and all the details regarding the timesharing and upbringing of your children. To prepare for trial your attorney will be required to spend more hours working on your case and attending trial, which means your total attorney’s fees cost will increase. You may also be very disappointed with the Judge’s decision. Sometimes trials are necessary and the best route for resolution. Each case is different and your attorney will be able to help direct you to the most beneficial and efficient road to resolve.

More about the Settlement Agreement

The Settlement Agreement is prepared based on the wants and needs of the parties. It will include the equitable distribution of all property (real property, bank accounts, retirement accounts, debts like student loans, car loans, etc.). It will also include alimony, if any, decided on by the parties.

If you have children, it will also include a timesharing schedule, child support amounts, and all the other details important to the upbringing of your children. Although the parties have discretion to make their own decisions regarding child support, the court will not approve a party opting-out of child support without specific circumstances.

Types of Divorce

Uncontested

The most basic type of divorce is uncontested. This means the parties will be able to mutually agree on a settlement, or more basically a contract, by working together to reach an agreement before the divorce is even filed with the courts. During an uncontested divorce, each party fills out a financial affidavit with their basic monthly earnings and costs. This is usually the only financial information collected in a truly uncontested divorce, so it is important parties trust one another and are honest with their affidavit. If there is any dispute on the financials or any term the parties will not agree upon, the type of divorce becomes contested.

Contested

A contested divorce means there are questions of fact. Classifying your case as a contested divorce does not mean it will go to trial or the parties will not settle. More basically it means the parties disagree on some terms and may need more discovery or more negotiation/other alternatives regarding children, for example.

Unfortunately, the label, “contested divorce” seems to have a bad connotation. In fact, being part of a contested divorce just means that you and your spouse have not agreed on all aspects of equitable distribution, alimony (if applicable) and the parenting plan of any children (if applicable). In a way, it can actually be the smarter decision for couples who have many assets or have been married for a long time. Clients who are part of a contested divorce will never have to wonder whether they missed out on their share of the marriage assets.

Child Support

Child Support is determined by the Child Support Guidelines, a mathematical calculation based off the combined incomes of the parties. After the total support for the children is calculated, it is divided proportionally to each parent dependent on their income or earning capacity. This often results in one parent owing a monthly obligation to the other.

It should be noted that even an unemployed spouse will not have a zero dollar income in a child support calculation. As long as the spouse is not disabled, the spouse is imputed to be able to earn at least minimum wage at 40 hours per week. If the spouse has a degree or had a career prior to choosing to stay at home, the presumption of income may be higher.

Interestingly enough, paying alimony to your spouse is included as “income” for child support purposes. So the more alimony a spouse receives means the child support requirement will decrease because the proportions of income are becoming more even.

Additionally, the amount of overnights plays a big role in the amount of child support that will be paid. If parents split time 50/50 then child support decreases. Understandably, when the child is with each parent then that parent assumes financial responsibility for the child and therefore does not need to pay the other parent for that time.

The purpose of child support is to provide for the children. We like to explain to our clients that child support is like a pie. It includes the cost of daycare and health insurance, as well as a basic daily amount for basic living expenses. We put all of these expenses into the entire pie of support needed. Then that pie is divided proportionally depending on the timesharing schedule and incomes of the parties.

So in sum, child support is calculated by:

Allowable net incomes of each party (gross with only allowable deductions)
Amount of overnights
Cost of daycare
Cost of health insurance
Cost of regularly incurred medical expenses (although this is seldom included)

Frequently Asked Questions

What if I remarry and my new spouse makes good money. Does that change the amount of child support I receive?

No, the child support is based off the incomes of the parents, not their spouses. If one of the parties has a significant change in income or circumstances (maybe a new disability or a substantial raise/promotion at work, for example), a party may file a Petition for Modification of Child Support. Basically, the courts will run the financial information again and make adjustments as needed.

I just separated from my spouse but we have not even retained attorneys for a divorce. Do I have to pay support now?

Legally, no. But technically, yes. You will be responsible for paying child support and alimony (if awarded) from the date of physical separation, meaning the date you moved into separate residences. If you make substantially more than your spouse there is a good chance you will have to pay child support. Although you may not know the correct amount at this point, it is always a smart financial decision to start paying some amount so when the court reviews child support, you have shown your intention to care for the children, and you have lessened the burden of arrears you will be responsible for.

