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Severing the Credit Connection during Georgia Divorce

Saturday, July 5th, 2014

Divorce is a complex maze of emotional, financial and familial issues. With that being said, it is not uncommon for some issues to receive more attention than others. For example, many going through the divorce process fail to give the proper attention to credit and debt issues until those issues turn into big problems post-divorce. Below are a few tips and things to consider regarding how to safely sever the credit connect to your soon-to-be ex-spouse to ensure that credit problems don’t hinder you from moving on financially after divorce.

1. Check your credit report. Even if you are not going through a divorce, checking your credit report annually is a good idea. In the context of divorce though, checking your credit report is essential because doing so will not only remind you of where you stand as it relates to making major purchases like a home or a car, but it will also give you a listing of all of your open accounts. Armed with this list of both individual and joint accounts, you can then take advantage of the tip listed immediately below.

2. Pay off joint lines of credit and close joint bank accounts. If possible, it is advisable to pay off all joint lines of credit and close joint bank accounts either prior to initiating the divorce process, or do so during the settlement phase of your case. Closing all joint accounts is advisable because it eliminates confusion over who will pay which account and how each account will be paid post-divorce. Closing all joint accounts will also eliminate the possibility that one former spouse’s credit will be negatively impacted due to the other spouse’s failure to pay an account he or she was ordered to pay. Alternatively, if it is not possible to pay off all joint lines of credit, negotiate which spouse is to pay which account, and then contact the credit account holder to have them transfer or refinance that account into that spouse’s name solely.

3. Anticipate potential problem areas when drafting your divorce settlement agreement. As mentioned above, if it is not possible to close all joint credit accounts prior to divorce, effort should be made to refinance any jointly held debt into the name of the spouse obligated to pay that debt. Once the parties agree how the joint debt should be apportioned, this agreement should be memorialized in the Marital Settlement Agreement. Additionally, the settlement agreement should clearly state each party’s obligation to refinance debt for which they are obligated into their name solely. Another safety precaution that may be taken is to include a contingency clause in the settlement agreement addressing what should be done in the event one former spouse’s plan to refinance marital debt is unsuccessful.

4. Divorce decrees are between you and your ex-spouse, not the bank. A divorce decree is an order of the court that finalizes a divorce between two parties and outlines each party’s obligations post-divorce. This decree is legally binding on both ex-spouses. However, it is not legally binding on former spouses’ lenders. Put another way, even if a divorce decree states that husband is obligated to pay the couple’s joint mortgage, if husband fails to pay the mortgage, the mortgage company may go after both husband and wife for payment. Thus, it is absolutely important for both spouses to either completely sever the credit connection, or put into mechanisms in place in their settlement agreement to protect themselves in the event one former spouse defaults on a joint obligation.

Engagement Ring May Be Viewed As Irrevocable Gift by Courts

Monday, May 19th, 2014

 

Who gets the engagement ring after a broken engagement?” This is a question that we as Atlanta divorce attorneys hear on a fairly regular basis. Generally, courts treat engagement rings as conditional gifts. This means that a certain condition must occur before the gift is deemed completed or irrevocable. In the case of engagement rings, most courts consider the marriage as the condition that must occur before the giving of the engagement ring is considered a completed gift. What this means practically is that in most instances of broken engagements, the man (or the giver of the engagement ring) is entitled to its return.  This is a general rule however, and as one New York man learned, there are instances in which an engagement ring may be viewed as an irrevocable or completed gift.

Recently, New York State Supreme Court Justice Russell P. Buscaglia ruled that in the matter of Louis J. Billittier Jr. vs. Christa M. Clark, Clark was entitled to keep the engagement ring given to her by Billittier. Billittier, who ended his three year engagement to Clark via text message, filed a suit seeking the return of the $50,000 ring in late 2012. Despite Billittier’s unorthodox method of ending his engagement to Clark, he would have legally been entitled to the return of the 2.97carat ring but for a statement he made in the text message conversation with Clark regarding the broken engagement. According to The Buffalo News, in response to Billittier’s initial message in which he indicated his desire to break the engagement, Clark responded: “Your doing this through a text message????” Billittier followed up his initial message by replying: “Plus you get a $50,000 parting ring. Enough for a down payment on a house.”

