Non-custodial parents pay child support in a variety of ways.   Divorced parents should be provided with all possible options for making these payments.  Some new options have emerged both in the public and private sectors.

            Perhaps the most common way child support is paid is through an income withholding or income deduction order, which is issued to the employer of the payor, and mandates payment of support directly to the recipient.  In most states income deduction orders have been mandatory unless (1) there is a written agreement between the parties specifying an alternative arrangement, or (2) there is a court order finding good cause against it and finding that the income deduction order is not in the child’s best interest. 

            However, income deduction orders can be problematic.  If the payor is self-employed, periodically unemployed, or is paid only on commission, income deduction orders may have little effect.  Moreover, many payors do not wish to disclose to their employer their private matters. Also, some employers refuse to comply without a court order.  Further, recipients of support do not want the payor to know their bank account information, which would be necessary if the payor’s employer is to follow the income deduction order.

            Most states have established agencies for the enforcement of child support orders.   The problem is these agencies have huge case overloads, suffer intermittent backlog of work, and delay in transferring payment to recipient.  Consequently, many custodial parents have to resort to private suits for enforcement through contempt, garnishment, and use of private child support enforcement companies. Problematically, many private child support enforcement companies charge astronomical fees for their services, deducting a large percentage (as high as 34%) from the child support collected, and in addition, charge annual fees (some as much as $500).

            In reality, most divorce cases settle privately and, divorce lawyers draft settlement agreements providing for the required “alternative arrangement” for child support payment.  The settlement agreements include the amount of monthly support due, the manner it shall be paid, how often, and until when.  A paragraph should also be included in the settlement agreement that provides if payments fall behind more than 30 days, garnishment for support is allowed. 

            The most common manner of private payment is still paper check.  Of course, the worst delivery method is through the child, at the conclusion of the payor’s visitation time.  When mailed, payment by check sets up the classic problem of “the check is in the mail” and real or false accusations of late receipt. 

            Both payors and recipients of support complain that they hardly use paper checks anymore.   Payors do not want to deal with mailing support checks when they pay most bills online.  Recipients do not want to deal with waiting to get the check in the mail, driving to the bank, and waiting in line, to deposit the check. Further, if the recipient is out of town when the check arrives, the deposit will be delayed even further.

            Most people do not want to use the government agencies to transfer the support from payor to payee. The parties have been involved in the court system during the divorce process. After the conclusion of the case they want to handle things privately, outside of government involvement. The solution: payment of child support online by credit card through a private company, rather than the government. Using a rewards credit card to pay support could allow the payor to earn cash back rewards or frequent flyer points. Better yet, setting up payments on a recurring basis would be convenient to the payor. The benefit to the recipient would be receiving the full amount of support conveniently directly deposited into their account whether they are home or not on the date support is scheduled to arrive. Bringing the payment of child support into the 21st century would prevent a lot of post-divorce conflict that too often happens.

SupportCertain is the brainchild of Sue Varon, a Georgia family law attorney and her daughter, Jennifer, an accountant with a Master’s Degree.  The company was established to provide divorced parties with “the peaceful way to pay”, minimizing interaction between the parties, while providing them with a way to make and receive support directly and on time. For further information, visit www.supportcertain.comor contact SupportCertain at jennifer@supportcertain.comor at 404 551-4849.

View full post on Georgia Family Law Blog

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Buried in DRL 240(1-b) and FCA 413(b)(5) is this often missed clause:

iv) at the discretion of the court, the court may attribute or impute income from, such other resources as may be available to the parent, including, but not limited to: … (A) any depreciation deduction greater than depreciation calculated on a straight-line basis for the purpose of determining business income or investment credits, …

I’ve seen this clause confuse judges and litigants, giving child support orders that are either too high or too low. So what exactly does this mean? In short, it means that some legitimate business deductions permitted by the IRS will not be allowed for determining income for child support.

Let’s take it one step at a time.

Straight Line Depreciation

First, what exactly is depreciation and what is meant by a straight line basis? I’m going to make up some numbers to make it easier to follow. For this example, all expenses are legitimate; there is no hidden income or artificially inflated expenses.

