Divorce Preparation: Step 10 – Stay Put (until further notice)

We are nearing the end of our series on practical steps to take when you are facing an imminent divorce. We have reached Step 10 – Stay Put (until further notice).

One of the most common questions I am asked by my clients is whether they can move out of the house. In most cases my answer to them is to stay put. It is not the answer most of my clients want.

I know that things are stressful. I know that they will likely get worse before they get better. Unfortunately, there are several reasons to avoid leaving. The most important ones are the following:

1. It could jeopardize your custody claim. If you end up in a custody dispute, then if you leave the house and the children remain there with your spouse you will almost guarantee that you will not receive primary custody. If the case becomes contested, it could drag out for many months (even a year or two). If your spouse has had primary physical custody that entire time and you’ve had alternate weekend visitation, then unless your spouse has made major mistakes in the interim, they will likely maintain primary custody.

2. It could affect your property interests. You’ve moved out. Your spouse pays the mortgage the entire time the case is pending. Some judges may factor that in when making the property division.

3. You will lose leverage in the negotiations. This is big. You want the divorce. Your spouse doesn’t. You decide you have to get out of the house. You move to an apartment and are paying your rent and the home mortgage. Now under the Pre-trial Status Quo Order you may be required to keep paying it as long as the case is pending. You have just given your spouse a major incentive to drag out the litigation. I see it happen all the time. Eventually you decide to settle for much worse terms because you can’t keep paying for two households. Do not make this mistake.

Moving out of the house can have dramatic effects on the case. Do not do it without discussing it with your lawyer and giving it a great deal of thought. You should know, also, that some judges will consider a motion for temporary possession of the residence pending the trial. This varies dramatically from county to county (and sometimes even from judge to judge) so you will want to discuss it with your lawyer.

It goes without saying that if domestic violence is an issue, then all of this is moot. You will need to take whatever steps you must to protect yourself. Just make sure you let your lawyer know what is going on. In the case of domestic violence, your lawyer may actually be able to have your spouse removed from the house.

Divorce Preparation: Step 11 – Keep a diary

This post continues are series on practical steps to take when a divorce is imminent. We are now on Step 11: Keep a diary/calendar.

It is important to documents all of the major events that occur until the divorce is final. Your lawyer will likely want your help in reconstructing a chronology (a list in order by date) of the major events that led to the filing of the divorce. Additionally, you should begin keeping careful records of new events and incidents as they occur. Simply note the date, what happened and any witnesses that may have observed it. In the unfortunate event that your case drags on, events will begin running together and your memory may fail you. Don’t rely on it.

Instead, keep an ongoing diary. Then provide this to your lawyer periodically so he is aware of any significant facts in your case.

I should note that you really should discuss this recommendation with your lawyer before implementing it. Some lawyers may not want you to have an ongoing record like this because it could be obtained by the other lawyer during the discovery phase of the trial (something that could have a negative effect on your case). Or, they may want you to take certain steps to attempt to protect it from begin discoverable by the opposing lawyer. These are technical legal issues beyond the scope of this blog. Suffice it to say that you need to talk this over with your lawyer first.

Divorce Preparation: Step 12 – Consider a PI

We continue our series on practical steps to consider when you are facing an imminent divorce. We are now on to Step 12 – Consider hiring a private investigator.

Alabama law does consider “fault” when deciding how to divide property in a divorce. Additionally, depending on the facts, adultery can affect custody determinations.

If your spouse is committing adultery, then you are better off having proof of it then not. This is the case even where you fully intend to settle your case. In fact, often having proof of an affair is what gets the case settled at terms that are fair to you.

It is not fun to find out your spouse has cheated, and you may be like many of my clients who have said they would rather not know. But, you should think carefully before making that decision. Talk to your lawyer. Assuming you’ve chosen a good one, listen to their advice. If you are going to get proof of it, now is the time. Your lawyer should be able to talk to you about the costs involved (it is not cheap) and how to improve your chances of making the surveillance effective, should you choose to go that route.

Divorce Preparation: Step 13 – Be Good

Well, we have finally reached the last step in this series of posts on practical steps to consider when you may be facing divorce. I will wrap up the series with two more posts to conclude and summarize the series. But, first, the final step which may seem a bit silly.

It is simply this: Be Good.

Here is the principle: you are about to be under a microscope. You are reading this blog, so I assume that you may be facing a divorce and you’d like to that unpleasant process to be as amicable as possible. Unfortunately, that is not always possible. Your spouse may not share that objective for some reason. They may be influenced by others (lawyers, friends, etc.) that convince them that what you are offering is not fair.

So, there is a chance that your case will end up going to trial no matter how diligent you and your lawyer are about trying to work the case out fairly and quickly. That being said, you should not put ammunition in the gun for your spouse to use against you.

That means no dating, no carousing, and no partying. If custody may be an issue it means making the children your number one priority (they should be that anyway, right?). Even things that are perfectly legal and harmless any other time can be twisted to look suspicious or worse in the hands of your spouse’s lawyer.

Suppose for example that you go out for dinner and drinks with members of the office to celebrate a fellow employee’s birthday. This sounds harmless enough. But, in a custody case these questions may be asked: While you chose to go out drinking with your friends, your spouse was at home taking care of the children, correct? Are you having a romantic relationship with Joe/Jane who was also at the party? How many drinks did you have that night? This is something you routinely did during the marriage, isn’t it (i.e. choosing social events over your family)? You drove home that night under the influence of alcohol didn’t you? Etc.

