If you are beginning the divorce process, there are many questions you may have for your divorce attorney regarding your finances. You many find yourself in a situation where you could be paying your former spouse alimony, or you could be the individual receiving alimony from your ex-spouse. In 2017, the GOP-run legislature enacted new tax laws that will greatly impact alimony payments and separation agreements. This article will explain to you some of the impacts the bill will have on your divorce and the financial implications you may face.
First, it is important to understand the fundamentals of alimony. When divorcing, a former spouse can ask for alimony, a form of financial maintenance to assist the other spouse in becoming financially stable once the marriage has ended. There are many factors that are considering in order to determine alimony payments. These include the length of the marriage, health of the parties, socioeconomic status of the ex-spouses, financial contributions to the marriage, age, education, profession, and a variety of other factors. Depending on the situation, alimony payments can last for a certain duration or an extended period of time. According to an IRS report, in 2015, over $12 billion dollars of alimony was paid in the United States.
First–and the most important thing to know–is that alimony payments will no longer be tax deductible for any separation or divorce agreement signed after 2018. As the alimony will be treated like child support for new alimony recipients, these payments will not be reported as income. However, if alimony payments are already being made prior to the end of 2018, there will still be tax deductions for these payments.
Also, if these payments are already in effect, you will not be affected by any of the new tax laws to be enacted in 2019. Any prior divorce agreements will remain valid, and the IRS will uphold prior alimony agreements. However, if agreements are modified in the future, they must comply with the new tax code.
The new tax bill likely will impact both you and your ex, as alimony payments are generally given to those in a different socioeconomic status than their ex-spouse. For example, let’s assume you are the payor, and you are now receiving a tax deduction for your payments to your ex-spouse in a lower tax bracket than you are. If you were to divorce in 2019, as the payor, you may have a better chance of no longer paying as much, since there would be no tax deduction. Due to the lack of deductions, monthly payments would inevitably be more expensive. These deductions have been so important because if a former spouse is having difficulty with payments, they were given a bit of a break due to the deduction. If tax relief is given to the payor as part of the divorce agreement, this could be one option to alleviate some of the stress that these new tax laws bring.
It is likely that many will not be able to afford as much in alimony, as these new tax laws are a deterrent to paying as much alimony as possible. Many have assumed that divorce proceedings will increase this year, as some people attempt to get ahead of the new tax laws. If both parties agree on these modifications, their old alimony agreement can be updated to conform with the new tax code. Since there will be no further tax deductions due to alimony, many payers will be rushing to divorce attorneys to deal with these agreements as soon as possible. It is inevitable that finances in a divorce could become a lot more cumbersome and messy.
If you are going through a divorce and are concerned about how the new tax laws will impact your current or future alimony payments, please contact a family law attorney to discuss your options. If you need more information about family law or this issue specifically, please feel free to schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete a contact form and we will respond to your phone call or submission promptly.
Robert and Mary, a Massachusetts couple, have been married for ten years and now want to proceed with obtaining a divorce. During the marriage, Robert worked and Mary took care of the home. They had no children. Because Robert has a pension plan, the question comes up: how does a court handle Social Security benefits and pension/retirement plans in property division and alimony?
In Massachusetts, the property in a divorce is subject to an “equitable division.” This does not mean that each party to the marriage receives an equal share of property in the marriage. Rather, each party to a marriage receives fair and equitable amounts of property, so that each party can experience a similar lifestyle to which he or she grew accustomed during the marriage.
A pension earned during the marriage is generally considered to be a joint asset of both parties, and would likely be equitably divided via a qualified domestic relations order. This is an order that is filed with the Massachusetts Family Court and if approved is given to the administrator of the pension, so that the pension maybe divided between the parties. The division of a pension may be a complex issue because pensions, also including IRA or 401(k) accounts, are not always equal in a dollar for dollar manner, as there may be penalties and taxes associated with them. A family law attorney can help evaluate and value the numerical amounts to handle this complexity on your behalf.
Retirement accounts are also considered to be marital assets in a divorce. As such, retirement accounts would be divided on an equitable basis. This issue becomes complex, however, because the parties must look to the length of the marriage. For example, in the case above, Robert and Mary were married for ten years. Suppose, therefore, that Robert continues to work for another 30 years. His payment to Mary would be one half of the quarter of the account, because his payment is one half of his working life during the marriage.
Alimony is different from property division in a divorce. Alimony is court-ordered support from one spouse to another and is separate from the equitable division of property. In Massachusetts, there are four types of alimony: (1) General Term alimony (provides regular support for a length of time based on the length of the marriage); (2) Rehabilitative alimony (provides regular support until the ex-spouse is able to be self-sustaining); (3) Reimbursement alimony (provides regular or one-time support for a shorter marriage to make up for costs that the ex-spouse paid in supporting the other spouse); and (4) Transitional alimony (provides regular or one-time support).
