Three major issues commonly resolved in a divorce decree or agreement are: alimony, or spousal support; division of property; and child support. Each has its own tax treatment and implications. In general, for federal income tax purposes, alimony is “deductible” from the income of the spouse paying it and considered taxable income to the spouse
In most states, the age of majority (when a person is recognized by law as an adult), is 18 years of age or older. A “minor” is a person who is under the age of 18. When a minor breaks the law or causes damage or injury to another person, an animal or property, the minor’s parents may bear the liability. Many state statutes authorize courts to hold parents financially responsible for the damages caused by their minor children. Some states may even hold parents criminally liable for failing to supervise a child whom they know to be delinquent.
Parental Liability for Minors
In general, minors are liable for their misdeeds. However, when a minor acts intentionally or negligently in a manner that causes harm to another, it is difficult to collect damages from the minor. In such a situation, the minor’s parents may also be held liable for their child’s acts and/or ordered to pay for them. A “parent” can be anyone exercising parental authority over the child, but typically refers to the “custodial” parent. Although they vary widely by state, most parental liability laws target intentional, malicious or reckless behavior and exclude pure accidents. Parental liability stems from the custodial parents’ obligation to supervise and educate their children.
Several states refer to children who are born or adopted after the execution of a parent’s will and omitted from the provisions of the testamentary instrument as “omitted” or “pretermitted” children. In the interest of fairness, states that recognize the inheritance rights of posthumously born or adopted children have traditionally allowed “omitted” children to inherit under intestate succession (i.e., taking a share equal in value to what the child would have received if the testator had died without a will).
However, the law on the inheritance rights of posthumously conceived children (children conceived after the death of a parent) is less developed. This lack of any firmly established legal precedent for determining the inheritance rights of posthumously conceived children may be attributed to significant and ongoing advances in reproductive technology, which have made it possible for children to be conceived subsequent to the death of a parent.
Prior to filing for divorce, various federal tax considerations should be reviewed due to their potentially profound implications. Among the major issues commonly covered in a divorce decree or agreement are: alimony, sometimes referred to as “spousal” or “separate maintenance” support; division of property; and child support. Each has its own tax treatment and implications.
Division of Property
Most divorces involve a division of the property owned by the couple. Such a division of property is not usually a taxable event, i.e., neither owes taxes nor gets a deduction from income because he or she receives certain property as a result of the divorce.
There are, however, tax implications following divorce that affect future taxes. More specifically, selling personal and real property in the future may require spouses who received such property (pursuant to a divorce) to pay taxes in connection to that property.
Although “loss of consortium” damages are traditionally associated with spousal relationships, modern cases have extended the right to recover them to parent-child relationships. Referred to as “filial consortium damages,” these awards are intended to compensate the parent for the loss of affection, love and companionship that results from a child’s injury or death.
- Keep it Simple. Be realistic about your holiday commitments. If you are over-extended, something will give…usually your temper. Know your party (and alcohol) tolerance. Have a party plan that works for you. RSVP to the ones you can enjoy and, when possible, avoid the ones you won’t. Arrive late, leave early, and bow out
Couples that seek to dissolve their marriages without the challenges of litigation often turn to alternative dispute resolution. Non-litigation settlement strategies are particularly effective for couples committed to maintaining respectful relationships with their spouses after the divorce, and may also minimize negative consequences facing the children. The following issues, among others, are typically amenable to such settlement strategies:
- Property divisions
- Spousal support
- Interim living arrangements
- Child support
- Custody and visitation
Divorce Mediation and Collaborative Divorce, Generally
Two kinds of alternative dispute resolution models, often used by divorcing couples, include collaborative divorce and divorce mediation. In divorce mediation, the parties hire an independent neutral third party who brings the spouses together (with their attorneys if any were hired) to assist them to reach a satisfactory divorce settlement. In collaborative divorce, a relatively new form of dispute resolution, each spouse hires their own attorney, and the two attorneys and their clients negotiate directly with each other without resorting to litigation.
