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Divorce During COVID-19 (February 2021)

The COVID-19, Coronavirus pandemic shutdowns have effected every one of us, from lost businesses, to school closures, to parents having to stay home with their children, to lost jobs, to unemployment applications, the list goes on. What we are starting to now see more of, are the emotional, psychological and relational stress on families, couples and children. Couples and families are now sharing closer quarters than ever before, working and learning from home, zoom classes, zoom meetings, puts every family member on top of one another. Parents are stretched to their capacity. Couples are spending more time together than they ever imagined. Most are lacking the other support networks they have relied on, such as work contacts, gyms, churches and friends and extended family.

People are at a breaking point. If this feels like you, or someone you know, remember that support systems are still there, but we have to work harder to find them. Therapy is happening via zoom, outdoor exercise classes, and friends are still just a call away. Now is a good time to get into couples counseling for the first time, or again, if you are feeling the strain. If you need referrals, ask a friend (or ask us! We have names we trust that have worked magic).  If you are ready to move on, getting advice in the early stages can save you a lot of grief later. The “how” the process starts can have more of an impact that any of the later steps in the process. We recommend getting the ‘how’ right, so that you can as gracefully as is possible, as smoothly as can be, transition to the next phase of your life, if that is what is happening. Getting the ‘how’ right, can impact your children for life. Although mediation is not longer happening in person, zoom is proving highly effective and some clients are preferring the separate space while in meetings. We have been doing zoom sessions long before COVID required it, and have found a seamless process to make the difficult, a little less so. The Santa Cruz County Self Help center is still meeting with people in person and filings are going through as usual.

Going through a divorce during COVID is adding an extra layer of challenge, and through mediation, guidance with filing divorce paperwork, we can get you through.

New Tax Law in Divorce 2019

Tax Changes related to divorce will be far reaching from the the new Tax Cuts and Jobs Act (TCJA) applicable going forward.

Below are few areas to talk with your tax professional or attorney about related to the new tax law and your divorce, even if you have been divorced for years.

1. Pre- and post-nuptial agreements may be affected by the tax changes. Depending on how your agreement was written, some tax changes may affect your prenuptial or postnuptial agreements. You can review this with the attorney that prepared your contract.

2. As discussed in our blog posted in September 2018, alimony or spousal support that is paid will no longer be tax-deductible to the payor anymore and alimony received will no longer be taxable income for the recipient.

3. Those whom already have a spousal support agreement and finalized it in their marital settlement agreement with their divorce judgement will be grandfathered in and receive the tax deduction. If you modify your agreements in 2019 or beyond, you could be subject to the new rules, depending on the language in your contract. If you have modified your support agreement, is important to ensure you are able to deduct it correctly and should therefore check with your tax preparer.

4. Children won’t be the tax deduction they used to be. This tax deduction has decreased in its benefit. Therefore, it has become a less significant factor in negotiation in divorce. Your attorney or mediator can assist you with the specifics.

See more on the New Tax Laws and Divorce

Impact of New Tax Law on Spousal Support (Alimony)

The new Tax Cuts and Jobs Act (TCJA) (See IRS tax reform) that passed in December 2017 eliminates spousal support as a tax deduction. Agreements filed with the court before the year end of 2018 can still receive this tax benefit.

Historically, spousal support has been a deduction for the higher earner, the spouse paying support, and a treated a taxable income for the lower earner, the spouse receiving spousal support. The higher earner is typically in a higher tax bracket and therefore, receives a valuable tax benefit to claiming that deduction. The lower earner is typically in a lower tax bracket, and therefore pays a lower amount in taxes than the higher earner would pay for the same amount. The support calculations take this into consideration and effectively shares the tax benefit given to higher earner by providing an increased amount of support to the lower earner.

Simply put, both spouses gain from the tax deduction and save more money in taxes.

Some financial articles are fueling an unnecessary dispute between divorcing spouses, inaccurately stating that the benefit is only for the higher earner. This would be true if the law did not adjust the amount paid in spousal support. With the law adjusting the amount paid, removing this tax deduction is a loss for both spouses. Without this tax deduction, the law reduces the support amount that the lower earner receives, resulting in both parties receiving a net loss.

