PRESIDENT TRUMP’S DECEMBER 2017 TAX PLAN ELIMINATES DEDUCTIONS FOR ALIMONY PAYMENTS

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The burden of paying spousal support is about to reverse.  That’s because there’s a new tax law called, Tax Cuts and Jobs Act (TCJA), that was passed by Congress in December 2017, that has effectively abolished tax deductions on alimony payments beginning January 1, 2019.  Under the new Tax Cuts and Jobs Act, alimony payments will be neither tax deductible for the paying spouse nor taxable in the hands of the recipient spouse.

This new law will apply to payments that are required under divorce or separation instruments that are:

(1) executed after December 31, 2018, or,

(2) modified after that date if the modification specifically states that the TCJA treatments of spousal support payments (not deductible by the payor and not taxable income tax by the recipient) applies forthwith.

This new alimony provision is not retroactive, and it does not apply to divorces and separation orders entered into before 2019.

Until this new law, paying spousal support could be considered a “win-win” situation for both divorcing spouses.  The payor receives the benefit of a reduced tax obligation and the payee receives the benefit of more income than might otherwise be forthcoming if the payor spouse wasn’t receiving the benefit of the tax deduction.

This change in law could now prove expensive for individuals who must pay spousal support, because the tax savings normally derived from deducting spousal support payments can be substantial for high-earners.  One of the biggest disadvantages of the new tax law is that it could affect the desire of a higher-earning spouse to settle with their dependent spouse, since the deduction acts as a great motivator for the higher wage earner to agree to help support the spouse with less income in the first place.

WINDOW IS STILL OPEN

There is still a window for the payor to receive deductions for spousal support payments, but that window is closing.  If you are involved in divorce proceedings, or you are thinking about divorcing, and you want deductible spousal support treatment for some or all of the payments that you will make to your soon-to-be-ex, the TCJA gives you a huge incentive to get your divorce agreement wrapped up and signed by December 31, 2018.

On the other hand, if you anticipate being the recipient of spousal support, you have a big incentive to put off finalizing your agreement until next year, because the payments will become tax-free to you.

Either way, you should contact a specialist in family law, someone who is experienced in divorce tax issues, to get the best tax results for yourself.  Tax-wise, waiting too long could turn out to be an expensive mistake for years to come.

Lastly, be warned that many otherwise competent divorce lawyers are not up to speed on many of the new tax changes.  So don’t assume that just any family law attorney is capable of guiding you to the best tax results in your divorce.  Do your homework.  Contact a specialist in family law who is up to date on the latest tax changes that might affect you.  Find out who can best represent you regarding your spousal support requirements, and other family law-related issues.

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PRESIDENT TRUMP’S DECEMBER 2017 TAX PLAN ELIMINATES DEDUCTIONS FOR ALIMONY PAYMENTS

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The burden of paying spousal support is about to reverse. That’s because there’s a new tax law called, Tax Cuts and Jobs Act (TCJA), that was passed by Congress in December 2017, that has effectively abolished tax deductions on alimony payments beginning January 1, 2019. Under the new Tax Cuts and Jobs Act, alimony payments will be neither tax deductible for the paying spouse nor taxable in the hands of the recipient spouse.

This new law will apply to payments that are required under divorce or separation instruments that are:

(1) executed after December 31, 2018, or,

(2) modified after that date if the modification specifically states that the TCJA treatments of spousal support payments (not deductible by the payor and not taxable income tax by the recipient) applies forthwith.

This new alimony provision is not retroactive, and it does not apply to divorces and separation orders entered into before 2019.

Until this new law, paying spousal support could be considered a “win-win” situation for both divorcing spouses. The payor receives the benefit of a reduced tax obligation and the payee receives the benefit of more income than might otherwise be forthcoming if the payor spouse wasn’t receiving the benefit of the tax deduction.

This change in law could now prove expensive for individuals who must pay spousal support, because the tax savings normally derived from deducting spousal support payments can be substantial for high-earners. One of the biggest disadvantages of the new tax law is that it could affect the desire of a higher-earning spouse to settle with their dependent spouse, since the deduction acts as a great motivator for the higher wage earner to agree to help support the spouse with less income in the first place.