Let’s assume someone is self employed, and has gross revenue of $500,000 per year. Obviously, there are certain expenses associated with running a business, and those expenses should be deducted off the gross income. For example, rent, the cost of goods sold, salaries paid and utilities are all deducted off the gross income to determine profit. For this example, let’s say there are $275,000 in legitimate business expenses and all are valid deductions by the IRS. Other than depreciation, there are no other expenses. That leaves $225,000 in profit so far.

Now let’s assume the business owner purchases a new piece of equipment for $100,000. Since $100,000 was spent as a legitimate business expense, you’d think that it would be acceptable to deduct this expense from the gross income, giving a profit of $125,000.

Nope says the IRS. Even though you paid for this piece of equipment in full, you have to spread out its cost over its useful lifetime. And, the IRS being what it is, has charts saying what the useful lifetime is for every conceivable item. For this example, let’s say the IRS says the lifetime is 10 years.

So, to determine the business deduction, you divide the cost of the equipment ($100,000) by its useful lifetime (10 years) giving you a permitted deduction of $10,000 per year for 10 years. This type of depreciation gives an equal amount for each year, and if you draw a line on a chart for the annual depreciation, you get a straight line. Somebody decided to call this “straight line depreciation” So far so good. So for out example, the $225,000 in profit would be reduced by $10,000, reflecting one year’s worth of straight line depreciation.

Accelerated Depreciation

Now here’s where it starts to get complicated. In 1981, Congress said it would be a good thing to allow business owners a tax break if they bought new equipment. To accomplish this goal, accelerated depreciation was invented, otherwise known as the Accelerated Cost Recovery System, known as ACRS for short. Using hypothetical numbers, ACRS would allow our business owner to obtain more depreciation early on at the expense of less depreciation down the road. For example, ACRS might allow 60% of the cost to be deducted the first four years, 20% of the cost spread out over the next two years, and the remaining 20% spread out equally over the remaining four years. Thus, under ACRS, the depreciation might be 15%-15%-15%-15%-10%-10%-5%-5%-5%-5%.

In 1986, Congress said that ACRS needed to be changed, and modified the depreciation schedule, giving us the Modified Accelerated Cost Recovery System, otherwise known as MACRS. Using hypothetical numbers, the depreciation schedule for our machine was changed to 20% the first year, 20% the second year, 15% for the third, 15% for the fourth year, and 5% for each of the remaining years. Thus under MACRS, the depreciation would be 20%-20%-15%-15%-5%-5%-5%-5%-5%-5%.

Separate from ACRS and MACRS, there is also the Section 179 expenses, which in simple terms, allows a business to deduct 100% of the expenses associated with certain qualified property in the year in which it was purchased. And for those who have made it this far, a Section 179 expense deduction is an exception to the depreciation rule. Remember, our tax code consists of rules, exceptions to the rules, and exceptions to the exceptions.

So turning back to the example, let’s say we are using MACRS, and the equipment is in the second year of service, giving a 20% depreciation deduction. Thus, for tax purposes, the net income is $125,000 less 20% of the cost (20% of $100,000 being $20,000), for a bottom line of $105,000.

But for child support, DRL 240 (1-b)(b) (vi)(A), and its twin companion, FCA 413 (b)(5) (vi)(A) require that any depreciation over the straight line be added back in. The straight line depreciation gives 10% of the total cost, or $10,000. The business properly deducted $20,000 under MACRS. Thus, any amount of depreciation over $10,000 is added back in. As $20,000 – $10,000 = $10,000, the income for child support is properly determined to be $105,000 plus $10,000, or $115,000.

In reality, the IRS has numerous classification of property, ranging from three to twenty years for personal property, and 27.5 & 30 years for buildings.

Examples

Now for two real examples. In one case, I represented the custodial parent, and got the credit for the increased depreciation added back in when the non custodial parent’s income was determined. In another case, I represented the non custodial parent. The judge was about to disallow all depreciation expenses, since they were only “paper losses.” I showed the judge this section of the statute, and preserved the deduction, thereby lowering the child support obligation.

