Neal Ashmore is committed to taking a different approach to divorce, child issues and matrimonial law. Considering that – as with so many things in our lives – divorce can be an opportunity for a new beginning rather than a sign of failure, this blog is focused on accentuating the positives.
Maybe I am just getting old – or perhaps 30 to 40 years ago all this talk about 401(k)’s, IRA’s, QDRO’s and the like were misunderstood by everyone. Whatever the reason, a lot of new clients are coming to me with questions and problems about retirement plans involving their ex-spouses. I am seeing all kinds of issues from plans that were never divided in the divorce to plans that were bought out by other financial companies to amounts being sent to the retirees that are wrong.
Here are some steps you can take to be proactive and make sure you get all that you are entitled to for those years you were married to your ex:
Pull out the old Divorce Decree. Look for what you were awarded. Next, check to see if a Qualified Domestics Relation Order was signed. Then check to see if it was sent to the PlanAdministrator. If the retirement plan accumulated while you were married was an IRA or a Roth IRA, make sure it was divided at the time of your divorce. Finally, check the ages. Most plans allow someone to start drawing retirement when they reach the age of 59 ½. If your ex is above that age, then you can begin receiving your portion. Also, depending on your own financial situation, even if your ex has not retired but has gotten to the age the Plan allows for retirement, then regardless of what she or he does, you can start withdrawing the money for yourself.
Check the Retirement Plans that were awarded. If you were awarded an interest in a retirement plan, check to make sure that company is still in existence. If not, research online what happened to the company. This will save you money if you have to take legal action to protect or get your retirement since you will have already done the work the lawyer would have to do.
Rethink employment during the marriage. Think back and write out each company your ex-husband or ex-wife worked for during your marriage and how long they worked there. Were they hourly or salaried employees? Again, research if those companies had any company retirement plans. It may be that this was overlooked or not disclosed in the divorce. If so, and it has not been withdrawn by your ex, Texas law says you still own your separate or community interest in that plan.
Be snoopy. Pay attention to the mail you get from retirement financial companies. Don’t throw away this mail away too quickly. I have had several cases where years after a divorce retirement plans send out a mailing addressed to both parties and, lo and behold, when opened we find a retirement plan about which nothing was known.
Visit with an attorney. Do a quick legal checkup on your retirement interests. This is a very complicated area of the law. Often, we see post-divorce changes in retirement plans done by the company or the Plan Administrator that change the terms of the plan or payout. We see plans where the names of the Plans in the Decree were wrong, and now the Plan is pushing back. We see situations where the Plan Administrator, years after the divorce, has read the QDRO and Divorce Decree differently than the parties. Or, heaven forbid, the lawyer drafted it wrong or ambiguously and now the Administrator is interpreting what those documents lay out differently than you, which can cause thousands of dollars to go to the wrong place.
The legal procedures for correcting mistakes, dividing undivided plans, and fixing wrong interpretations vary depending on the Retirement Plans, the length of time from the divorce and other factors. The important point to remember is that not acting quickly after you find out about a situation with a retirement plan could cost you to lose your interest in that plan. So, don’t wait. Be proactive.
It’s hard enough nowadays to save up enough money to retire comfortably. Don’t let inattention or procrastination deprive you of your use of those monies that you own.
For the last few years in my practice of Family Law, it seems every case involving children there has been the issue of equal (50/50) possession. I applaud both parents wanting to step up during or after a divorce and share the tremendous rigors of raising kids alone (or, most likely, down the road with a step-parent). When discussion ensues, and it gets analyzed and laid out on the table, you can’t avoid the issue of money – or child support. Why? Well, our Texas Family Code does not address child support and equal possession. Child Support is only provided for in the Family Code if one parent has a standard, or “expanded”, possession Order and the other parent has the rest of the time with the child or children. The question I always get very early in this conversation is “Why am I paying child support if I have them the same amount of time as my ex?”
