Harsh Exposure of Divorce Lawyers & Courts: The Divorce Corp Documentary

July 7, 2015

UYe2xpOm.jpegDivorce Corp http://www.divorcecorp.com/ is a 2014 documentary film, directed by Joe Sorge, that exposes the inner workings and, in their own words, “the appalling waste and shameless collusive practices” seen daily in U.S. family law courts. This film presents a shocking viewpoint on the divorce industry, divorce lawyer practice, and the family law court system in the United States.   Divorce Corp’s goal is to make the viewer feel enraged toward the family law courts and the divorce attorneys who, they say, take advantage of individuals who are in a weakened emotional state.

The statistics presented in Divorce Corp are alarming.  For example, the producers estimate the total costs of divorce to be $50 Billion Dollars per year! In relatable financial terms, Divorce Corp estimates that the total dollars spent by Americans on their divorces, each year, is equal to the dollars needed:

  • To produce a healthy lunch for every child, every day, grade school through high school, in North America, South America, and Africa;
  • To pay the tuition for 5 million college students;
  • To fund the research and development of 50 new medicines each year.

While these statistics are tremendous, they do not compare to the wickedness that Divorce Corp asserts that the family law court system and their main players, the divorce attorneys, are capable of. The goal of Sorge and his guest “experts” is to prove that there is mass corruption in the family law courts in the United States.

They spend much time on the fact that family law courts are “courts of equity”, meaning that there are no juries and no right to an attorney –- despite the fact that people’s basic rights, such as the right to raise and enjoy the companionship of one’s children and the right to use and distribute one’s own hard earned money as the earner sees fit — are taken from them every day in divorce court.

Judges, they tell the viewer, have the authority to order complete liquidation of the parties’ assets and to issue restraining orders, even when there is very little evidence to support such a deprivation of liberty and seizure of real estate, personal property and money. Divorce Corp presents these facts in such a light as to make the viewer almost queasy at the thought of how one all-powerful judge can make extreme decisions, without even the nominal due process protections afforded criminals, and how an individual can be completely railroaded by the family law court – and pay for that railroading out of his or her own pocket!

The facts and statistics that Divorce Corp presents are deeply unsettling; but a skeptical eye is necessary considering the extreme sensational manner in which the information is presented. The producers of this documentary film focus on the absolute worst-case divorce scenarios and only showcase the most egregious of problems that individuals have had with family law judges. Though there is no doubt that these terrible situations occur, most reasonable viewers would have to wonder just how often and/or how likely these incredibly horrendous situations arise?  Divorce Corp’s modus operandi is to make it seem as if everyone getting a divorce will be severely overcharged by their divorce attorney and will, chances are, experience a corrupt judge who is out to ruin one of the spouse’s lives.

Though Divorce Corp did a sensational job of presenting the horrors of the divorce industry, divorce lawyers and the family law courts, it did not offer an alternative solution to that system, nor did the writers, director or “experts” provide any guidance whatsoever as to what could be done to reform the family law court system. No alternatives to litigation were presented and this is a shame considering there is a very effective and sensible alternative to divorce litigation: Mediation.

Parties that mediate the settlement of their divorce are able to avoid the court system and remain in control of their children, their assets and their future.  The parties create their own personalized settlement agreements, which include all matters of custody, child support, spousal support and the distribution of property and debt, by working together, with the help of a neutral party, i.e. the Mediator.   The Mediator works with the parties in four specific areas:

  1. Pinpointing relevant issues for settlement (usually eliminating strictly emotional issues that merely inflame parties and fuel litigious behavior);
  2. Gathering information about the children and all other relevant factual and financial information necessary for the parties to make sound settlement decisions for the present and the future (as much as practically possible);
  3. Sharing of information by the Mediator which is important for the parties in making fair and informed settlement decisions (e.g. divorce law and legal culture in the area, divorce tax law, expert information related to the effect of divorce on children and potential financial implications of various settlement decisions); and
  4. Assisting the parties in their negotiations and in reaching compromises that are mutually agreed and that give each of them the best possible opportunity for a fresh start.