For both cases, I anticipated that the court may not properly apply this section of the statute, and had several hard copies of the section ready to show the court. As a practice tip to any attorney dealing with the self employed, I’d recommend doing the same, highlighting the section helps greatly too.

One final point that’s worth repeating – this section of the child support statute simply disallows a legitimate deduction. There is no artificial manipulation of income or expenses going on.

View full post on New York Family Law and Divorce

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The Daily Breeze recently published an article on the finanical planning that divorcing spouses should consider.  The article suggests that in addition to having good divorce attorneys involved, that divorcing spouses should also consider involving a “divorce savvy” finanical planner.  One of the soundest pieces of advice that the artilce suggests is also something I always tell my divorce clients: get a copy of there credit report.  You can usually get a free copy once a year from a service like www.freecreditreport.com.

The author also recommends removing your ex’s name from all joint bank accounts and considering whether you should refinance any joint debt that cannot easily be divided between the two of you.

Here is a link to the full article.

This post from the AlabamaFamilyLawBlog.com where you can find information about Alabama divorce and family law.

Financial Planning for Divorcing Spouses

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How do I tell the children about the divorce?

It is one of the toughest tasks that accompanies a divorce.  How do we tell the children? I recently came across a good article that advised parents facing divorce to avoid these three mistakes when telling the children:

1. Pressuring the children to make a choice,
2. Forgetting to emphasize that the children did not cause the divorce, and
3. Sharing information that only adults should be aware of.

You can read the entire article here.  In the article, the author elaborates on each point. I want to specifically emphasize the third point.  Divorce attorneys see this mistake made all of the time (sharing information with the children that only adults should be aware of).  It is typically done when one parent is hurt and mad at the other because they have somehow been wronged.  Often it is when adultery is involved.  The parent decides to tell the children the reason mommy and daddy are getting  divorce is because “your father has a girlfriend” (or something like that).  When asked why in the world they would tell their children this, they justify it by saying, “the children deserve to know the truth” or “I was just being honest with them.”

DO NOT DO THIS. Really.  It is incredibly selfish and immature and it hurts your children.  I know there may be some circumstances where it may be necessary.  Maybe the child is 17 and the affair was with a teacher at the school and so all of her friends are going to find out (yes, I’ve seen it happen).  But, even in those situations, slow down. Check your motivation.  Are you really protecting your child by telling her?  Is it really necessary? I find that often it is not.  Don’t do it to your children.  The divorce is going to be hard enough on them.

Finally, I would add one more to the author’s list: Remind them that both mom and dad still love them. Children in divorce need to be reminded that the breakup of the marriage does not mean that either parent no longer loves them.  This is VERY important.  Even if you are the spouse who did not want the divorce, make sure they know that the other spouse still loves them and the divorce does not mean they don’t.  They need to hear that.

NOTE: The author of the article offers some resources at the end of the article to assist in telling the children about divorce. I have not reviewed them myself, but I have talked to the author in the past and I have heard very good reports about those resources.  You may want to check them out if you are facing divorce and are not sure how to tell the kids.

This post from the AlabamaFamilyLawBlog.com where you can find information about Alabama divorce and family law.

Telling the Kids About the Divorce

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Divorce is a painful and extremely difficult process. Knowing how divorce laws function and understanding the court’s role in a divorce can help to make this transition smoother and easier, however.

Divorce laws govern the dissolution of a marriage. Every country has its own laws regarding divorce and, in fact, divorce laws can vary from state to state or province to province within a nation. Knowing your jurisdiction’s divorce laws can keep a bad situation from becoming worse, and save you future turmoil.

In the United States, divorce laws, in general, provide two basic forms of divorce: fault based and no-fault based. However, even in some jurisdictions whose divorce laws do not require a party to claim fault of their partner, a court may still take into account the behavior of the parties when dividing property, debts, evaluating custody, and support.