You get the point. This is a silly example, but why even open yourself up to this line of questioning. Don’t put the judge in the position having to decide whether you are telling the truth that this was a harmless and isolated event.

Spend time with your kids, work, stay around the house, exercise, and attend to your spiritual life. Be above reproach. Be Good. Come to think of it, Its not bad advice whether you are facing divorce or not.

As mentioned in the most recent post, we have reached the end of the series on steps to take when you are facing a divorce. Although there are other things to say on the subject, if you consider these steps and discuss them with your lawyer, it should ease the difficulty of the process.

I set out here the list of steps to consider in its entirety for easy reference:

1. Find a wise guide

2. Make an accounting of the family finances

2A. Determine what you own
2B. Determine what you owe
2C. Determine income (yours and your spouse’s)

3. Make photocopies of the financial records

4. Prepare a budget

5. Document and safeguard personal property

6. Establish your own credit

7. Assess the financial accounts

8. Address the credit accounts

9. Avoid additional debt or major purchases

10. Stay put

11. Keep a diary

12. Consider a private investigator

13. Be good

This recent article from The Oklahoman revisits some of the tax issues arising from divorce cases. According to the article and to my surprise, there are many divorcing spouses that do not realize that periodic alimony is included as income for tax purposes (don’t there lawyers explain this to them?). So, because taxes are not withheld, they are surprised in April to find out they owe taxes on all of the alimony received in a given year. The percentage will obviously depend on the recipient’s tax bracket.

My suggestion is to take 25% – 30% of each alimony check received and put it in a separate “tax account” to be used only at tax time to pay this obligation. I also recommend considering an ING Direct online account for this purpose. This account is currently paying 4% APR, which is better than most bank checking or savings accounts, and the money is liquid. Additionally, you link the ING account with your normal checking account and it is easy to make transactions into and out of the account online.

Also remember that if you want more in depth information, go to www.irs.gov and download publication 504, the tax guide for Divorced and Separated Individuals. Or you can access a pdf version here.

If you have any questions about the implications your divorce case will have on your tax situation, discuss it with your CPA or tax planner. The time to have that conversation is before the divorce is finalized.

A March 15, 2006, Wall Street Journal article points out the difficulty that spouses and former spouses are having in seeking Innocent Spouse Relief from the IRS. When you sign a joint income tax return with your spouse, you and your spouse are jointly responsible for the taxes, interest or penalties on those returns unless you qualify for innocent spouse relief. That means that under most circumstances, the IRS can collect the entire amount owed from either party.

When you claim the “innocent spouse” defense, you argue that you did not know and had no reason to know about any under reporting of income or other wrongdoing associated with the filing of the return and that therefore you should not be held responsible for paying any additional taxes, penalties or interest due.

According to the article the IRS has taken a renewed interest in enforcement, due in part to growing concern of the budget deficit. The article sites a recent report that states that of the nearly 50,000 innocent spouse claims received by the IRS in 2005, only 21% were allowed in full and another 8% were partially allowed.

The moral to the story: if you have even a hint of impropriety, do not sign a joint return. As a divorce lawyer, I would also add that if a divorce is imminent then before signing a joint return, talk to your lawyer about the implications first.

Note: I would link to the Wall Street Journal story but it is not available on wsj.com without a subscription. If you are a subscriber and have acces to the Journal online, you can go to the above link and do an article search for “Innocence in Tax Fraud” and it will pull up the article.

Also, you can download the IRS publication describing and explaining Innocent Spouse Relief here.

The Alabama Court of Civil Appeals recently issued an opinion in Buchanan v. Buchanan which addressed the issue of market fluctuations in retirement accounts. The facts in the case are common: husband and wife divorce, wife is awarded 50% of husband’s retirement account, the parties and/or their lawyers do not process the Qualified Domestic Relations Order to effectuate the transfer from Husband to Wife. Over three years later, the wife files a petition to hold the husband in contempt of court for failing to transfer her 1/2 of the retirement account.

Unfortunately for the parties, by then the value of the account had been reduced from $77,000 to $43,000 due to market fluctuations. The question was should the wife get 1/2 of $77,000 or 1/2 of $43,000? Who should bear the loss in value that occurred between the time of the divorce to the actual division of the accounts? The Appeals Court found that each party should share the market loss, which meant the wife would only get 1/2 of $43,000. The net result is that she lost $17,000 because a QDRO was not immediately prepared to divide the account.

I came across this article from the St. Louis Post-Dispatch. It is has some very good advice about the financial implications of divorce. I especially echo the advice regarding both spouses having a complete understanding of household finances. Not only is it helpful in the case of a divorce as this article points out, but it also seems to me to be a foundational communication issue in a good marriage. But, I continue to talk to clients who do not know their household financial picture because their spouse has kept them “out of the loop” regarding income, expenses, assets, and debts. That can be a costly mistake for a number of reasons. Don’t you make it.

I also found this nugget of statistical information that I had not heard before: Average length of a first marriage that ends in divorce: 8.2 years for men, 7.9 years for women, according to the Census Bureau. The eight year itch, I guess.

Here is a link to an article at MSN Money entitled 10 Steps to a Money Smart Divorce. The article generally contains good advice. Several of these steps are things that I routinely advise my clients to do (particularly the one about getting a copy of your credit report).

One word of warning though – one of the suggested steps is to close joint accounts. This can often be a good idea, but many jurisdictions in Alabama enter a standard Pre-trial Order of Court in every divorce case which expressly prohibits either party from closing joint accounts. So, before you do so, make sure you consult with your lawyer and that you understand any outstanding court orders that may prevent you from taking the proposed action.