Mediation prevents one spouse from gaining power over the other spouse, eliminates the aspect of an all powerful judge, helps individualize the settlement based on the needs of the family and costs a fraction of what divorce litigation costs.  As the producers of Divorce Corp correctly point out, litigation often creates more problems and difficulties for divorcing parties than it solves. Instead of focusing on helping divorcing men and women move forward with their lives, litigation tends to drag them back through all the difficulties of a marriage that has, for all intents and purposes, already ended.

Written by Jessica Wilds, Mediation Assistant

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.


Divorce Lawyers Vs. Divorce Mediators: How They Approach Child Custody

May 26, 2015

istock_000018888305small300Parents who divorce are faced with many decisions about how their children will be cared for post-separation.  Divorce attorneys and divorce mediators have different approaches when helping clients formulate custodial care plans.

Divorce attorneys often focus on:

(1) The type of custody a client wants for him or herself (e.g. sole custody, primary custody); and

(2) Winning that custody for the client through strategic legal maneuvering and traditional bargaining tactics.

Divorce mediators tend to focus on:

(1) Formulating mutually agreeable parenting arrangements that are best suited to the child’s needs; and

(2) Assigning “legal labels” (e.g. primary custody, shared custody) to the the parenting arrangements only after the custody decisions are determined.

 

KEY CONSIDERATIONS FOR CHILD CUSTODY DECISION MAKING

Until parties truly understand how their children will process and handle their parents’ divorce, child custody decisions need to be approached with great caution and sensitivity to the child’s basic need for:

(1) affection from both parents;

(2) bonding time with both parents;

(3) enough time to experience both parents’ influence and role modeling;

(4) routine and structure; and

(5) a sense of rootedness (home, school, community).

 

WHY CHOOSE A DIVORCE MEDIATOR?

  •  Child Centered.  Divorce Mediation is child-centered and consists, primarily, of neutral facilitation of parents’ discussions and creative problem solving.  
  • No Games. There are no games or intimidation tactics that are usually employed by divorce lawyers.
  • Confidential. Everything in mediation is confidential.  This allows parents, without the concern of “blowing their legal strategy”, to speak freely and honestly.
  • Everything on the table. Mediation encourages comprehensive conversations about their child and how best to parent him or her in the unsurprisingly complex two-home structure necessitated by divorce.
  • Cooperation. Mediators are skilled at nurturing cooperation between parents.
  • Perspective. In mediation, parents are usually able to see disputed custody issues from various perspectives.  Usually, both parents have good ideas to share.
  • Information & Knowledge. Experienced mediators have practical information and empirical knowledge to help clients make decisions on behalf of their child that both parents are comfortable with.

WHEN IS IT BEST TO CHOOSE A DIVORCE ATTORNEY OVER A DIVORCE MEDIATOR

  • Abuse. Where there is a history of child abuse (physical or sexual) or domestic violence, parties are usually better off having the protection of the Courts and a divorce lawyer right from the start.  
  • Not living in reality.  Parents who are mentally ill or have a personality disorder such that they cannot distinguish reality from fantasy are not good candidates for mediation.  They need a divorce lawyer to advocate on their behalf.
  • Punishment. Parents who are adamant that they want their child’s other parent punished – and believe that the Courts will do that for them (which they almost always do not do) – need to hire a lawyer.  Mediation is not punishment-oriented.
  • Need to win.  Some parties need to win.  Cooperation and mutually agreeable decision-making is not for everyone.  Parties who believe they are dead “right” with regard to what is best for their child in every way, and that the other parent is “wrong” on those matters, need to hire a divorce attorney.  Most mediators don’t think in terms of “winning” when it comes to children.

CHOOSING A MEDIATOR STYLE

There are as many styles of mediation as there are mediators.  If you choose mediation as your method of determining the parenting arrangements for your child post separation/divorce, make sure you are comfortable with the mediator’s approach and style.  Talk with him or her a while before committing to your first mediation session.  Ask questions.  A good mediator will be happy to ensure that both parents are comfortable with the process and that the personalities make a good fit before setting the first session date.

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.


“Happily Ever, After We Split” –An Uplifting Article About Divorce? A Definite Must-Read.

August 5, 2012

Boy with parents.