Fault-based divorces can be contested and may involve allegations of collusion of the parties, connivance, or provocation by the other party.

In a no-fault divorce, the dissolution of a marriage does not require an allegation or proof of fault of either party. Forty-nine states have adopted no-fault divorce laws, with grounds for divorce including incompatibility, irreconcilable differences, and irremediable breakdown of the marriage. New York is the sole exception divorce laws there still require a proof of fault.

About 95 percent of divorces in the US are “uncontested,” because the two parties are able to work out an arrangement concerning property, debt, children and support issues. When the parties can agree and present the court with a fair and equitable agreement, approval of the divorce is almost guaranteed. If the parties can’t work out their differences, divorce laws govern the fair and equitable disposition of these issues.

Divorce laws generally recognize two types of property during property division proceedings – marital property and separate property. Marital property consists of property that the spouses acquire individually or jointly during the course of marriage. Under divorce laws, separate property constitutes any property that one spouse purchased and possessed prior to the marriage and that did not substantially change in value during the course of the marriage because of the efforts of one or both spouses. Under modern divorce laws, separate property is returned to its original owner, while marital property is divided according to negotiated settlement and what the court deems equitable.

In cases involving children, divorce laws attempt to ensure the matter does not spill over into the family court system. In many jurisdictions, divorce laws require divorcing parents to submit a parenting plan spelling out each party’s rights and responsibilities.

Divorce laws also provide for the establishment of alimony, often depending on the length of the marriage and other factors. Spousal support is becoming less common, however, as more women are entering the workforce and earning their own income.

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Going through a divorce is a very challenging time in a woman’s life. After divorce, most women continue to be dependent for their survival either on their ex-husbands in the form of support payments, or on the state in the form of welfare. Neither of these options allows women to attain economic self-sufficiency following divorce and both continue a dynamic of dependency reminiscent of the marriage relationship for many. It is of the utmost importance that when such a pain descends upon you, you should realize that you can recover. The following information may help you get rid of this pain.

Properly control your emotion. After breaking up, you may feel angry, guilty, upset and frustrated. There feeling might be appearing to grow stronger with each passing day. These feelings are persistent and are even threatening to lead you towards a depression. Therefore, you have to control these feelings and adjust yourself to the changing situation, through which you can restart your happy life. In addition, your children are deeply hurt by the divorce. They need your help and you can help them only if you deal with your emotions. So stop feeling victimized, change your thought process by creating a new self-image of yourself.

After a divorce you can give yourself a break. Many women feel the need to stay busy to keep their minds off of this stressful time, such as working overtime or cleaning the house from top to bottom, but let this time also include pampering yourself. Barter with a friend or neighbor to watch your children or leave work a few minutes early so you can stop to sit on a park bench long enough to get that sense of the unique and special you. Take this time to experience life without feeling like a wife, mother, sister or daughter… simply you!

Once you have regained control of yourself, you can turn your concentration on to other important issues that require your attention like personal safety, rebuilding career and handling personal finances. Those may cost most of your energy and time, which can help you forget the sadness. However, do not be in a hurry to find someone to remarry. Remarriage, immediately after divorce, is not advisable.

Learn to handle your finances well. Apart from the emotional turmoil, you may experience the financial difficulty. In martial phase, two persons’ income meets a household or your husband can provide you. But after the divorce, you must support yourself. Your finances have to be managed well to meet the current and future requirements. Work hard to make yourself economically stronger. Try to find employment if you had been a ’stay at home mom.’ Rebuild your career that might have been interspersed by breaks while you cared for your children.

Divorce is not the end of life. Begin by discovering your lost self. Recollect your premarital years and try to be the person you once were.

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Working Together to Resolve Divorce

The Orlando Sentinel posted an article today on Collaborative Divorce.  Collaborative divorce is an alternative way to resolve a divorce case without resorting to litigation. I was actually trained as a collaborative lawyer in 2001.  However, it has been slow to pick up steam in Alabama.  In fact, many divorce attorneys in Alabama that I have spoken to have expressed their reluctance to hanlde cases collaboratively. I think that will change.  As it becomes more common and more people find out about it, there will be a market demand for it.