As it turns out, this one message cost Billittier $50,000. Justice Buscaglia ruled that the message sent by Billittier referring to the ring as a “parting ring” transformed the engagement ring from a conditional gift – conditioned on marriage – to a completed gift. According to the court in this case, Billittier’s reference to the ring as a “parting ring” instead of an engagement ring evidences Billittier’s intent to give Clark the ring as a parting gift. Because Billittier’s intent regarding the purpose of the gift has changed, the ring was no longer viewed as a conditional gift under the law, but a completed irrevocable gift.

 

Who Gets the Dependency Exemption & Child Tax Credit Post Divorce?

Wednesday, May 14th, 2014

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Generally post divorce, the parent who was awarded primary custody of the child or children is entitled to claim the dependency exemption and child tax credits for the children in their custody. However, there are some exceptions to this general rule. Below is a brief discussion of the caveats regarding the Federal dependency exemption and child tax credit.

Child and Dependant Care Tax Credit

As mentioned above, the custodial parent is generally the parent who may claim the dependency exemption and the child and dependant care tax credit (usually referred to as the child tax credit). Although in some situations the non-custodial parent may claim the dependency exemption, only the custodial parent may claim the child tax credit. The non-custodial parent may not claim this credit, even if that non-custodial parent may claim the dependency exemption for a particular child. Conversely, even if a custodial parent may not claim the dependency exemption (for instance, if the custodial parent agrees to allow the non-custodial parent to claim the exemption), that custodial parent may still claim the child tax credit on his or her return as long as all other requirements are met. For more specific information concerning the requirement that must be met for a custodial parent to take advantage of this tax credit, see IRS Publication 503, Child and Dependant Care Expenses.

Dependency Exemption

Unlike the child tax credit, there are some situations in which a non-custodial parent may enjoy the benefit of this exemption. The most common is when both parents agree, either during divorce settlement discussion or post-divorce, to allow the non-custodial parent to take this exemption. In matters where more than one child is involved, the parent may agree for the non-custodial parent to claim all of the children, or just one.  Once a divorced or divorcing couple has agreed to allow the non-custodial parent to take this exemption, the custodial parent must sign a written statement that the custodial parent will not claim the child as a dependent for any tax year beginning in that calendar year. The non-custodial parent must attach that declaration to his or her tax return. This release must be made either on a completed IRS Form 8332, or on a statement conforming to the substance of Form 8332. For additional information regarding the dependency exemption or other divorce related tax issues, see IRS Publication 504, Divorced or Separated Individuals.

Who Gets the Medical Expenses Deduction Post Divorce?

Wednesday, May 7th, 2014

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Although much attention is often paid to the child and dependent care tax credit or the dependency exemption during and after divorce proceedings, there is another often overlooked Federal tax deduction that deserves a similar level of attention: the Medical Expenses Deduction.

What is the Medical Expense Deduction?

The medical expense deduction is a Federal tax deduction that may be utilized by certain individuals to reduce their Federal income tax burden. Generally, in order for an individual to take advantage of the medical expense deduction, the amount of medical and dental expenses must be more than 10% of their AGI. Additionally, Schedule A on Form 1040 must be completed in order to take advantage of the medical expense deduction.

According to the IRS, deductible medical expenses are the costs associated with the “diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.” Medical expenses also include “Medical expenses that are not deductible include “expenses that are merely beneficial to general health, such as vitamins or a vacation.” IRS Publication 502, Medical and Dental Expenses.

Medical expenses also include health insurance premiums paid to cover medical expenses. Health insurance premiums paid for a spouse and children are also considered medical expenses for the purposes of the medical expense deduction. This is why it is important to consider this deduction both during and after divorce.

Why is it important to consider this deduction during and post-divorce?

