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Entries in divorce and taxes (2)

Friday
Jan152016

To Bifurcate, or Not to Bifurcate: That is the Divorce Question

Divorce Attorney

 

 

by Veronica R. Woods

818.907.3250

 

Divorce Bifurcation

 

Some divorcing couples may want their divorce resolved as quickly as possible. In California, the legal minimum time requirement that a dissolution can be entered is six months from the date of service of the Petition to the entered judgment. However oftentimes, complex financial matters or other contentious questions make the process much longer.

Fortunately, California’s Family Code provides an alternative option: Courts may allow parties to request a bifurcation, which essentially gives the Court the leeway to grant a divorce before other outstanding issues are resolved. Bifurcation is the separation of one or more issues in a case.

The California Rules of Court: Rule 5.390 provides for the separate trial of 13 issues, if a quicker resolution of a family law matter may help move proceedings along: 

  • Postnuptial or prenuptial agreement validity
  • Date of separation
  • Date of asset valuation
  • Separate vs. community property questions
  • Distribution of increased value of a business
  • Value of business or professional goodwill
  • Termination of marriage or domestic partnership
  • Custody and visitation rights
  • Support for child, partner or spouse
  • Attorneys’ fees
  • Equitable property and debt distribution
  • Claims for reimbursement
  • Other specific issues

Submitting a motion to bifurcate also means meeting certain demands. If the reason for bifurcating involves determining an alternate date of valuation of assets for example, the party making the motion will have to give the reasons for alternating the date and whether or not the proposed date applies to all or only some of the assets.

Other indemnities must be made to protect both spouses and children, in regards to health insurance, retirement, social security and other estate benefits.

Practical reasons for “Status Only” Bifurcation

There are some practical reasons to submit a motion to bifurcate. In a status-only bifurcation, which effectively restores the parties to “single” again, a common motive is that one or both of the parties wish to remarry immediately. Another less common reason, is to protect the best interests of the children, as in the case of Dwayne Wade’s dissolution in Illinois.

Financially, there are a few reasons: 

  • Tax Incentives: Under IRS rules, a party may file as a single tax payer or “Head of Household” if s/he had a divorce finalized anytime that year, even on December 31st. Remember, spousal support payments are deductible to the payor. Conversely, the party who receives spousal support must claim the money as income.

  • Bankruptcy: If one spouse files for bankruptcy, couples may seek bifurcation so the divorce proceedings can proceed while bankruptcy issues are still being resolved.

  • Time is Money: One party refusing to agree to certain issues to prolong the proceedings just leads to more legal fees. Reasons vary: a party may want to put off the ex’s remarriage or one party is highly emotional and unwilling to compromise, dragging on proceedings for as long as s/he can. 

Legislative Intent: Slight Evidence Required

The legislature intends “that the dissolution of marriage should not be postponed merely because issues relating to property, support, attorney fees or child custody [are] unready for decision.’ [Citation.]” (Gionis v. Superior Court (1988) 202 Cal.App.3d 786, 788.) The court is more concerned that parties forced to remain legally bound to one another when this status can do nothing but engender additional bitterness and unhappiness.” (Hull v. Superior Court (1960) 54 Cal.2d 139, 147-148.) A decision dissolving the marital status is reviewed under the substantial evidence standard. No valid purpose is served by requiring the parties to stay married.

Motion to Bifurcate Divorce

Opposing a Bifurcation

The burden of evidence to defeat a status only bifurcation must be compelling.

In the recent case of In re Marriage of Kimberly M. and Fletcher Jones, Jr., the Fourth Appellate District Court of California upheld the trial court’s decision to allow bifurcation and end the marriage in status.

In 2012, Fletcher made a motion to bifurcate based on, among other reasons, detrimental effects on future investments. Kimberly alleged her spouse did not comply with preliminary disclosure requirements – these must be filed before a bifurcation judgment is granted under Family Code §2337(b). She asked for 31 conditions to be met if bifurcation is granted.

Though Fletcher provided the required list of assets and debts, and though Kimberly did not disagree that the marriage should be dissolved, she did contend that Fletcher should be required to provide current values of the listed assets and debts, and that she be allowed an opportunity to seek further conditions of the bifurcation.

The lower court found that the disclosure and augmentations Fletcher provided were sufficient to allow the bifurcation.

Additionally,

…Kimberly made no showing the rejected conditions were necessary to protect her interests. She argues they are necessary because the early termination of the marital status “may impact upon property division issues” . . . The same can be said in every situation wherein the court bifurcates the trial, resulting in termination of the marital status prior to resolution of other issues.

Here, the court reaffirmed the legislative intent that severance of a personal relationship which the law has found to be unworkable and, as a result, injurious to the public welfare, is not dependent upon final settlement of property disputes. Society will be little concerned if the parties engage in property litigation of however long duration.

 

Veronica R. Woods is an attorney in our Family Law Practice Group. 

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Friday
Mar132015

Tax Filing During a Divorce: Separate or Joint Returns?

Encino Tarzana Divorce LawyerDivorce Attorney

by Vanessa Soto Nellis
818.907.3274

 

Couples going through a divorce should remember this regarding taxes: You can still file a joint return, so long as you were still married as of December 31st.

Taxes During DivorceEven if you separated from your spouse and moved out of the house on  January 1, 2014 – if you did not receive a divorce decree by December 31st, you're still considered married in the eyes of the Internal Revenue Service.

The IRS considers same-sex couples married, if the couple was married in a state where same-sex marriages are legal. So here in California, no distinctions are made in terms of whether a heterosexual or same-sex couple is considered married or divorced – all follow the same rules.

For most couples, filing jointly will result in more tax savings. If your divorce finalized before December 31st, you'll have to file singly, or as head of household – the latter could garner you more tax savings if filing that way. Talk to your accountant to figure out what's best for your situation.

Speaking of accountants, the IRS allows you to deduct some of the fees paid for expert advice regarding tax planning and obtaining or collecting spousal support. Thus, you may want an itemized statement from your attorney.

Separated & Filing Taxes

No matter what the relationship status, couples should always communicate. That holds especially true for separating couples at tax time. Consider these questions: 

  • Are you Married, Filing Jointly; or Married, Filing Singly?

  • Which of you is the custodial parent?

  • Who claims the children as dependent exemptions?

  • Will one of you file as head of household, while the other claims the dependent exemptions? 

Divorce Finance Attorney

If you are legally separated in California, claiming head of household means you have dependents and pay for at least half of the costs of maintaining a home. So if your child(ren) live with your spouse in a home that you mostly pay for – you could file your taxes as head of household, rather than singly.

If you and your spouse each have 50 percent custody of your child(ren), you'll really need to communicate in terms of deciding who gets to claim what on the tax returns. If there is only one child, it might make sense to alternate the tax deduction annually. Alternatively, the tax deduction may benefit one parent more than another. It is important to make sure you are in sync so that you do not get audited.

There are many options to consider when separated and filing taxes. The best thing to do in these situations is to get help from an expert.

 

Vanessa Soto Nellis is a Divorce Attorney in our Family Law Practice Group. Contact her via phone:818.907.3274; or by email: vnellis@lewitthackman.com for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

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