       Divorce can be scary. Especially, when contemplating whether or not to take that leap. The best analogy I heard, when faced with that very decision, is this: it’s like a cat that falls from a window, from way up high. At first, it arches its back and scrunches its face, adjusting to the pain and taking an inventory of the damage. But then, like a cat that always lands on its feet, after the initial impact, most people look around and realize: I am going to be just fine; there’s a big new world all around me, just waiting to be what I make of it.

       I like that. A lot. To be honest, hearing that very analogy was one of the final pieces I needed before taking that leap on my own. And now, nearly two years later, there’s no doubt that, for my ex-husband and me, divorce was the right decision. In fact, my ex, and son’s father, is the very person who clipped and mailed to me the article I want to share with you.

       Only now, post-divorce, are my ex and I able to enjoy together (with our son, of course), long lunches filled with laughter, and exciting road trips to the National Aquarium – just like back when we were dating. Well, kind of. The big difference, is that now we know how our story as a couple ends. Still, we both couldn’t be happier with our current “relationship” (as exes and co-parents).

       Don’t get me wrong. A) I would certainly never advocate for divorce…at least not indiscriminately. Anyone who’s been through one, knows the process can feel a whole lot like Hell on Earth.  And, B) without a doubt, I’m a true romantic, a true believer. I wish to holy heaven that my union of matrimony had turned out to be the real deal: a joyful, enriching companionship, enduring forever and ever. Unfortunately, my marriage most certainly did not. And yet, I sense that my ex and I will nonetheless share an enduring, enriching, and even joyful companionship. It’s just that, it looks absolutely nothing like how I would have planned or expected it.

      Everyone knows our national statistic. The divorce rate hovers somewhere around 50%. The point is, as a society, maybe we need to reevaluate our expectations of marriage. And, until we stop getting divorced with such frequency, maybe we should consider learning how to divorce with a whole lot more civility.

       Wendy Paris, the author of The New York Times article, “Happily Ever, After We Split” tells a wonderful anecdote with commentary, exactly to that effect. Enjoy!

Posted by Maggie Fox Dierker, Esq.


The Emotional Stages of Divorce

November 22, 2011

Everyone reacts differently to divorce. Most people, however, go through similar stages, much like grief. Just like after the death of a loved one, it is common to move back and forth between the stages. The tough part for the divorce mediator is that client-couples are rarely in the same stage at the same time.
When one party is ready to “get down to business”, while the other party is an emotional mess, it is the mediators job to slow the “ready” party down and allow the other party to catch up a little bit. It is important for both the husband and the wife to be able to keep up with the facts, information, proposals, etc., and to make sure that they are not too emotionally unstable to negotiate effectively.

Cathy Meyer, About.com Divorce News Editor, lists 6 emotional stages of divorce:

• Denial
• Shock
• Rollercoaster
• Bargaining
• Letting go
• Acceptance

For more detail about each stage please visit her article http://divorcesupport.about.com/od/copingandemotialissue/f/stagesofgreif.htm


Living Separate and Apart – What does that Mean?

November 14, 2011

With the tough current ecomonic times, many couples who are planning for a divorce are making the choice to remain under the same roof, in the marital residence, during their legally-mandated period of pre-divorce separation.  This is probably not what the Virginia legislature intended when they wrote the law about living “separate and apart” before divorce, but this is where we are at in these shaky financial times and the courts have found themselves having to creatively define what “separate and apart” means.

In Virginia, the law states that, before being granted a no-fault divorce, parties must “live separate and apart, without cohabitation and without interruption, for one year”.  If there are no minor children, and if the parties have a written and signed settlement agreement, their period of living separate and apart is just six months.

