Claiming Children on Your Taxes

I’m often puzzled by how much time clients spend fighting over which spouse gets to claim the children on their post-divorce taxes.  While a Separation Agreement should not specify who files as Head of Household, a Separation Agreement may specify who claims the children as dependents.  Many clients seem to believe that claiming a child will reap them significant financial award.  While clients may be correct that claiming a child impacts tax credits, claiming a child may not provide quite the financial windfall the client is anticipating.  Accordingly, I advise my clients to contact their CPA before negotiations to determine how much money claiming a dependent really awards them.  Clients might be surprised to learn that it’s less than a $1,000.00.  In light of that number, it doesn’t make sense to argue for hours over it in an expensive mediation.

I also advise my clients to think creatively about solutions.  If there are two children, perhaps each parent will claim one child.  Or, if there is only one child, perhaps one parent can claim on even years and the other parent can claim on odd years.

As I’ve stated previously on this blog, it’s crucial to enter negotiations informed and prepared.  Prepare yourself on this topic by asking your CPA for the true value of claiming your child(ren).  You might be surprised by his or her answer.   And, if you don’t have a personal accountant, now is the time to secure someone.  Look for someone like Susan Miller at Aurora Financial Advisors or Marc Bello at Edelstein and Company, both of whom are experienced in divorce finances. 

You’ve Been Served: Understanding Service and Its Meaning

Clients report that being served with a divorce summons is one of the most upsetting stages of divorce.  In Massachusetts, the service must be in-hand service, which means that the service processor cannot leave it for you at your residence.  Instead, the sheriff or constable must find you at your house, at your work, or potentially at a relative’s friends and serve it to you personally.  Your neighbors, colleagues, and relatives might witness the service, which might cause humiliation, concern, and anger. 

It is important for clients to realize that service is not necessarily a scary thing.  It is required by law, and thus you should not understand it as one more example of your spouse’s insensitivity.  Your spouse is merely following the legal requirements in order to initiate the divorce proceeding. 

Many clients are alarmed that their spouse initiated the proceeding, rendering the spouse the plaintiff.  Generally, this should not be a point of worry.  Unlike a criminal proceeding, where only the defendant can go to jail, in a divorce it is not necessarily bad to be the defendant.  You should speak to your attorney about whether or not you want to file a counter-complaint, in which you can identify your own grounds for the divorce.  You should also strategize with your attorney about how to use your position as the defendant to help you present evidence at trial, since the plaintiff introduces his or her case before the defendant. 

Negotiation Strategies

Clients often ask me what they should say during settlement discussions in order to be effective and persuasive.  I always tell them that they should first do their negotiation homework.  I mean that, before the negotiation, they must identify the topics to be discussed (i.e. “alimony, child support, and time-sharing”).  Then, for each topic, the client must determine their range of acceptable solutions.  For example, the non-custodial parent might decide that the minimum s/he will pay is the amount determined by the child support guidelines, and the maximum is the child support guidelines plus half the cost of extra-curricular activities, half the cost of summer camp, 70% of SAT tutoring, and 70% of college tuition.

So, once you’re at the negotiation table, how do you get your spouse to agree to a solution that is within your range of agreeable solutions?  When you state your proposal to your spouse, substantiate it with three supporting arguments.  Psychologists have found that people respond well to arguments grouped in three.  For example, you could state, “I am only willing to pay child support in the amount of $1,000 per month for the following three reasons.  First, $1,000 per month is $150 more than the child support guidelines propose.  Second, I give our child an allowance of $15/per week directly to her, which she uses to buy accessories and snacks.  Third, I am giving you 60% of the value of the marital home.”

And what if your spouse has a negative response to your proposal?  Let’s say your spouse’s vitriolic response includes personal attacks, curse words, and heightened volume.  To respond to vitriol and deescalate the conversation, use “I” statements.  An “I” statements takes the following form: “I feel ______ when ______ because _______.”  If your spouse attacks you, you might say, “I felt attacked by that statement because it was personally hurtful and because I don’t think it moves us toward an agreement.”  You will be surprised at the effectiveness of an “I” statement response. 

These strategies take practice, but they will keep you calm and confident and ultimately make your spouse more likely to agree to your ideas.  They also work in non-legal negotiations!