WINDOW IS STILL OPEN

There is still a window for the payor to receive deductions for spousal support payments, but that window is closing. If you are involved in divorce proceedings, or you are thinking about divorcing, and you want deductible spousal support treatment for some or all of the payments that you will make to your soon-to-be-ex, the TCJA gives you a huge incentive to get your divorce agreement wrapped up and signed by December 31, 2018.

On the other hand, if you anticipate being the recipient of spousal support, you have a big incentive to put off finalizing your agreement until next year, because the payments will become tax-free to you.

Either way, you should contact a specialist in family law, someone who is experienced in divorce tax issues, to get the best tax results for yourself. Tax-wise, waiting too long could turn out to be an expensive mistake for years to come.

Lastly, be warned that many otherwise competent divorce lawyers are not up to speed on many of the new tax changes. So don’t assume that just any family law attorney is capable of guiding you to the best tax results in your divorce. Do your homework. Contact a specialist in family law who is up to date on the latest tax changes that might affect you. Find out who can best represent you regarding your spousal support requirements, and other family law-related issues.

FAMILY LAW COURT ORDER NOT ENOUGH TO ESTOP WIFE FROM SUING EX FOR DOMESTIC VIOLENCE

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If he continuously commits acts of violence against his ex wife, she should be able to go after him with a legal vengeance.  And the California appellate courts agree.  In its wisdom, the Golden State’s highest court has held that despite the fact Wife went after Husband in family law court, and was awarded spousal support, she is not collaterally estopped (prevented) by res judicata from filing a tort action against her former Husband based on his alleged acts of domestic violence against her. In the case of Boblitt v Boblitt (2010) 190 CA4th 603, 118 CR3d 788, Wife, at the couple’s divorce trial, claimed that her Husband had been physically and mentally abusive for decades, from the time before they were married up until after the dissolution was filed.  She further claimed that injuries resulting from the abuse had impaired her ability to work. The trial judge indicated that he considered her allegations in reviewing the factors set forth in Family Code §4320 affecting spousal support and stated in his statement of decision that he had trouble with Wife’s credibility relating to some of the alleged incidents.  The family court judge then went on to state that, although Wife had also requested she be repaid for “past medical bills, future medical bills, counseling and alleged pain and suffering,” he felt her spousal support award was appropriate.  When a judgment on reserved issues was entered in the family law court, the wife requested reconsideration and then, when that was unsuccessful, appealed the judgment. In a civil action, Wife later sued Husband for damages based on domestic violence, assault and battery, and negligent and intentional infliction of emotional distress, as well as other causes of action.  Husband moved for judgment on the pleadings, claiming that all of Wife’s claims had been or could have been tried in the family law case and that the family law court had denied Wife most of the relief she had requested there. Wife opposed Husband’s motion, first by arguing that the family law judgment, being on appeal, was not a final judgment, and second, by arguing that the domestic violence cause of action was “not tried in the dissolution action.”  The trial court in the tort action granted Husband’s motion based on collateral estoppel or res judicata. The appellate court reversed.  It found Wife to be correct on both counts in her tort action.  The panel pointed out that even had the family law judgment on reserved issues been final, Wife’s second argument remained valid.  The appellate court found that Wife’s tort action was based on “the primary right to be free from personal injury,” while the right to spousal support from a former spouse was based on the trial court’s consideration of numerous factors, one of which is a history of domestic violence.  Also, the family law judge’s failure to award Wife some of the relief she requested, such as for past and future medical bills, counseling, and alleged pain and suffering, did not have a preclusive effect, because that judge had no power to award such relief in a divorce case.

NO ERR TO BASE SUPPORT ORDERS ON REASONABLY REDUCED WORK SCHEDULE BASED ON CHILD’S BEST INTERESTS

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An important case has recently been handed down by California’s appellate courts that stated that the trial court in a family law matter did not err by basing its support orders on Wife’s 80% work schedule where that percentage constituted objectively reasonable work regimen and was in Child’s best interests.  The facts of In re Marriage of Lim and Carrasco are as follows:

The couple was married in 2003, and later they had two children.  During the marriage, Husband was a college professor and Wife was a partner in a law firm.  They separated in 2011 and Husband filed for divorce later that year.  Husband dismissed his petition three (3) days later, and they attempted to reconcile.  Having failed their reconciliation, one month later Wife filed for divorce.

