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Alimony Tax Deduction: Is It Too Late To Divorce in 2018?

Have you heard the news about the alimony tax deduction?  It is going away for divorces finalized after December 31, 2018.  But fear not!  If you and your spouse act smartly and quickly, you can still lock in your alimony tax deduction.

What is the Alimony Tax Deduction?

The alimony tax deduction is currently enshrined in 26 U.S. Code section 215.  It states that alimony (as opposed to child support or distribution of property) can be tax deductible to the payor and taxable to the payee.  This means that the person who pays alimony will pay less in taxes, and the person who receives alimony will pay taxes on it as if it were regular income.

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The Truth: Alimony is Arbitrary

I recently came across an article on how alimony is awarded in different states.  The article, titled “A Survey of Lawyers’ Observations About the Principles Governing the Award of Spousal Support Throughout the United States,” was written by J. Thomas Oldham of the University of Houston Law Center.  Here is the abstract:

Abstract

At the beginning of this project, I distributed 5000 questionnaires to family lawyers around the country. I asked the lawyers to respond by estimating the spousal support award, if any, that would result for six hypothetical divorcing couples in their jurisdiction. While the response rate was not great, the responses received suggest that there are three different types of spousal support systems in the U. S. today. In some states, spousal support is rarely awarded, and then only to prevent severe hardship. In others, spousal support is frequently awarded when the spouses’ incomes are substantially different at divorce. In most states, however, it appears that there is no clear spousal support policy, and the award, if any, in any given case is the result of which judge is assigned to hear the matter. In these states, spousal support determinations appear to be arbitrary. I have included as an appendix to my article a summary of the responses.

Some states have responded to this lack of clarity regarding spousal support standards by adopting guidelines. These guidelines attempt to provide more uniformity in terms of award amounts and award duration. To date, they have not attempted to provide guidance regarding when a spousal support award is warranted. In this article, I discuss how spousal support standards could be clarified in those states where there appears to be no clearly accepted policy.

I would say that Florida falls into the last category:  there are no alimony guidelines, and the amount you might receive or pay is highly dependent on the whims of the judge you are in front of.

That is, if you let the judge decide the amount of alimony.

You Can Be Your Own Judge

More and more families are coming to realize that going through a court battle is, in most cases, the worst possible way to divorce.  If you choose a private form of dispute resolution, such as the Collaborative Process, you and your spouse will have the final say on the amount of any alimony.

In the Collaborative Process, you and your spouse each have separate attorneys to guide you.  However, the attorneys are not there for opposition research or to prepare for trial; rather, they are there solely for the purpose of helping you reach an out-of-court agreement.  This means that no time, energy, or money is spent fighting in court.

Oftentimes, a neutral financial professional will help you and your spouse develop and analyze financial options that work best for your family.  The financial neutral can do a lifestyle analysis to determine what has been spent in the past and where there might be efficiencies that can be created in a spouse’s cash flow.   The financial professional will oftentimes also look into whether there are tax loopholes that might allow the family to enlarge their proverbial pie.

So do your family and your future a favor and consider the Collaborative Family Law Process.


Adam B. Cordover is co-author of an upcoming American Bar Association book on Collaborative Divorce.  Further, Adam trains attorneys, mental health professional, financial professionals, and mediators in the Collaborative Process throughout Florida and the U.S.

2016 Florida Alimony Reform Bill Vetoed

The Tampa Bay Times is reporting that Florida Governor Rick Scott has vetoed SB 668, a bill that was intended to make large-scale changes to the state’s alimony and child custody laws.

Rick Scott (cropped).jpg

For the first time, the bill was set to create alimony guidelines that calculated a presumptive range for the amount and length of spousal support.  Further, the bill would have directed judges, when establishing custody schedules, to start out with the premise that each parent should have approximately an equal amount of time with children.

It was that second point that seemed to be the sticking point for Governor Scott.

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2015 Florida Alimony Reform – Proposed Factors for Alimony

In a previous post, I wrote about Florida House Bill 943 and the proposed alimony guidelines contained in the bill.  Florida currently has no guidelines for alimony, and the bill creates formulas which would implement presumptive ranges for the amount and duration of alimony that a judge could order, making awards more predictable.