Take for example a father who is ordered to pay $500 a month for child support and has never paid. Now, a year later, father is responsible for $500 a month and $6,000 in arrears. That’s a big chunk of change most people do not have on the spot. The good news is arrears can be paid over time, not in one chunk, but it often overwhelms many parents and increases the burden of child support. Now your $500 child support requirement just went up to $650 until the $6,000 is paid off. On the flip side, if you have paid since the date of separation and happen to pay too much, that amount will count towards future payments. So either way, paying child support immediately upon separation can be helpful.

Another common error we see is a parent making payments in cash. Always pay by check and keep track of your payments as evidence. There is nothing worse than being ordered to pay arrears that you have already paid but cannot prove.

I love my husband and know he will always take care of our child. I do not want the court to force him to pay child support.

Sometimes parents forget that child support really has nothing to do with the parents. It is not meant to be a reward or punishment, although many see it that way. Child support is mandated by the State as a way to make sure the child is taken care of and does not become a burden on the State. For example, if a mother could opt out of child support, she may then not be able to make ends meet and need food stamps, thus the State is now responsible for her child. From a public policy standpoint, it is clear why child support exists.

Furthermore, during the process of a divorce many decisions are emotionally driven. Unfortunately, your loving ex-husband who cares for the child now may eventually remarry and have more children. To take it further, say one of his new children has a special need. The father makes a finite amount of money and the father may decide, with the best intentions, that the child with special needs has more important financial needs than his previous healthy child. Unfortunately, no one can predict the future and court ordered child support helps prepare for changes and establish stability for the child at issue.

Whether you are the payor or payee of child support, try to remember to respect its purpose.

To learn more, please contact our office. We’d love to speak with you!

Alimony

Alimony: What is the Right Amount?

December 30, 2015 By Anthony Fernandez No Comments

Alimony in Florida is one of the more frequently discussed topics in family law of late as there have been several proposed legislative changes in recent years. One of the most common questions that we receive is, “will I have to pay alimony to my spouse?”

The answer to this question depends completely on the facts of your case. Florida Statute§ 61.08 tells us that the court’s determination of as to whether to award alimony to a spouse in a dissolution of marriage proceeding will depend on:

1) one spouse’s need for alimony from the other, and;

2) the other spouse’s ability to pay alimony.

In essence, does the spouse have enough money to meet his or her needs? If not, does the other spouse have enough money to financially assist that other spouse? If your case meets this criterion, the statute then states that the court must determine the type and amount of alimony to be paid. In order to reach this determination, the court will consider the following factors:

(a) The standard of living established during the marriage.

(b) The duration of the marriage.

(d) The financial resources of each party, including the nonmarital and the marital assets and liabilities distributed to each.

(e) The earning capacities, educational levels, vocational skills, and employability of the parties and, when applicable, the time necessary for either party to acquire sufficient education or training to enable such party to find appropriate employment.

(f) The contribution of each party to the marriage, including, but not limited to, services rendered in homemaking, child care, education, and career building of the other party.

(g) The responsibilities each party will have with regard to any minor children they have in common.

(h) The tax treatment and consequences to both parties of any alimony award, including the designation of all or a portion of the payment as a nontaxable, nondeductible payment.

(i) All sources of income available to either party, including income available to either party through investments of any asset held by that party.

(j) Any other factor necessary to do equity and justice between the parties.

The judge in your case obviously has a fair amount of discretion in determining the amount, type and duration of alimony. However, I am often asked for my opinion as to the appropriate amount of alimony, especially when it comes to settlement negotiations. This is a very sensitive area as it is imperative to ensure the payor client is not overpaying or that the payee client is not accepting less than s/he may be entitled. Florida Statute does not give us a formal calculation to use in calculating alimony, as with child support. However, your attorney should be able to give you advice as to a potential range that s/he would foresee the judge ordering, if you were to go to trial. This advice will help the client to come to more confidently engage in settlement negotiations if s/he wishes to avoid trial.

I cannot emphasis how important it is to have sound advice regarding alimony before signing an agreement. I have had far too many clients consult with me after they have committed to pay alimony that they cannot afford, or, conversely, have agreed to accept too little alimony. The best practice is to make sure you are in the loop on the front end of the deal. After you have signed an agreement and finalized your divorce, a petition for modification would need to be filed in order to request that the alimony amount in your case be increased or decreased. In order for the court to change your alimony award or obligation, you need to prove that there has been a substantial change in circumstances since your divorce was finalized. This is especially problematic if an individual agreed to pay more alimony than s/he could afford or to accept too little alimony, and cannot show that court that anything has changed since the divorce was finalized.

Don’t stay in the dark regarding your alimony situation. Make sure you educate yourself before making decisions with lasting legal ramifications. Call today to schedule your consultation so that we can discuss your options in regard to alimony.