The Answer? You are paying child support because your income and your ex’s income aren’t the same. The higher income earner can provide a better home, better clothes, more cell phone apps – basically more and better of everything. Therefore, Judges (although not bound to do this by legislation or statute) almost uniformly offset the child support obligations of each. If Dad is making $125,000 a year and Mom is making $50,000 a year, using the Texas Child Support Guidelines, the Court will figure what Mom’s child support would be and then calculate what Dad’s child support would be then offset the two amounts. The bottom line is someone is going to pay and having equal possession will not stop that outcome UNLESS – both Mom and Dad make the same (or close – no definitive definition here on “close” – so beware) income.
So, agreeing to and fighting for, equal (50/50) possession of your kids when you and your ex-spouse do not make the same money can reduce the amount a parent will pay in child support thus reduce the amount a parent will be receiving. Often, (if not most) of the time the higher income earner can survive paying out whatever the amount of support works out to be – but the lower income earner can’t afford to lose the money they would have gotten had a standard or expanded possession order been in place.
Folks that come to see me for consultations about divorce with children are always worried and always have the lingo down wrong. They have talked to their neighbor, a co-worker, a friend, or a family member living in another state who has been through a divorce and they want to know about “joint custody.” They have heard this term being bandied about with their spouse during talks (or arguments) about potential divorce and they want to know if this “shared custody” is going to mean their soon to be ex is going to have the children equal (50%) of the time post-divorce?
First, learn and understand the lingo. There is no legal terminology in the Texas Family Code referring to “Joint Custody.” None. Same is true with the phrases “shared custody” and “equal custody.” The terms get all knotted up in discussions and arguments, and it knots my clients’ stomachs when they hear it. They naturally think it means equal time with the kids between them and their divorcing spouse.
What Texas does have is called “Joint Managing Conservators” (or euphemistically referred to in the legal world as “JMCs.”) That’s what our legislature back in 1973 decided to nickname Mom and Dad after divorce legally. It is merely a label – a name the law has put on divorced parents. It confers nothing on divorcing parents other than the label (and all of you are going to be living within a set geographic restriction of each other after the divorce). The name doesn’t mean there will be equal possession of your kids. It doesn’t say neither parent will pay child support. It doesn’t mean all future decisions about your kids are going to have to be agreed equally. It means none of that. It merely connotes what the law in Texas is going to call you after divorce.
When you know and understand the terms, then the possible fear that shoots through you when you hear your spouse proclaim he/she is going to have “joint custody,” “shared custody,” or “equal custody” shouldn’t affect a single nerve synapse in your body. Instead, you should smile and know that your divorcing spouse doesn’t know the lingo – and you are already a step ahead because you do.
Divorce can have a significant impact on the tax status of the divorcing parties. The time of the divorce can determine the taxpayer’s bracket and the eligibility for certain credits and deductions, which can impact the amount of income tax paid.
For IRS purposes, if the couple is still legally married on the last day of the tax year, usually December 31, then the couple will still be considered married for that tax year, even if their divorce is finalized before the tax return is filed. If a couple is still legally married on the last day of the tax year, they can choose to file jointly or separately. The benefits of filing separately are that each spouse is only responsible for the tax due on their own income and for the accuracy of information filed on their tax return. The major disadvantages of filing separately are that each taxpayer will likely end up paying a higher tax rate, and it may be more difficult to use certain tax credits, such as the Earned Income Tax Credit and education credits.
After the divorce is finalized, there are other tax issues that couples should be aware of. For instance, alimony received is taxed as income for the receiving spouse and is tax-deductible for the paying spouse. Also, while most costs of divorce are not deductible, a taxpayer may claim a deduction for legal fees incurred for tax advice related to the divorce and for legal fees incurred while trying to obtain or collect alimony.
Often when couples are considering divorce, they neglect to consider all of the financial and tax consequences of the divorce. This may lead to problems or unintended tax consequences. A divorce attorney may be able to help a client avoid or prepare for these consequences.
Source: Yuma News Now, “How Marriage And Divorce Can Impact Your Taxes”