For many, especially spouses who were responsible for paying medical expenses and medical insurance premiums for  the other spouse and their children during marriage, and ex-spouses who are responsible for paying medical expenses and insurance premiums for their children post-divorce, the medical expense deduction may constitute a fairly significant itemized deduction on their federal income tax return.

Post-divorce, it is possible for both former spouses to potentially take advantage of this deduction if the qualifying medical expenses were paid from a joint checking account during the marriage. For example, a couple filing taxes in the year immediately following divorce may both take advantage of the medical expense deduction if medical expenses were paid out of their joint account during the marriage by allocating the deductible expenses equally between the spouses. In other words, each former spouse may claim half the expenses. Alternatively, a former spouse may deduct any medical expenses paid separately for him or her, for the other spouse, and for children. However, a former spouse may only deduct medical expenses paid on behalf of a spouse (or former spouse) if the spouses were married at the time the medical services were received or when the expenses were paid. Thus, former spouses ordered to continue providing medical insurance coverage for their ex-spouse post-divorce via COBRA or other insurance options may not deduct these costs. Such payments may be deductible as alimony however. On the other hand, non-custodial parents who continue to pay insurance premiums and medical expenses for a child or children post-divorce may deduct those costs of their federal income tax return even though the other former spouse may have custody of the children.

For more information on this deduction and the other deductions and exemptions that may be beneficial to divorced and divorcing individuals, see IRS Publication 502, Medical and Dental Expenses, and IRS Publication 504, Divorced or Separated Individuals.

Don’t Forget to Adjust Your Tax Withholding Post-Divorce

Tuesday, May 6th, 2014

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Completing a new W-4 form is something that many people only think of when starting a new job. However, because several things such as filing status and the amount and type of exemptions and deductions you are allowed to take advantage of changes post-divorce, it is very important to adjust tax withholdings after divorce. This may be done by completing a new W-4 form and submitting it to your employer. Generally, completing this task is as simple as requesting a new W-4 form from your employer, making the necessary adjustments, and returning it to your employer’s payroll or human resources department.

It is important to adjust your tax withholding post-divorce because married individuals who file joint federal income tax returns qualify for lower tax rates and other deductions.  Divorced individuals loose those tax benefits and many deductions. Thus failing to make the necessary withholding adjustments could cause an underpayment of taxes throughout the year resulting in a large and unexpected tax liability at tax time. It is also imperative for divorced individuals to adjust their withholdings post-divorce because according to IRS rules, in the event of divorce, individuals must submit an updated W-4 form to their employer within 10 days after the divorce becomes final. For more details regarding when and how to change tax withholding see IRS Publication 505, Tax Withholding and Estimated Tax.

 

 

Who Gets Mortgage Interest Deduction Post Divorce?

Wednesday, April 30th, 2014

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Tax issues are generally not the paramount concern of couples going through divorce in Georgia. However, failure to recognize and understand the impact divorce may have on Federal Income Tax filings may lead to unsavory results and unnecessary conflict with the IRS. One question that many divorcing or divorce couples often fail to address until the time for filing taxes is fast approaching is: “Who gets to take the mortgage interest deduction?” Like many questions regarding divorce, the answer to this question depends on the circumstances of each individual case. Thus, it is important any individual who has recently finalized their Georgia divorce to seek the advice of a tax expert regarding the effect their Georgia divorce may have on their taxes. In fact, it is advisable to seek both the input of an experienced Georgia divorce attorney as well as a tax expert during the divorce process, to ensure that any Marital Settlement Agreement entered into adequately address how tax matters will be handled during and after the divorce process. Below is some general guidance on how the mortgage interest deduction is handled post-divorce.

  • If the home is owned in the name of only one of the former spouses during the marriage, only that spouse may claim the mortgage interest deduction for the payments made during the marriage post-divorce.

  • If the home is jointly owned and the mortgage was paid from a joint account during the marriage, the mortgage interest deduction may be split equally between the former spouses for the pre-divorce portion of the year.