Merger vs. Survival

Separation agreements often include a merger or survival clause.  This legalese has significant meaning.

A merged agreement becomes one with the divorce.  In other words, a merged agreement no longer stands as a separate contract; it is part of the divorce.  Since a merged agreement no longer stands alone, one cannot pursue contract remedies to enforce it.  Instead, one must file a motion for contempt of the divorce order.

A surviving agreement, on the other hand, continues to stand as an independent contract.  Thus, to enforce a surviving agreement, one may employ ordinary contract remedies, such as breach of contract.  Unlike merged agreement, surviving agreements cannot be modified by the ordinary standard of a “material change of circumstances.”  A higher standard applies for changing surviving agreements. 

What if I want to remove my child from Massachusetts after a divorce order is in place?

If you want to remove your child from Massachusetts, you should first seek the consent of the other party.  If the other party fails to consent, you must take the matter to the court.

The court will first consider the best interests of the child and whether a move provides the child with a real advantage.  The court will consider other factors as well, such as whether there are sincere motives for the relocation and whether the removal might seriously hinder the relationship between the child and the other parent.  The court is unlikely to authorize a removal simply because the removing parent is the primary custodian.  Instead, the court will consider the full picture to determine whether the removal is in the child’s best interests, will damage either parental relationship, or will provide a real advantage to the child.   

What is a Guardian Ad Litem and what does a Guardian Ad Litem look for?

A Guardian Ad Litem, or GAL, is a court-appointed attorney who represents the best interests of minor children in custody disputes.  In some states, the GAL is almost always an attorney, but in Massachusetts the GAL might be a mental health worker, social worker, or lawyer.  The GAL is responsible for gathering information on the child’s well-being and the custody dispute, and then providing a report back to the court. Often, the GAL will meet with the minor child, both parties, and the child’s therapists/teachers to get a full picture of the custody issues.

Sometimes a particular issue is at the fore, such as a child’s mental illness, and the court will direct the GAL to focus his or her attention there.  Other times, the GAL is generally investigating which party is best suited to meet the best needs of the minor child.  While this is in no way an exhaustive list, the GAL might consider: the home environment of each party; the child’s relationship and level of comfort with each party; the stability of each party and its impact on the child; the child’s physical, mental, moral, and emotional health; and the child’s education. 

Divorce Stress Relief

It is sometimes said that there are three types of divorce:  a legal divorce, a financial divorce, and an emotional divorce.  Your lawyer can deliver your legal divorce and financial divorce, and a seasoned CPA or financial planner can assist with the financial divorce.  But who can you turn to for the emotional divorce? 

In collaborative divorce, a “divorce coach,” generally a psychologist or social worker, assists with stress and emotional management.   For those people who have not chosen a collaborative divorce, or for those who did and still would like more emotional assistance, stress reduction yoga is a tool for managing the stress of divorce.  The Boston area is host to several excellent yoga studios.  Recently, I learned about a local therapist, Susan Davis, who doubles as a yoga instructor; she provides both talk and yoga therapy to assist you through the emotional upheaval of your divorce or separation.  Releasing stress through yoga therapy, or with a divorce coach, will likely make you stronger, more reasonable, and more effective at the negotiation table.   

What does the new Massachusetts alimony law say about cohabitation?

The new alimony law bases the calculation of alimony, in large part, on the duration of the marriage.  The alimony law defines duration of marriage as the number of months from the date of marriage to the filing of a divorce complaint.  However, the law adds that “the court shall have discretion to increase the duration of marriage where there is evidence that the parties’ economic marital partnership began during their cohabitation period prior to the marriage.”  In other words, the court may find that a couple married for six years actually had a duration of marriage of nine years, since that is the point at which they began the intermingling of finances during cohabitation.  As a result, the payor spouse may end up paying more money in alimony where there was financial intermingling during premarital cohabitation.

The new alimony law mentions cohabitation again when discussing the termination of general term alimony: “General term alimony shall be suspended, reduced, or terminated upon the cohabitation of the recipient spouse when the payor shows that the recipient has maintained a common household, as defined below, with another person for a continuous period of at least three months.”  This means that the recipient spouse may lose alimony when he or she cohabits with a new partner for at least three months in a primary residence, has economic interdependence with the new partner, and the recipient spouse and new partner have a community reputation as a couple.  If alimony is terminated for this reason, the new law provides that alimony may be reinstated when the new relationship with the new partner ends.  If reinstated, the alimony payments will not extend beyond the original termination date.