The reason for the one-year separation rule is public policy: The state wants married couples with children to be absolutely sure that divorce is what is best for their family.  In order to determine that, the legislature has forced families to go through all of the holidays, birthdays, seasons, etc. before they are even allowed to make that final decision to divorce.  Living under the same roof does not truly meet those public policy mandates, but if that is what you plan on doing (and many peope do, these days), here are some guidelines that may help you in determining how to live separate and apart while under the same roof:

  • One spouse should deliver a formal letter to the other stating the intention to live separate and apart as of a certain date.*
  • To establish separate households, you should not engage in the following activites:
    • Sexual Relations
    • Sharing of Food (keep food separate in pantry and refrigerator)
    • Sharing a Room
    • Shopping and Cooking for each other
    • Cleaning Up or doing each other’s Laundry
    • Giving Gifts to each other
    • Attending (arriving at) Social or Family Functions Together
    • Holding Yourselves Out as a Married Couple
  • Spouses should separate and secure Computer, Phones and Email Accounts*
  • Spouses should consider dividing Bank Accounts (close joint accounts)*
  • Spouses should consider paying off and closing Joint Credit Cards*
  • Spouses need to Agree On Division Of:
  • Household Expenses
  • Household Duties
  • Living Arrangements
  • Childcare
  • Other tips:
  • Let others know you are separated
  • Choose a friend of famly member, who visits frequently, as your independent witness.  In Virginia, you will need someone to testify as to your living separate and apart.
  • Be prepared to explain, in a way that is comfortable for you, the reasons for living separately in the same residence to your family, friends, neighbors and children.

*These are bold pre-divorce financial moves that should not be attempted without the advice of legal counsel.

This article is not intended to take the place for legal advice from an attorney.  This blog is for informaitonal purposes only and is not legal advice.

Source: From Virginia State Bar, Family Law News – Fall 2010 (Vol.30 No.3) with personalized comments and suggestions by the blogger, Robin Graine

 


CHILDREN of DIVORCE: Do They Have Shaky Relationship Skills as Adults?

September 22, 2011

We all know that divorce can be a very traumatic time for the children who get caught in the middle. For years, though, there has been loud rumbling that “if mom and dad keep it friendly, everyone will be OK.”  Is that true?  Not really, say the experts.  Though the damage may not appear in acting out behavior, plummeting grades or depression, you need only to look at your own children to see that children learn most about life – at least as far as their parents are concerned – by way of watching what the the parents do, not what they say.  That should make it easy to see, then, that kids who live through a divorce are probably more likely, as adults, to experience their own divorce.  Monkey-See, Monkey-Do.

According to Nicholas H. Wolfinger, in his book Understanding the Divorce Cycle: The Children of Divorce in their Own Marriages, there is clear statistical evidence that “divorce is transmissible from parents to children and that it continues, in many families, to cycle through generations.”  “The crux of the idea”, says Wolfinger, “is that the family structure of origin powerfully affects marriage formation and marital stability in the adult offspring of divorce.”  Wolfinger and colleagues found that:

Among adults whose parents had two or more failed marriages:

67% divorced, 26% two or more times.

Among adults whose parents divorced and remarried only once:

58% divorced, 19% at least twice.

Among adults raised in intact homes:

41% divorced, 9% two or more times.

What to do if you are contemplating or are in the middle of divorce?  Try your best to use the divorce as a learning tool to help our kids develop mature, seasoned conflict resolution skills.  Sound trite?  Maybe.  But, at least it will keep you focused on your kids and not your soon-to-be-ex-spouse’s idiot behavior and post-divorce financial blues.  It will help you, too, blossom into the level-headed and child-centric negotiator that you need to be at this complex and emotional time.


Divorce & Taxes Series: Part 3

September 16, 2011

Tax Snippet #6 – Alimony (Spousal Support) has a Big Tax Affect; Child Support is a Wash.  It’s boon and bust with alimony.  Alimony is a boon to the payor, because it is deducted right off the front page of his/her 1040, thereby decreasing his/her Adjusted Gross Income (taxable income) by the amount of the alimony paid.3 Of course, that means that the receiver of alimony gets taxed on the money received, just as if it were ordinary income (like a salary).

In contrast, child support has no tax affect.  It is not considered income to the recipient or a write-off for the payor.  Instead, the IRS views the payment of child support simply as money spent for the support of one’s children – money that would have been spent on the kids whether or not there had been a divorce.  Therefore, the payor does not get to take a deduction for child support (like he/she would have for alimony) since it is usual and ordinary for parents to support their children with post-tax dollars from their employment with little opportunity for write-offs, etc.  Similarly, the recipient of child support does not have to categorize child support as income, for tax purposes, because child support is supposed to be used, as directly as possible, for the support of the kids and, of course, that money was already taxed at the payor’s end.