Spouses who have not yet filed for a divorce, may still start the filing process and as the law is interpreted today, may file a settlement agreement prior to the year end and be grandfathered in for the spousal support tax deduction for the life of the support. As the tax law is a significant change, tax advisors cannot guarantee how this will be interpreted down the road.

Spouses who have filed but have not completed their divorce, can file a partial settlement agreement.

In either case, you would need to act fast to gain this benefit to you both.

Spouses who have already divorced prior to the law will be grandfathered in, and not affected.

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How is Wevorce different from Divorce Mediation? (November 2015)

It’s not. There is no standardized certification for mediation or divorce mediation, so Wevorce is aiming to create one. Lack of standardization has sometimes given mediation a bad reputation with complaints of gender bias, aggressive mediators, and non-attorney mediators unable to provide the law. Wevorce is a company’s effort to ensure that only trained, attorney-mediators oversee the mediation. They then connect clients to financial or child specialists as needed.

Wevorce’s model is very similar to the collaborative practice model where clients use consulting attorneys, a neutral mediator, financial advisors, and child specialists, as needed. (See Collaborative Practice) A critique of the collaborative practice model is the lack of structure, allowing the success of the process to rely upon the professionals’ expertise. Wevorce tries to create more structure thereby putting the reigns on the exploding financial costs we have seen in collaborative practice. Wevorce states an average cost of $9K for a divorce. (See Wevorce) . While this is lower than many collaborative divorces, most mediated divorces should have a much lower price point.

Additionally, lack of certification for mediation has resulted in mediating attorneys that run the spectrum of haphazard mediations that lack legal content and legal protections, to ongoing and relentless mediations that fail to settle. Wevorce is creating a structure that many mediations lack, aiming to help mediators provide efficient yet legally protective mediations.

Whether using Wevorce or another divorce mediator, things to look for in your mediator are: 1) attorney member with their state Bar Association; 2) trained and experienced in divorce mediation; 3) offering a structured mediation process; and 4) collaborating with paralegals, financial advisors and child specialists.
For clients that do not have these options available locally, Wevorce can fill this gap.

Is Conscious Uncoupling just a trend? (October 2015)

Conscious Uncoupling become present in the media when Gwyneth Paltrow called her separation a conscious uncoupling rather than a divorce. She has tried to illustrate how fantastic divorce can really be. Yes, fantastic. It certainly seems like a stretch, but more and more couples are exclaiming this to be true. Paltrow’s blog says: ‘You’ll see that although it looks like everything is coming apart; it’s actually all coming back together.’ The marriage and family therapist, Katherine Woodward Thomas, who coined the phrase “Conscious Uncoupling”, created a program for individuals to work through who are going through separation or divorce. (See more at: Conscious Uncoupling, Katherine Woodward Thomas )

The idea is that individuals who complete the program will come through separation with positive change and happiness. She created the program based on her own experience and learning in her own separation. One concept behind it is delaying the asset division and final decisions until the emotions have subsided to avoid making permanent decisions out of anger or loss. Couples will then make temporary financial arrangement and put off any larger decisions. Couples considering Conscious Uncoupling could use mediation to reach temporary financial decisions, including expenses, cashflow, temporary custody, temporary living arrangements. The temporary financial decisions could be memorialized in a written legal agreement pending a final agreement. While this program will not address how to divide assets, debts, custody and support, it certainly will make those decisions easier when the time comes.

Conscious Uncoupling broadens the black or white concept of whether to divorce or not. For years we have assured clients that they can in fact craft their own version of what works for them. Many couples uncertain of their future together chose to create a postnuptual financial agreement, finding that this alone can actually help support the marriage reducing some tension off of financial conflict. Other couples may chose to file for divorce, have a financial contract prepared and filed with the court, but then delay closing their actual marital status. Some couples complete a traditional divorce and yet remain in partnership with one another, living together or sharing finances together. Every couple’s and family’s circumstances are unique and there are creative solutions for every situation. Looking into these creative solutions can often take a lot of the pain out of a black and white divorce.