Section 1, 1A, and 1B Divorce in Massachusetts

There are different types of divorce complaints in Massachusetts.  You can file on fault grounds, such as adultery, impotency, desertion for one year or more, or cruel and abusive treatment to name a few.  This is called a Section 1 divorce.  Although many clients are emotionally motivated to file on fault grounds, you should speak to your attorney about whether or not there is a productive purpose for filing on fault grounds.  It is possible that filing on fault grounds may only complicate your divorce.

If you and your spouse have already reached a Separation Agreement, you may want to file a Section 1A complaint for divorce.  After filing a 1A divorce, a hearing date will be set earlier than six months from the date of filing.  At the hearing, the judge will review your Separation Agreement and ask a number of questions.  If the judge enters the divorce order, the divorce will not become final until a period of time passes after the hearing date.  This is a speedier route of divorce than the others.

If you and your spoke have not reached an agreement and are choosing a “no-fault” basis for divorce, you will file a Section 1B complaint for divorce.  This is the most common type of divorce filed in Massachusetts.  The court will schedule a hearing on the Section 1B complaint no earlier than six months after you file it.  During these six months, you and your attorney will negotiate with your spouse and your spouse’s attorney to reach a Separation Agreement.  If you and your spouse reach a Separation Agreement within the six month period, you can file a motion to amend to a Section 1A complaint and request an immediate hearing on your joint petition. 

Alimony Reform in Massachusetts

You’ve probably heard the buzz about the new alimony law in Massachusetts.  Here are some answers to your questions.

Why should I care about the new law if it does not take effect until March 12, 2012?

You should talk to your attorney about how it might impact you even now.  For example, you may want to start thinking about whether to request a modification of your current alimony arrangement, or you may want to use the new law to frame current alimony negotiations.

What are the four types of alimony?

General term alimony is alimony given for a specified duration.  There are three other types of alimony in Massachusetts: rehabilitative alimony, reimbursement alimony, and transitional alimony.  The purpose of rehabilitative alimony is to help a recipient spouse become economically self-sufficient by a predicted time.  The purpose of reimbursement alimony is to compensate the recipient spouse for an economic or non-economic contribution to the financial resources of the payor spouse.  The purpose of transitional alimony is to transition the recipient spouse to an adjusted lifestyle or location following the divorce.  Ask your attorney which type of alimony is most appropriate in your divorce.

How long will “general term” alimony last under the new law? 

For general term alimony, it depends on the length of your marriage (i.e. the number of months married):
    – If your marriage is five years or less, at a maximum you will receive/pay     alimony for half the number of months of the marriage.  
    – If your marriage is ten years or less, but more than five years, at a maximum you will receive/pay alimony for 60% of the number of months of the marriage.
    – If your marriage is fifteen years or less, but more than ten years, at a maximum you will receive/pay alimony for 70% of the number of months of the marriage.
    – If your marriage is twenty years or less, but more than fifteen years, at a maximum you will receive/pay alimony for 80% of the number of months of the marriage.
    – If your marriage is longer than twenty years, the court may order indefinite alimony. 
    – You should speak ask your attorney about exceptions to these general rules. 

General term alimony shall terminate upon the payor attaining the full retirement age, although you should ask your attorney about exceptions. 

What is the amount of alimony for “general term” alimony?

General term alimony shall not exceed the recipient’s need or 30 to 35% of the difference between the parties’ gross incomes at the time the order was issued.

This information inspires me to file an action to modify my current alimony arrangement.  Under the new law, when can I file my action to modify?

    – If your marriage is five years or less, you may file a modification action as of March 1, 2013.
    – If your marriage is ten years or less, but more than five years, you may file a modification action as of March 1, 2014.
    – If your marriage is fifteen years or less, but more than ten years, you may file a modification action as of March 1, 2015.
    – If your marriage is twenty years or less, you may file a modification action as of September 1, 2015.

Be sure to speak with your attorney if you will reach retirement age before your date to file a modification action.