If a judge decides to award alimony under the common General Term alimony standard, then he or she will review the following factors when deciding whether or not to award alimony or for how much the alimony award should be assigned: the length of the marriage; age of the parties; health of the parties; income, employment and employability of both parties, including employability through reasonable diligence and additional training, if necessary; economic and non-economic contribution of both parties to the marriage; marital lifestyle; ability of each party to maintain the marital lifestyle; lost economic opportunity as a result of the marriage, and other factors the court considers relevant and material.
Robert and Mary were married for ten years, and the facts indicate that Robert was the sole working person in their family unit. As such, alimony payments would likely be awarded to Mary from Robert. Depending on the type of alimony that the Court determines that Mary would receive, Mary would likely be able to receive alimony payments until Robert’s retirement age. The Massachusetts family court may review several factors in awarding alimony payments to Mary, such as her health and disability (if she has issues such as these), marital lifestyle (she was able to stay at home), and her contribution to the family unit (lost opportunity to work, for example).
If a Massachusetts Justice decides to use this equitable factors approach under General Term Alimony, then the Justice would likely order that Mary receive alimony for seven years, unless Mary remarries or if Robert passes away or if Robert reaches full retirement age. If Mary cohabitates with someone else and has maintained a common household with another person, then Mary’s alimony payments could be ordered to be ceased. It is important that a payor spouse, like Robert, not arbitrarily discontinue payments without the approval from a Massachusetts Justice.
If you are seeking a competent family, pension, retirement, or alimony law lawyer or domestic relations attorney, please contact our offices by phone at 978-225-9030 during business hours or complete a contact form on our website. We will respond to your phone call or submission promptly, and you may schedule a free consultation with us.
As we explained previously, the Massachusetts Alimony Reform Act of 2011 prescribed durational limits for alimony payments. These limits cap alimony based on the length of the parties’ marriage. The limits are imposed at the time the marriage is over—but what exactly does that mean? In the case of multiple filings and counter-filings, for example (as tends to be the case with many divorces) just when is the marriage “over”?
The Appeals Court addressed this issue in a recent case, Sbrogna v. Sbrogna. In that case, the parties were married in 1973. The husband first filed a complaint for divorce in 1990 on the ground of irretrievable breakdown of the marriage; however, no record of service of process on the wife existed. A few months later, the husband filed some motions related to the case. Those motions were never acted on, and two years later, the case was marked “inactive,” though not dismissed or otherwise formally closed by the court.
In 1994, the parties filed a joint motion to amend and a joint petition for divorce based on the irretrievable breakdown of the marriage. The motion to amend was allowed, and the case proceeded as a joint action for divorce. The judgment of divorce was entered in 1994.
In 2016, the husband filed an action seeking to modify his alimony obligations. To do so, he attempted to use the 1990 filing date as the end date of the marriage, as opposed to the 1994 filing date of the joint petition. The husband argued that because of the 1990 filing, the parties were married more than fifteen years but less than twenty years, making his alimony obligation modifiable. The wife filed a motion to dismiss, which was granted. The husband appealed.
The Appeals Court explained the durational limits imposed by the Alimony Reform Act of 2011. Under those limits, a marriage lasting more than 15 but less than 20 years is capped at 80% of the duration of the marriage for purposes of alimony payments. However, those caps do not apply to a marriage lasting more than 20 years—hence the husband’s argument regarding the original 1990 filing date signifying the end of the parties’ marriage.
The Appeals Court then explained that for purposes of alimony, the length of the marriage is defined as the number of months from the date of legal marriage to the date of service of a complaint or petition for divorce. However, the Court noted, the relevant pleading is that which results in a valid judgment of divorce. “To read the statute otherwise would lead to the nonsensical result that service of a pleading that leads neither to a valid divorce nor to an alimony award could nonetheless serve as the basis for calculating the length of the marriage and the duration of alimony, even if the parties reconciled and lived together for decades before ultimately divorcing,” the Court stated.
Because it’s common to have multiple complaints and petitions in divorce cases, any other reading of the statute would be difficult, if not impossible, to enforce, the Court said. As a result of this interpretation, the Court noted that for alimony purposes, the 1994 joint petition must be used as the date for calculating the length of the Sbrognas’ marriage. As such, the husband was not entitled to modification of his alimony payments, because the marriage lasted longer than twenty years, thereby falling outside of the Act’s durational limits on general alimony.
If you have any questions about alimony or any other issues regarding family law, please contact our firm. You may schedule a free consultation with an experienced family law lawyer today. Call our offices at 978-225-9030 during business hours or complete a contact form online. Do not hesitate to call our offices today.