How does this matter to parents in the middle of a divorce situation?  My experience is that it matters a great deal – or, perhaps, should matter a great deal — to many people.  It can mean big dollars for some divorcing couples and is an excellent tool in the divorce settlement negotiator’s toolbox.  Determining how to divvy-up support between the child and spousal support sides of the ledger can add civility to financial settlement negotiations.  Why is that?  Because a positive tax benefit to one parent does not necessarily create a negative tax burden to the other.  It’s just does not always work that way.  Do the math with your accountant, bring it to the table, and you may be able to allow both parents to walk away with something good in the deal.

The Tax benefits to the payor of spousal support may turn a spouse, who is otherwise emotionally resistant to the concept of alimony, into a willing participant.  Many people do not like paying alimony.  It rubs them the wrong way.  A little massage by Uncle Sam, though, can turn that frown into a smile.

With all this negotiating over tax bennies and smacks, is the IRS standing by idly and waiting for your numbers to come in.  Of course, not.  Where there is play in the tax code, there is the taxman overseeing the game.  Be aware that questions bearing on whether dollars sent from one household to the other, post-divorce, are actually “alimony” or “child support”, are usually answered with the IRS’s default: “Child Support”.

As long as a legal amount of child support is clearly being awarded in a divorce case (in Virginia and most other states there are statutory guidelines that must be met), the characterization of support as “alimony” or “child support” is often negotiated in divorce settlement talks.  Be aware, however, as the IRS may not always agree with your and your ex-spouses characterization of support as “alimony” or “child support” regardless of how fair the two of you think the deal is.  And, they are the boss when it comes to taxes.  See Tax Snippet #7, below and, of course, your CPA, if there any questions on this slippery area of divorce tax.

_________________

3A deduction is an exact dollar amount by which your gross income (income that is taxable) is reduced.  In other words, deductions lower the final amount of income that Uncle Sam can tax.  After subtracting deductions from gross salary (page 1 of your Federal Tax Return – Form 1040), the dollar amount remaining is referred to as your Adjusted Gross Income. (Other deductions include IRA deductions, certain educator expenses, health savings account contributions, student loan interest, moving expenses, and a few others.) Deductions are not the same as credits.  Credits are taken off the top of what you would have owed to the IRS if you did not have the credits.  Credits do not lower your taxable incomes.  Instead, they lower the actual tax bill owed to Uncle Sam. (Page 2 of your 1040) The IRS allows, as credits, certain child and dependent care expenses, the child tax credit, residential energy credits, and a few others.)  To further confuse you, the Fed’s also have one more deduction that has a different name: Exemptions.  Exemptions (page 1 & 2 of your 1040) include the tax breaks you receive for: (a)  just being a human being and; (b) for the other human beings who are your dependents (children, dependent relatives).

*  *  *  *  *  *

Tax Snippet #7 – Don’t Mess with the IRS when it comes to Labeling Support as “Child Support” or “Alimony”.  Many parents feel that the minimum guidelines for child support in their state could not possibly meet their child’s needs, but the tax affect of child support (being a wash) does not sit well with the payor.  In these cases, divorcing couples often negotiate a division in the characterization of support into both camps: The Minimum Statutory Guidelines Amount = Child Support; The rest of the Support Money = Spousal Support.  This can often work well, financially, for divorced parents.  Beware, however, that the IRS does not always go along with parents’ tax planning decisions.

In particular, divorcing parents need to be careful where a big change in the amount of alimony is automatically triggered around the time (within 6 months) of a major event in a child’s life (such as graduation from high school).  In those cases, the IRS may very well re-characterize those alimony payments as child support and come looking for the payor to pony up.  Remember: Don’t mess with the IRS.  See your CPA and your divorce attorney.

These Tax Snippets are written based on my observations and experience.  I am and not a CPA, tax planner or tax attorney.  I am a mediator and former family law attorney. These are, however,  some of the key issues that I see over and over again with my clients.  This series of articles is intended to help you “get your feet wet” in this mucky area of divorce.  If you think any of these issues might affect you, see your tax professional for up-to-the-minute and personally-tailored tax advice.