Although divorce mediation has become a popular alternative to litigation, collaborative divorce, available in most states, is also beginning to establish itself as a successful form of divorce dispute resolution. Further, just as the practice of mediation is common in numerous other areas of law, collaborative law is starting to be used for numerous non-family law disputes, such as employment and business disputes.
Same Goals, Different Approaches
The underlying goal of both divorce mediation and collaborative divorce is to allow couples to reach mutually satisfactory divorce settlements in lieu of facing the unpredictable results of judge-imposed decisions. While both resolution models have proved to be generally effective, numerous differences may affect a couple’s decision when deciding which would be most appropriate.
Fees and Experts
Although few comparison studies have been conducted with respect to the costs of collaborative divorce, the general consensus is that litigation, on average, is more expensive. One study indicates that collaborative divorce fees generally reach about 1/3 the cost of the typical litigated divorce. Expenses will increase when there is a need to hire outside professionals. For instance, if the attorneys reach an impasse or lack the expertise to address a particular issue such as the value of one of the spouse’s businesses, a financial expert may be retained for assistance. In collaborative divorce, the parties generally split all costs and fees.
Similar to collaborative divorce, in mediation the parties generally split the mediator fees. However, unlike collaborative divorce, the parties are not required to hire attorneys (although the option generally remains open). Mediator fees can range widely, being as low as $100 to $200 per hour and sometimes exceeding $400 per hour, often depending upon the type of law involved or the complexity of the issues. Many mediators have separate fee scales for couples who choose to schedule the whole day
In July 2001, the United States Department of State implemented a law regarding passport application procedures. Under the Two-Parent Consent Law, as amended in 2008, both parents are required to consent to the passport application for a minor U.S. citizen under the age of 16. By putting this law into practice, the Department of State sought to decrease the likelihood that a U.S. passport will be used to facilitate an international parental child abduction.
Basic Requirements of the Law
Under U.S. immigration law, passport applications for minor children under age 16 must be filed in person by a parent or an individual specially authorized as a person “in loco parentis.” (This term is used to identify a foster parent, or other appropriate authority, e.g., a county custodial agency, protecting the minor’s legal rights). The minor must appear in person when applying for the passport. Either parent, whether a U.S. citizen or not, may apply for a U.S. passport on behalf of the minor child. However, in addition to establishing the child’s identity and U.S. citizenship, the adult applicant must also document his or her compliance with the Two-Parent Consent Law.
Most people are aware that a surviving spouse is usually entitled to inherit all or a large portion of the estate of a deceased spouse. Fewer understand the effect on estates if one spouse dies during a legal separation or after a divorce. After a divorce, many neglect to change wills that specify bequests to a former spouse or their beneficiary designations for life insurance and retirement accounts. State law may dictate what will happen in such situations. However, provisions and procedures can vary substantially from state to state. Additionally, federal law may be implicated, especially when pension and retirement accounts are involved.
Minors have no legal capacity to manage property. Thus, transferring property and other assets to minors can be problematic. For example, parents or other adults may wish to convey a small amount of property to a minor without investing the time and expense of establishing a trust.
Another option is to set up a custodianship for the minor. Under a custodianship, the transferring party names a custodian and transfers the property into an account in the minor’s name. The custodian holds and manages the custodial property for the benefit of the minor. A custodial account is irrevocable and belongs to the minor as the owner.
Uniform Transfers to Minors Act (UTMA)
The Uniform Transfers to Minors Act of 1986 (UTMA) was passed in order to eliminate some limitations of the earlier Uniform Gifts to Minors Act (UGMA). All states have adopted some form of the UTMA or UGMA. The UTMA provides a convenient method of allowing the transfer of property to minors without setting up a trust.
In a custodianship, an adult custodian holds and manages property for the benefit of a minor child until that minor is old enough to receive the property. A UTMA transfer is irrevocable, and the custodian must relinquish the property to the minor as soon as they reach the age of majority, which varies by state (usually 18 or 21, sometimes 25)