In what ways might a part-time job or second job affect alimony or child support payments?
Under Massachusetts divorce law, a spousal support award is not set in stone. Rather, it may be altered by a petition for modification to the court initiated by either party. To prevail, the petitioner must demonstrate that an adjustment of the alimony judgment is warranted because of a material change of circumstances since the earlier judgment was entered.
Likewise, a court may modify an earlier judgment regarding the care and custody of minor children if it determines a material and substantial change in the parties’ circumstances has occurred requiring an adjustment that would be in the children’s best interests. As noted in Section III. (A.) of the 2017 Massachusetts Child Support Guidelines, among the occurrences that justify modifying a child support order are:
- An inconsistency between the amount of the existing order and the amount that would result from the application of the guidelines;
- previously ordered health care coverage is no longer available;
- previously ordered health care coverage is still available but no longer at a reasonable cost or without an undue hardship; and
- access to health care coverage not previously available to a parent has become available.
Concerning both alimony and child support, a common basis for complaints for modification brought by one party involves the other party either taking on a second job to supplement his or her main income or accepting a part-time position.
In ordering one of the parties in a divorce to pay alimony to the other in the first instance, the court weighs numerous factors, including the length of the marriage, the parties’ age and health, their employability and the sources and amounts of income. To arrive at the parties’ incomes concerning an alimony award, a judge may attribute income to a party who is unemployed or underemployed.
In a spousal support modification action, any income earned by the party paying alimony from a part-time job, second job or through overtime is presumed not to be material to a redetermination of alimony, so long as the party is working more than a “single full-time equivalent position,” and the second job or overtime pay began after the initial spousal support award was entered.
In one case, the former wife appealed her court-ordered rehabilitative alimony payments to her ex-husband. The Appeals Court found the probate court judge had not abused his discretion in making the award, but had erred in determining her ability to pay the amount of spousal support by considering her income both from her full-time position and a part-time job she took on after the judgment of divorce had entered. The appellate court vacated the alimony award and remanded the case to the trial judge. The court held that a party working full-time cannot be considered “underemployed” based on the pay level from a post-judgment second job unless a judge finds supporting evidence that “a basis exists for rebutting the presumption of immateriality applicable to the income earned from the second job.”
The 2017 Massachusetts Child Support Guidelines allow a court considering the best interests of the children to weigh “none, some, or all overtime income or income from a secondary job” from the calculation of gross income for child support purposes. A presumption exists that any part-time job, overtime pay or second-job income not be considered in a future child support order if the payor or recipient parent began receiving such income after the initial child support order was entered.
If you have any questions about alimony, child support, or any other issues regarding family law, please contact our firm. You may schedule a free consultation with an experienced family law attorney today. Call our offices at 978-225-9030 during business hours or complete a contact form online.
What are “gross income” tax implications of alimony payments? Alimony is court-ordered support from one spouse to another under a divorce or separation agreement. The purpose of alimony is to allow a receiving spouse to endure the same or similar type of lifestyle that he or she had during the marriage relationship.
In 2011, Massachusetts adopted the Alimony Reform Act. The Act, which took effect in March, 2012, governs the type, the amount, the duration, and the termination of alimony payments. This ensures that alimony payments do not endure if their endurance would be unequitable, or unfair. The goal in Massachusetts is to achieve an equitable result based upon several factors about the marriage relationship.
It is important to note that child support is separate from alimony. Child support is awarded to a custodial parent, so that the children are financially supported when a divorce occurs between a child’s or children’s parents.
In the Commonwealth, there are four types of alimony: (1) General Term alimony (provides regular support for a length of time based on the length of the marriage); (2) Rehabilitative alimony (provides regular support until the ex-spouse is able to be self-sustaining); (3) Reimbursement alimony (provides regular or one-time support for a shorter marriage to make up for costs that the ex-spouse paid in supporting the other spouse); and (4) Transitional alimony (provides regular or one-time support).
People who pay or receive alimony payments need to consider the “gross income” tax implications that are invoked with the paying and receiving of alimony payments in a divorce. This is an important consideration that should be handled between an experienced family law attorney and tax professional, especially since income is handled on a federal and state level.
For example, suppose that a couple is divorced in Massachusetts. The judge orders that the former husband pay $2,000.00 each month to the former wife. Are any of the former husband’s payments to his ex-wife deductible? In other words, how may the husband handle the alimony payments that he makes to his wife for tax purposes? The law states that a party’s alimony payments are deductible from gross income by the payer, and are included in gross income by the collecting spouse. Any alimony received is included in federal gross income and therefore must be included as Massachusetts gross income. With the example mentioned, the husband is likely able to deduct his alimony payments that he transacts to his ex-spouse. The former wife will have to include the payments that she receives as her income.