Divorce & Taxes Series: Part 2

September 11, 2011

Tax Snippet #3 – The Exemption for a Dependent – Who Gets to Keep It? The IRS will, in most circumstances, dub the person with whom the child lives the majority of the time as “The Custodial Parent”.  This is true unless your settlement agreement and/or divorce decree clearly states otherwise, e.g. one parent is officially named the “primary custodian”.2 Why is it important, for tax purposes, which parent the IRS views as the “custodial parent”?  Because, the custodial parent, by default, gets to keep the child exemption for a dependent child – a good savings for most people.

What happens if your settlement agreement/divorce decree states that custody be “shared equally” by the parents?  Confusion and trouble, if you don’t make some decisions.  To help in these situations, the IRS has implemented default criteria to determine who, in fact, is the “custodial parent”.  The IRS looks at whether:

  • Your child is under age 19 at the end of the year (or under age 24 at the end of the year if a full-time student);
  • Your child has lived with you for more than half the year;
    and
  • Your child has provided less than half of his/her support for the year.

The trouble comes when two taxpayers meet all of the criteria above and their settlement agreement/divorce decree is silent as to which parent gets the dependency deduction.  What to do?  The IRS has made a tiebreaker for these circumstances:

  • The custodial parent is the one with whom the child spent the most number of nights in the tax year in question.

But, what if the parents truly shared time with their child (ren) on a 50-50% basis?

  • The IRS will grant custodial parent status on the parent who has the highest adjusted gross income.

Is the dependent child deduction “bargainable”?  Yes.  Some people trade off the exemption (every other year), some split up the children (e.g., dad takes the boy, mom takes the girl), some negotiate the deduction in exchange for something else of value, and some couples (smart ones) go to an accountant to see what the true benefit would be to each of them before making proposals and engaging in negotiations regarding the dependent child exemption.

As of this writing, the IRS requires the custodial parent to complete and sign IRS Form 8332 and have it attached to their and the other parent’s tax return if the primary custodian is giving away her/his right to the deduction.  (This has not always been the case and you should check on the rules each and every year that you file your taxes to see what the IRS has cooked up on this one.

__________________________

2Of course, if your child’s living situation directly contradicts your divorce paperwork, this can create lots of problems and you may want to consider renegotiating your written parenting arrangements sooner rather than later.

*  *  *  *  *  *  *

Tax Snippet #4 – Head of Household.  Somewhere in between “married”, “married filing separately” and “single” is the divorced taxpayers’ best friend: “head of household” status.  What is that?  Filing as “head of household” usually nets you:

  • A lower tax rate than if you claim a filing status of single or married filing separately;
  • Allows more liberal income limits before the IRS puts a damper on your child tax credit (same for retirement account contributions);
  • You may be able, if you are still married, to claim certain credits (such as the dependent care credit and the earned income credit) that you cannot claim if your filing status is married filing separately;
    and
  • It increases the income limits that reduce your child tax credits.

You must meet the following criteria to be eligible to file as “head of household”:

  • You file a separate return (if you are still married);
  • Your spouse did not live in your home during the last 6 months of the year (whether or not you are yet divorced);
  • You paid over half the cost of keeping up your main residence;
  • You qualify to claim your children as dependents (whether or not you have kept or given away the dependency deduction to the other parent); and
  • Your home was the main home of your child for more than half the year.

These Tax Snippets are written based on my observations and experience.  I am and not a CPA, tax planner or tax attorney.  I am a mediator and former family law attorney. These are, however,  some of the key issues that I see over and over again with my clients.  This series of articles is intended to help you “get your feet wet” in this mucky area of divorce.  If you think any of these issues might affect you, see your tax professional for up-to-the-minute and personally-tailored tax advice. 


Divorce & Taxes Series: Part 1

September 7, 2011

The thought of taxes is stressful enough, let alone when divorce becomes a factor.  To help you sort through this wildly misunderstood area of divorce financial planning, I will be posting several “Tax Snippets” over the next several days.

These Tax Snippets are written based on my observations and experience.  I am and not a CPA, tax planner or tax attorney.  I am a mediator and former family law attorney.  These are, however, some of the key issues that I see over and over again with my clients.  This series of articles is intended to help you “get your feet wet” in this mucky area of divorce.  If you think any of these issues might affect you, see your tax professional for up-to-the-minute and personally tailored tax advice.