As an update to my prior post, HB 943 has been amended.  As of the date I am writing this, the years of marriage is multiplied by 1.5%, rather than 1.25%, in the formula to determine the low amount of alimony that a judge could order.  There are likely to be more changes to the bill before the it passes both houses of the Florida legislature and is signed into law (if, indeed, it makes it that far).

So, if the alimony guidelines become official, where in the range of amount and duration of alimony will any particular award fall?  The bill sets out certain factors to help a judge make this decision:

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Florida Alimony Reform 2015 – Florida Alimony Guidelines

Many people are surprised to learn that, currently, Florida has no alimony guidelines.  Rather, it has a bunch of factors that a judge considers, such as lifestyle of the parties, each spouses’ contribution to the marriage, and the age and physical condition of each.  This has left many clients frustrated when they ask their attorneys how much alimony they should expect to pay or receive.

House Bill 943 looks to change this.

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Florida Family Law: Mandatory Disclosure

When you file and serve a petition in a Florida family law case that involves financial issues such as child support, alimony, or the division of property in debts, a clock starts ticking.  Within 45 days of the initial pleadings being served on the respondent, each party is required to provide the other party with a whole host of financial documents and information.

This is what is known as Mandatory Disclosure, and it is governed by Rule 12.285, Florida Family Law Rules of Procedure.

The following are a list of documents that are required to be exchanged:

(1) A financial affidavit in substantial conformity with Florida Family Law Rules of Procedure Form 12.902(b) if the party’s gross annual income is less than $50,000, or Florida Family Law Rules of Procedure Form 12.902(c) if the party’s gross annual income is equal to or more than $50,000, which requirement cannot be waived by the parties. The financial affidavits must also be filed with the court. A party may request, by using the Standard Family Law Interrogatories, or the court on its own motion may order, a party whose gross annual income is less than $50,000 to complete Florida Family Law Rules of
Procedure Form 12.902(c).

(2) All federal and state income tax returns, gift tax returns, and intangible personal property tax returns filed by the party or on the party’s behalf for the past 3 years.

(3) IRS forms W-2, 1099, and K-1 for the past year, if the income tax return for that year has not been prepared. Read more

Florida Divorce, Financial Affidavits, and Privacy

In almost any Florida family law matter that involves financial issues, such as child support, alimony, division of property and debt, or attorney’s fees, parties are required to exchange and file Florida Family Law Financial Affidavits.  Financial Affidavits outline each party’s source(s) of income, as well as expenses, assets, and liabilities.

And, when they are filed, they become part of the public record, accessible by anyone.

Most people, for any number reasons, do not want their financial profile to become public.  And yet, when people go through the traditional litigated divorce, that’s exactly what happens.

But it does not need to be that way.

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Florida Child Support & Alimony: What is an Obligee? What is an Obligor?

If you are going through a Florida family law case involving alimony or child support, you have probably run into the terms “obligee” and “obligor.”  So what do these terms mean?

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Does Florida Recognize Legal Separation?

Many jurisdictions require spouses to be legally separated for a certain period of time (oftentimes about 6-12 months) before they can get a divorce.

Florida does not have such a requirement.

However, there are many couples out there who wish to go through a “trial separation” without taking the leap of divorce.  Many want an interim step short of divorce to maintain the possibility that the parties can work things out later and reconcile.  Does Florida have any mechanisms to provide protections to spouses and children during a trial separation?

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Modifying Florida Alimony

Now that Senate Bill 718 on alimony reform has been vetoed by Florida Governor Rick Scott, many Tampa Bay residents are wondering whether there is any way to modify or terminate their alimony obligations.  The answer, in many cases, may be yes.

Chapter 61 of the Florida Statutes states that most types of alimony may be modified or terminated when there has been a substantial change in circumstances that affects the receiving spouse’s need for alimony or the paying spouse’s ability to pay. Case law tells us that a “substantial change in circumstances” means a change that was unanticipated at the time the alimony was ordered by the Court, and a change that is permanent, involuntary, and material. Examples of substantial changes in circumstance that may justify upward or downward modification include health issues, long-term unemployment, a big raise, or a large inheritance.

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