If the former husband and former wife in the aforementioned example have a child or children together and the former husband is ordered to also pay for child support, may the former husband include any child support payments as an alimony deduction? No, because the law states that a child support payment does not qualify as an alimony deduction and any amounts are not included as gross income by the recipient, which, in this example, is the former wife.
Here is an example: Sally and Joe decide to divorce. Sally and Joe have three children together between the ages of 6 and 14. Sally works as a public school teacher in an inner-city school and earns $45,000 per year. Joe is a CEO of a company and earns $170,000 per year. A Massachusetts justice of the Family Court ordered that Joe make alimony payments to Sally in the divorce decree. Additionally, the judge ordered that Sally will have custody of the children, but Joe will make child support payments to Sally for the children. Sally and Joe want to know whether they must include the alimony and child support payments on their tax returns.
Because Joe is the person making the alimony payments to Sally, Joe may deduct his alimony payments on his tax returns. Sally, however, must include any alimony payments that she receives as “gross income.” Joe may not deduct child support payments and Sally should not include child support payments as income on her taxes; child support payments are awarded for the “best interest of the children.”
Massachusetts alimony and child support issues are nuanced and complex. If you have any questions about divorce, family law, child support, alimony, or more, please contact our competent attorneys. You may schedule a free consultation with an experienced divorce law attorney or family law lawyer today. Call our offices at 978-225-9030 during business hours or complete a contact form online.
Family dynamics are complex. The members of a family unit must work hard to support their family system. In some family units, one spouse may work while the other stays home. Other families include two spouses who work. The diversity of the family unit applies to Massachusetts same-sex relationships as well.
One example of an issue in Massachusetts family and divorce law cases is how rehabilitative alimony is awarded and the method by which it works.
Take the following example: Leila and Les started dating fifteen years ago. Les worked full-time as a bank teller, and Leila had recently earned a college degree in computer information systems and started a career in her field at a local company. Over the years during their relationship, Les graduated from college and graduate school. During this time, Leila supported Les’s professional endeavors. She cared for all household responsibilities, including tasks such as cleaning, cooking, and raising the couple’s children after they were born. Recently, Leila and Les were married, but sadly they decided to divorce.
Because of the years of sustaining the family unit at home, Leila even as a girlfriend, did not build a career for herself. She now believes that she would not be able to obtain a career unless she pursued another college degree. Her computer degree is outdated, and she does not have as much experience as others in her field. Assuming that their divorce proceeds forward, how would the Massachusetts courts award alimony to the wife? Is the court able to award alimony for a short length of time?
In Massachusetts, the Probate and Family Court may award rehabilitative alimony. As one of four forms of alimony, rehabilitative alimony is a form of financial support for a short period of time. Rehabilitative alimony allows the spouse who receives the alimony to reestablish herself until she is self-sufficient and self-sustaining. Until the receiving spouse is self-supporting and more independent, the paying spouse may be required to make payments to the receiving spouse.
To refer to the example above, Leila may want to obtain a modern computer degree or take additional classes to update her skill set. A Massachusetts court may award her alimony for the length of time required to complete her degree plus several more months, so that she may obtain a career position. The judge may award an equitable amount that is subject to the judge’s discretion.
Suppose that the husband in the aforementioned example remarries. Would he be able to terminate the payments to his former wife? The answer is no. However, if the wife remarries, the wife would not be able to continue to receive alimony payments.
One question often asked by many couples, spouses, and clients is, how long may the rehabilitative alimony payments last? Alimony payments may be made for 5 years or less. The payments may also end if either party passes away.
This award may later be modified if needed, in the event of a material change in circumstances. Let’s say that the Massachusetts orders Les to make monthly payments to Leila in the amount of $2000. Two months later, Leila becomes a social media blogger superstar and earns one million dollars per year. May Les stop making payments to her without the court’s approval? The answer is no, but Les may petition the court to modify the alimony amount. Because Leila could be deemed to be self-sustaining based upon her income, the Massachusetts judge would likely alter the amount of the alimony payment.
Conversely, if the wife was unable to become self-sufficient during the period of her alimony, the wife may ask the court to extend her alimony by arguing that her circumstances are compelling enough to warrant an extension of alimony.
In addition to awarding rehabilitative alimony, Massachusetts courts may award three other forms of alimony: (1) General Term Alimony; (2) Reimbursement Alimony; and (3) Transitional Alimony.
It is important to hire a competent family law lawyer to handle your unique case. If you have any questions about alimony, divorce, or family law issues, please call our offices at 978-225-9030 during business hours or complete a contact form on our website. We will respond to your phone call or submission with prompt attention.