  • The mortgage interest deduction and deduction for real estate taxes paid for the post-divorce period of the year will be determined by the terms of the final Order of Divorce or Marital Settlement Agreement and the form of ownership following the divorce. Thus, if the home continues to be owned jointly by both former spouses, both former spouses are both entitled to take deductions for half of the mortgage interest and real estate taxes. Conversely, if marital home is transferred to one party solely as part of a settlement, only that ex-spouse may take the mortgage interest deduction.

  • If a Marital Settlement Agreement requires one former spouse to pay the mortgage on a home owned jointly by the former spouses, those payments may be considered alimony and deducted as such. For more information regarding situations such as this as well as more specific information on how the mortgage interest deduction should be handled post-divorce see IRS Publication 504,  Divorced or Separated Individuals.

 

How to Prove an Ex-Spouse’s Cohabitation in Alimony Dispute

Wednesday, April 23rd, 2014

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According to Georgia alimony law:

Subsequent to a final judgment of divorce awarding periodic payment of alimony for the support of a spouse, the voluntary cohabitation of such former spouse with a third party in a meretricious relationship shall also be grounds to modify provisions made for periodic payments of permanent alimony for the support of the former spouse.

O.C.G.A. § 19-6-19(b).

Put plainly, if your ex-spouse begins living with a new boyfriend or girlfriend after you have been order to pay alimony to him or her, you may ask the court to downwardly modify your alimony obligation or terminate it completely. Hurley v. Hurley, 249 Ga. 220 (1982). Despite their ability to seek a downward modification or termination of alimony pursuant to Georgia law, many obligated ex-spouses find it difficult if not impossible to prove to the court that their ex-spouse is cohabitation with a significant other.

Very rarely will an ex-spouse receiving alimony be willing to admit to cohabitation, because such an admission has the potential to negatively impact that amount of alimony received. Additionally, alimony recipients may go to great lengths to mask such relationships in an effort to thwart an obligated ex-spouse’s efforts to reduce alimony payment. With this being said, what is an obligated ex-spouse to do if he or she knows their ex-spouse is cohabitating with a lover but is unable to prove the relationship? Below is a list of questions and concerns for obligated ex-spouses to consider in deterring whether there is enough evidence to seek a modification of alimony based on the recipient’s cohabitation.

  • Does the cohabitating couple share a residence? How may this cohabitation be proven?  – Even if the residence is owned or paid for by one of the parties solely, there are other ways to prove a shared residence, such as the amount of time each party spends at the residence or the amount of food consumed at the residence. For instance, an increase I the amount of food purchased for consumption in the home may indicate the addition of another occupant.
  • Is the payment of utility or other household bills shared by the couple? If your ex-spouse’s new lover is responsible for paying certain household expenses, like utility bills, this fact points toward cohabitation.
  • How does your ex-spouse characterize his or her relationship? Does your ex represent the relationship as a committed or exclusive relationship?
  • Does your ex’s new boyfriend or girlfriend share parenting responsibilities with your ex?
  • Are there pictures of your ex and their paramour on social media sites that tend to prove the couple’s cohabitation?
  • Does you ex seem to have more cash on hand than normal? If so, this may point to the financial contribution of another person in his or her household.

Getting a Divorce? There’s an App for That

Tuesday, April 22nd, 2014

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In the increasingly technological society we live in, there seems to be an app for almost every activity from communicating with friends and family via video calls to investigating home values and sale prices. But, when the topic of divorce comes to mind, many do not consider how apps found on laptops, tablets or cell phones may prove extremely useful to the litigants in divorce and other domestic relations matters such as child support and child custody modifications. Below is a list of four apps, along with brief descriptions of each, that may make the divorce process less stressful for both parties involved.

Four Helpful Divorce Apps:

2houses – 2houses is an online co-parenting facilitator that may be accessed via a mobile app as well. This app was specifically designed to help separated or divorced parents communicate more easily and effectively concerning their children’s lives, parenting time schedules, school schedules and extracurricular activities. Some of the apps features include: the ability of both parents to edit and update a shared digital calendar, the ability to track shared expensesand the ability to exchange important information such as school  activities and assignments and medical details.