The only real down side to collaborative divorce can be the expense. But, it is far less costly than a traditional adversarial divorce.

I have been working on something called the No Nonsense Divorce that I think will provide another viable option for families in Alabama trying to cope with divorce.  It is a way for divorcing couples to streamline the divorce process and to resolve their case for a fixed fee that is far less than would be incurred in litigation. I’ll be posting more about No Nonsense Divorce here as soon as we have all of the parts in place.

Until then, I encourage you to read the article linked above on Collaborative Divorce. It captures some of the same themes that I urge my clients to consider in the way we handle their divorce case.

This post from the AlabamaFamilyLawBlog.com where you can find information about Alabama divorce and family law.

Collaborative Divorce: A Kinder, Gentler Approach?

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Interesting article about the increase in divorce rates across the pond:

Why is the UK drawing so much attention? Divorce rates are high in a few other West European nations too. What is drawing statisticians down here is the rapidly changing demographic contours of the nation. The statistics reveal a people moving through a time of great flux. The very fact that this data is being considered as an important matter of study is itself an indication of the opinion of a generation.

A History of the Relations

Only 2% of men and women born before 1930 cohabited before marriage. By the 1960’s, the number rose to 50%. Around the middle of the 1980’s, the attitude towards cohabitation changed massively. This was when we were poised at the brink of the digital age, the concept of retail was changing, home businesses were beginning to flourish, and the children were becoming more neglected. Cohabitation was previously considered a preamble to marriage. But now cohabitation began to come up as a solution for divorcees to turn over a new leaf, avoiding a second brush with marriage. For young people it became an alternative to marriage itself. Now there is no doubt that it is a strong trend for long-term partnerships.

Divorce, in the meantime, has become quite commonplace. The divorce rates rose steadily over the years, before slumping in 2005, and it is hoped that the slump will persist. However, this is not a result of a sudden spurt of successful marriages all over the country. In fact, the number of marriages solemnised in 2005, has reached an all-time low when compared to the statistics for the past decade. So the best way to avoid getting divorced is not to get married at all.

Divorce and the Elderly

It is stunning but true, divorce rates among the sixty plus group have been on the rise for the past few years. More 55+ men and women are also getting married than ever before. The concept of the old man in ‘slippers and pantaloons’, shaking a disapproving finger at young women who leave their husbands, get a divorce, and then leave the child at home to go to work is a thing of the yester years. In fact, a jolly old granny, still working and glamorous, may start a new affair at 65. There is much support being offered on the part of the elderly where their grandchildren are concerned. More than 75% of grandparents in the UK are in favour of granting visitation rights to them too when their children divorce, and are ready to help the grand children tide over the troubled times under their care. However, most fight shy of providing continued financial support to the divorced offspring or to grand children.

Divorce and the Middle Aged

If we take the 40 – 55 group as middle-aged, the ruling trend is divorce, followed by remarriage. People of this age group are at the peak of their career, have children, and are earning well. They also divorce the least, and remarry quite often. Child care tendencies among them are also highest, and four out of five divorced mothers have voiced the opinion that they are willing to go out for work if they only had access to proper daycare for their children. Poverty among single parents is a major problem in this sector, and there are couples who are actually dragging on with a marriage because they know they won’t be able to give their children all that they need if they separated. The middle-aged group seems to be having the greatest variety of opinions as well, and survey results are highly uneven, suggesting that attitudes changed over localities, economies and cultures within the nation.

Divorce and the Young

Young people, 25 – 35, are losing faith in marriage. So divorce is not on the horizon. Those who do get married early are splitting soon. Divorce rates have been the highest among the 25 –29 group for five years now.

Divorce and Children

They are the worst-hit, and most neglected, despite all the awareness campaigns and support groups. Divorce, for them, is only pain and confusion from the unfair world of adults.

For information about Kentucky divorce, contact the Louisville Divorce Attorneys of Barrow & Weigel, PLLC.

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