Tax Snippet #1 – Filing Status Your filing status is a defining factor in determining your tax bracket.  Tax status is dependent on (1) your marital status, and (2) your parenting arrangements (if you have dependent children).  The choices are, in order of preference for most people (i.e., greatest tax advantages):

  • Married Filing Jointly
  • Head of Household (see “Tax Snippet #4)
  • Single
  • Married Filing Separately

Determining – and often times actively choosing — your tax status is very important.  The percentage of tax that you pay to Uncle Sam on your Adjusted Gross Income1 — 10 to 35% (with some exceptions) — is determined by your tax bracket.

Your tax status is determined on December 31st of that tax year.  Period.  It has nothing to do with April 15 or any other factors.  In other words, if you are divorced on or before December 31, you only have the tax status choices that single people have (single, head of household).  You lose the tax advantages that “married filing jointly” might offer for that tax year.

Don’t panic, though, if you are still married on December 31, but your spouse refuses to file with you or, on the other hand, if you decide that you don’t want to file with him/her for your own reasons.  If you are the main residential caretaker of your child(ren), there may be a less expensive way to present yourself to the IRS than as a “married filing separate” or “single”.  The IRS calls this “Head of Household” status.

____________________

1Definition of Adjusted Gross Income (AGI): Your AGI is your gross, or total, income from taxable sources minus certain deductions.  Income includes salary and other employment income, interest and dividends, and long- and short-term capital gains and losses.  Deductions include some unreimbursed business and medical expenses, contributions to a deductible individual retirement account (IRA), and alimony you pay.  Your AGI serves as the basis for calculating the income tax you owe.  (See page one of your federal tax return.) Your AGI is then used to establish your eligibility for certain tax or financial benefits, such as deduction of your IRA contribution or qualifying tax credits (such as the child tax credit and the earned income credit).

*  *  *  *  *  *  *

Tax Snippet #2 – Tax Advantages for Parents Lots of divorcing people get confused when it comes to the tax benefits of having children.  That is because, when they were married and raising children under the same roof, the tax benefits allowed were clear.  Upon divorce, however, the rules get very confusing.  Some of the key tax benefits of having children become “negotiable” upon divorce.  It is important for you and your soon-to-be-ex to figure out how your tax reality and your parenting arrangements relate to and affect on another.  Here are the key points to consider:

(1) The Dependent Child Exemption (a deduction):  Every member of a household potentially counts toward a tax-deductible exemption on the family tax return.  In 2011, each exemption will equate to a $3,700 deduction.  So, if you are single and claim the exemptions for 2 kids, you have 3 exemptions totaling $11,100 in deductions.  Whether or not you may claim your child(ren) as a dependent for purposes of utilizing the exemption is a point of negotiation in divorce settlements.  The primary residence of the child(ren) does not necessarily have to determine who can claim the child(ren) on their federal tax returns and custodial parents can give away the right to claim the child(ren) as dependents by completing IRS Form 8332.  (See your CPA for up-to-the-minute details.)

(2) Other IRS Benefits to Parent Claiming Dependent Exemption(s):  The party who claims the child(ren) as a dependent on his/her tax return (whether by default or pursuant to agreement and the completion of IRS Form 8332) is also the only parent eligible for other IRS benefits including, but not limited to:

  • The Child Tax Credit:  $1,000 per child, under the age of 17, with gradually reduced phase-outs that start at the following income levels:   $55,000 for married couples filing separately, $75,000 for single and head of household filers and $110,000 for married couples filing jointly.  In the phase-out range, the child tax credit is reduced by $50 for each $1,000 of income above these threshold amounts.
  • Certain College and Educational Credits: In 2010, there were two tax credits that apply to education: The American Opportunity Credit (which replaced the Hope Credit) and the Lifetime Learning Credit.  The American Opportunity Credit is worth up to $2,500 for each qualifying student, and is available during the first four years of postsecondary education.  The credit is phased out for taxpayers with adjusted gross incomes (taxable income “AGI” ) starting at $60,000 for single filers and $120,000 for joint filers.  The Lifetime Learning Credit is 20% of the first $10,000 you paid for qualifying tuition and related expenses each year.  The maximum credit for 2010 was $2,000.  Unlike the American Opportunity Credit, there is no limit on the number of years that this credit can be claimed; however, it is subject to the same AGI income phase rules as the American Opportunity Credit.