Husband filed an ex parte request seeking custody of the children, child support, visitation, and temporary spousal support.  In his supporting declaration, Husband stated that his flexible work schedule allowed him more time to care for the two children, while Wife’s burden of billable hours required her to work longer hours.

In her responsive declaration, Wife agreed to pay guideline child support based on her recently adopted 80% work schedule.  At the conclusion of the hearing, the family law trial court found that Wife’s reduced working schedule would still involve “working a substantial amount of the time” and that the 80% schedule would be in the children’s best interests.

Accordingly, the trial court determined that child support should be based on Wife’s actual income under that schedule.  In findings and order after hearing, the trial court further found that child support and spousal support should be calculated per Wife’s reduced schedule income.  Husband claimed the trial court should have calculated support based on Wife’s full-time earning capacity and erred by deviating from the guideline, and he appealed.  But CA-6 affirmed the trial court’s decision.

SAME-GENDER COHABITATION NOW ON PAR WITH THAT OF OPPOSITE-SEX

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Over the last half century, California law has evolved tremendously when it comes to same-gender cohabitation and spousal support.  It has gone from penalizing same-gender cohabitation by the termination of spousal support and the requirement of restitution from the date of cohabitation to extending the same rights, obligations, and privileges of marriage to same-gender cohabitating partners.

Same-gender couples should now be prepared to assume the benefits of cohabitation as well as the burdens that have always been placed on cohabitating couples of the opposite-sex.  They should recognize that the sharing of household expenses reduces the need for spousal support regardless of the genders involved.  The reality is that the presumption of decreased need for support upon cohabitation is a gender-neutral issue.

SPOUSAL SUPPORT PRESUMPTION DIFFERENT FOR ‘SAME-GENDER’ COHABITANTS

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It is interesting to note that in California when same-gender couples part their ways, Family Code § 4323(a)(1) imposes a presumption that affects the “burden of proof, of decreased need for spousal support if the supported party is cohabiting with a person of the opposite sex.”  What this means is that when a spouse who receives support cohabits with an opposite-sex partner in a relationship, a burden is placed upon that spouse to demonstrate a continued need for spousal support at the same level to which he or she was entitled before cohabiting.

A key understanding here is that section 4223(a)(1) addresses opposite gender spouses only.  There is no such presumption where a supported spouse is cohabiting with a same-sex partner.  The California legislature still seems to be lagging when it comes to addressing the financial realities of same-gender relationships.

WAIVER OF SPOUSAL SUPPORT IN FINAL JUDGMENT NON MODIFIABLE

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A very interesting unpublished opinion was recently handed down by California’s Court of Appeals regarding spousal support.  The case of Irmo Camerlingo basically stands for the proposition that when one party expressly waives spousal support in a final judgment of dissolution that party cannot later attempt to modify the agreement to provide for support.

It’s important to remember, however, that Camerlingo was not published, meaning it should not be cited or relied upon except as permitted under Rules 8.1115 (a) and (b) of the California Rules of Court.  It should strictly be used for case study to show how recurring family law disputes were resolved in trial and appellate courts.

Camerlingo involved a Husband and Wife who were married for 25 years before divorcing.  The terms of their Marriage Settlement Agreement expressly waived spousal support for either party.  Husband and Wife later fashioned a new stipulation whereby Husband agreed to provide support for Wife.  Wife later filed an OSC to modify the stipulated agreement.

In its wisdom, the California Court of Appeals ruled that collateral estoppel bars Wife from enforcing the stipulation as a support order.  The doctrine of collateral estoppel precludes re-litigation of issues previously adjudicated.

The appellate court concluded that spouses are permitted to waive support and the trial court’s jurisdiction terminates unless there has been an express reservation concerning spousal support.  The parties may not confer jurisdiction on a court.  The family court’s jurisdictional finding was final under these circumstances.

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