Divorce Log – Often, in matters involving alimony, child support or child custody disputes, litigants are advised to maintain a diary or log of all certain activities, such as payments received or dates of exercised parenting time. Divorce Log is an app designed to make such documentation easy for those involved in contested divorce actions or other contested family law matters. The app, which may be purchased for $4.99, is a calendar-based program that allows a party to log case relevant information in one place, and forward the compiled information directly to an email address (such as an attorney’s or ex-spouses email address).

iSplit Divorce – iSplit Divorce is an  app specifically designed for Apple mobile devices, such as iPads and iPhones. This app helps divorcing couples divide their marital assets and debts by allowing the couple to assign an icon and monetary value to each asset or debt subject to division. Once each asset or debt is assigned an icon and value, the app allows the users to move the icons between the parties prompting the program to automatically re-calculate the asset and debt distribution between the parties and the net value of the couple’s assets in real time. Once the users have arranged the icons such that a fair division has been achieved, the information may then be exported into a spreadsheet and shared with attorneys or financial advisors. Using this app may be easier and more user-friendly that utilizing marital balance sheets generated by certain attorneys.

Georgia’s Child Support Calculator Child Support Calculator – This app may provide divorcing parents a convenient way to investigate potential child support payments. Although this app allows users to estimate their potential child support payment according to their state’s guidelines, a more accurate estimate child support obligations may be obtained by completing the Child Support Calculator.

Who Should Keep the Marital Home Post-Divorce?

Wednesday, April 16th, 2014

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Unfortunately, there isn’t a“right” answer to the question of who should keep the marital home upon divorce. In fact, depending on the details of the particular case, it may be more advantageous for neither spouse to retain the marital home, but to instead sell the home and split the proceeds. Below is a list of factors that each spouse should consider before a decision is made regarding whether the home should be retained by one spouse post-divorce, and if so, by whom.

Does either spouse want the marital home? If neither spouse wishes to retain the marital home post-divorce, the best options are likely to sell the marital home or to seek to rent the marital home to a third party if selling the home will not yield a profit. Alternatively, if both spouses want to retain the marital home after divorce, extensive negotiation may be necessary to determine which spouse should retain the marital home. In the event the parties are not able to resolve the issue of who will retain the spouse, it may necessary to proceed to trial in order for a judge to make this determination. Situations where only one spouse wants to keep the home are generally the least difficult. In such situations, it is generally only necessary for the parties to determine how the other marital assets will be apportioned in order offset the value received by the party retaining the home.

Can either spouse afford the mortgage payments post-divorce? In determining which spouse should retain the marital home post-divorce another issue that should be considered is which spouse will be able to afford mortgage payments post-divorce. If the spouse who seeks to keep the home will not be able to handle the home’s mortgage, other alternatives should be considered such as selling the home or awarding it to the other spouse.

Can the spouse who wishes to retain the home able to refinance the mortgage into their name solely? In addition to being able to afford the mortgage payment, the spouse who wishes to retain the marital home post-divorce must also have the ability to refinance the home mortgage into his or her name solely. Often couple’s obtain home mortgages jointly, meaning that both spouses are jointly liable for the mortgage. Divorce does not sever this joint liability, thus if the spouse who retains the home fails to make timely payments the other spouse’s credit may suffer if the mortgage is not refinanced.

Are there any second mortgages or HELOCs? If there are second mortgages or home equity lines of credit that have been taken out against the marital home, not only must it be determined who will retain the home itself, but it must also be determined how the debt against the home will be apportioned. Often, the spouse who gives up the marital home will resist accepting any liability for the debt associated with it. Thus, the spouse who wishes to retain the marital residence must also be prepared to potentially take on all liabilities associated with the home as well.

Is there agreement regarding the home’s value? This is often a sticking point between spouses who have otherwise reached a decision concerning the disposition of the marital home post-divorce. Even if the home is not going to be sold, the value attributed to the home is important because it directly impacts the analysis that must be conducted to ensure that the marital assets are divided equitably.