(3) Tax Benefits to the Primary Custodian (only!), regardless of who claims the exemption(s):

  • The Child & Dependent Care Deduction: If you paid someone to care for a child or a dependent so you could work, you may be able to reduce your federal income tax by claiming the Credit for Child and Dependent Care expenses on your tax return.  This Credit is available to people who, in order to work or to look for work, have to pay for child care services for dependents under age 13.  The Credit is also available if you paid for the care of a spouse or a dependent of any age who is physically or mentally incapable of self-care.  This federal tax credit can be worth up to 20-35% percent of the cost of day care (depending on your Adjusted Gross Income).
  • The Exclusion for Dependent Care Benefits: If your employer provides dependent care benefits on a qualified plan, you may be able to exclude those benefits from your taxable income.
  • The Earned Income Credit: This is a refundable tax credit that is given to qualified, modest-income taxpayers who have at least one child living at home.  The credit begins to phase out at $21,420 for married taxpayers filing a joint return with children and completely phases out at $40,463 for one child, $45,295 for two children and $48,279 for three or more children.  For married taxpayers filing a joint return with no children, the credit begins to phase out at $12,470 and completely phases out at $18,440.
  • Right to File as “Head of Household”: Filing taxes as “Head of Household” is also wholly dependent on which parent is considered the “primary custodian”, and IRS Form 8332 has no affect on this privilege.  (See Tax Snippet # 4)

The thought of taxes is stressful enough, let alone when divorce becomes a factor.  To help you sort through this wildly misunderstood area of divorce financial planning, I will be posting several “Tax Snippets” over the next several days.

These Tax Snippets are written based on my observations and experience.  I am and not a CPA, tax planner or tax attorney.  I am a mediator and former family law attorney. These are, however,  some of the key issues that I see over and over again with my clients.  This series of articles is intended to help you “get your feet wet” in this mucky area of divorce.  If you think any of these issues might affect you, see your tax professional for up-to-the-minute and personally-tailored tax advice.

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Divorce Mediation as Affordable Alternative to Divorce Lawyer Settlements

November 15, 2010

Simply put, mediation is much less expensive than litigation.  For starters, there is only one mediator per couple (versus two lawyers, in a litigated case). This “one-fee versus two-fees” can add up very quickly.  Then, there is the question of the hourly fee for divorce mediators versus divorce lawyers. In the Fairfax and Northern Virginia area, divorce attorneys usually cost between $300-$500 and hour.  Mediators often charge significantly less.  At Graine Mediation, we charge $235 per hour.  Why do we charge less than litigators?  Simply put, because our job is much more streamlined. We focus on one thing:  To help divorcing couples reach a mutually agreeable and long-lasting solution to their divorce disputes.  No expensive, complex and inflammatory strategies — that require a lot of time and preparation by divorce attorneys — are employed.  Mediators help couples learn to communicate at least well enough to settle their divorce disputes and get through the years of co-parenting that often lie ahead for divorced people.   Good divorce mediators know the law and are good at helping couples understand those areas of the law and legal trends at least well enough to make rational, sensible decisions in their divorce settlements. Couples make their own decisions based on the information given and a thorough understanding of the facts and issues in their case.  Mediators do not give legal advice, but they  help couples stay within the reality of the legal divorce culture in which they live.  “Winning” in a divorce is usually very expensive because the courts, at least in Fairfax and Northern Virginia, tend to work very hard to be fair and impartial.  This makes it difficult for lawyers to “win”.  From the perspective of this divorce mediator, after the money is spent on attorney-driven settlement negotiations, the division of assets & debts, support and the custody and visitation of the children is not wildly divergent from what the couple could have negotiated on their own with the assistance of a trained divorce mediator.  Check out   http://www.grainemediation.com/faq-fees-costs-comparison.html for a more detailed comparison of divorce mediation and litigation.

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