If the home is sold, how will the proceeds be divided? Will the home sale proceeds be divided equally or will one spouse receive a greater of the proceeds? If the parties agree to sell the home, not only must the division of home sale proceeds be determined, but the home sale price must be agreed upon and a determination regarding how the costs associated with the sale will be apportioned must be made as well.

Car Insurance and Georgia Divorce

Monday, March 24th, 2014

 

Stock Image 29Although car insurance and divorce do not appear to be related concepts at first blush, in our experience as Georgia divorce attorneys, car insurance is often the most overlooked aspect of Georgia divorce that has the potential to negatively impact both parties post-divorce.

Car insurance is relevant to divorce in that just as the marital home and other marital property must be divided upon divorce, vehicles must be apportioned between the spouses upon divorce as well. And, the apportionment of vehicles between spouses upon divorce usually necessitates modifying the insurance policy or policies covering the vehicles. However, because of the other important issues that must be considered and resolved during the divorce process, many couples fail to make or even consider the necessary policy changes until problems arise post-divorce. If you are considering divorce in Georgia, or if you are currently going through the divorce process, take the time to review the following considerations regarding modifying car insurance coverage upon divorce.

  • You and your spouse should discuss which of you will maintain the existing policy. If you and your soon to be ex-spouse share a car insurance policy, one of you may choose to maintain the existing policy. In this event, the other spouse will need to obtain a new insurance policy before being removed from the original policy. Regardless of which spouse chooses to obtain a new policy, it is imperative for that spouse to make sure the new policy is in effect before he or she is removed from the old policy to avoid a gap in coverage.
  • You may need your spouse’s consent to remove him or her from the auto policy. Many insurers require a signed consent form before removing a named insured from an auto policy. Without the signed consent form, the person keeping the auto policy will not be able to remove the other spouse’s name from the policy, and must thus continue paying for a policy which lists both drivers. In such a situation in which one of the insured spouses refuses to cooperate in separating policies, the uncooperative spouse may be left on the policy, allowing the other spouse to obtain a new policy and sign the removal consent form.
  • Your coverage, limit and deductible needs may change post-divorce. Financial circumstances often change after divorce. With this being said, car insurance premiums and deductibles that were once affordable may no longer be feasible post-divorce. Reevaluating coverage limits, deductibles and premium costs post-divorce and comparing quotes from several companies is advisable to determine if changes in coverage are necessary.
  • Your divorce may affect your car insurance premium. In addition to potentially effecting a spouse’s financial circumstances, divorce may also have a more direct impact on car insurance premiums. For example, discounts that normally enjoyed by married couples, such as multi-car discounts or homeowner’s discounts may be lost upon divorce. Additionally, driving records and vehicle values also impact premium costs. For example, if your ex-spouse had a spotless driving history and you did not, your rate may rise when you remove the ex from your policy. Alternatively, if your spouse takes the more valuable vehicle in the divorce, and leaves you with the less valuable vehicle, your comprehensive and collision coverage costs should decrease.
  • If your address changes post-divorce, be sure to inform your insurer. If you move to a new state or town, be sure to update your address with your insurance provider. This is important because your new location may impact your car insurance premium. For example, if you move to an urban area with a high risk of theft, your rates might go up to account for the increased risk. Alternatively, if you are moving from a city to a more rural area with less crime, you might see a corresponding drop in your premium. Additionally, each state has its own rules and regulations concerning the mandated amount of car insurance coverage. Thus, it is important to notify your insurance carrier if you move out of state to ensure your coverage meets all requirements.
  • Insuring your children may pose additional concerns. If you and your ex-spouse have driving age children, you should ensure that your children are covered on at least one, if not both parents’ auto policies, especially if your children have access to both parents’ cars. If your children have their own vehicles, then these vehicles are generally registered and insured in the name of the parent in whose home the children reside most frequently. These issues are not always clear-cut, especially if custody is shared relatively equally between both parents. In this event, questions concerning which parent should be responsible for a child’s car insurance needs may become particularity complex. In such a situation, it is best to seek the advice of a Georgia divorce attorney and an auto insurance agent to determine which coverage structure is most appropriate.