Collaborative Divorce

Collaborative Divorce

Whenever the court is involved in family issues, your divorce will become a battleground. The resulting conflict can have far-reaching consequences for you and your children. While the financial cost can be high, the emotional and psychological cost can be equally devastating.

The Collaborative Process

One way to diffuse the conflict is to engage in a collaborative approach.  Collaborative divorce offers a respectful process focused on reaching agreement, not battling an adversary.  When a couple decides to enter into a collaborative divorce, each party hires their own personal lawyer with training in collaborative law. Both parties must sign a collaborative retainer agreement with their lawyer. A collaborative retainer agreement is different from a traditional retainer agreement in that it states that, if the divorce needs to be litigated, the lawyer’s representation will terminate.  If the party wishes to continue to be represented by the lawyer during the litigation, they must abandon the collaborative process and sign a separate retainer agreement.

Once the parties have retained counsel, they meet privately with each other, their lawyers, and any neutral professionals they’ve hired.  These professionals may include appraisers, financial professionals and therapists concentrating in child psychology. These meetings are intended to produce a settlement through an honest exchange of information and clear understanding about needs and expectations, especially concerning the well-being of children.

If the parties are able to reach an agreement on all relevant issues in the divorce, a settlement agreement is written and submitted to the court for approval. 

Why Use a Collaborative Approach?

To Protect the Children

Children are the innocent victims of separation and divorce. Our family law attorneys in Garden City understand the stress, conflict and uncertainty that are present can be major risk factors for childhood development. Yet, as much as parents say they want what is best for their children, they often have difficulty working together for the sake of their children. With the cooperative atmosphere of a collaborative divorce, more attention can be given to the needs of your children. 

To Keep the Divorce Private

An adversarial divorce litigation involves a public trial where each party’s personal and financial secrets are revealed and recorded into public record. A collaborative divorce takes place in a controlled environment with only the parties and their attorneys. If a couple would like to keep the process as quiet and painless as possible, collaborative divorce is the way to go.

To Expedite the Process

While the length of a divorce often depends on the complexity of each individual situation, getting a court involved will likely increase that length. The litigation process involves many formalities and procedures on top of a series of court appearances that do little to solve the parties’ problems. In contrast, the full disclosure and open communication inherent in a collaborative process assures that the issues are covered in a timely manner.

Conclusion While some situations may be too contentious for a collaborative approach to divorce, many people prefer its cooperative and discreet nature.

Contact the family law attorneys in Garden City at Fass & Greenberg and let them explain how collaborative law may work for you.

Going to court isn’t the only legal process that can help you to solve a dispute. In many cases, the two sides of an issue can work together collaboratively to come to a decision that satisfies both sides. If you’re interested in an alternative way of bringing disputes to an end, the Garden City mediators at Fass & Greenberg believe that you might benefit from taking a closer look at mediation.

Mediation is a form of alternative dispute resolution that allows two parties to come together and, with the guidance of a neutral third-party mediator, to craft solutions to their disputes that might not necessarily fall within the bounds of what the court is able to do. When you sit down for mediation in Garden City NY, you can go alone or with an attorney and you’ll be able to speak relatively freely.

Mediation in Garden City NY does, however, leads to binding results. If the two parties come to an agreement in mediation, that agreement can and will be enforced. The solutions that are found, however, are almost always compromises in at least some manner. The goal in mediation is to help the two parties find some sort of middle ground that will allow them to move forward with their lives.

It’s important to remember that mediation is also a process on which both parties have to agree. If no solution can be found to the problems at hand, the parties are still able to go through the traditional court system. Either party can walk away at any time, preserving their own rights to find a more traditional solution.

Mediation is an excellent way to solve problems and preserve a relationship at the same time. While the mediator is there to help all involved, it is ultimately the two parties that must come up with a solution. If you’re considering mediation, make sure to contact the Garden City mediators at Fass & Greenberg.

Divorce is difficult. In addition to the emotional ties that are broken during the process of marriage dissolution, there is also the matter of property (real and personal) that must be determined by the separating parties. In some states, there is community property, which requires all assets to be equally distributed.   In New York, our divorce laws are governed by equitable distribution, which takes may factors into consideration before distributing the assets. Some of these factors include the ages and relative health of the parties, the length of the marriage, the presence of underage children, and future inheritance rights.  It may be the case that the spouse who did not work during the marriage takes more wealth away from the relationship in the end. Equitable distribution, then, works so that both parties are as financially stable as possible.

Garden City NY family lawyers such as those at Fass & Greenberg know about equitable distribution. They can help you navigate the process so that your divorce is not as chaotic as it would be without their help. Call them to schedule an appointment for a consultation after you get familiar with the following tips about how assets can be distributed equally in cases of equitable distribution.

1. Understand that equitable distribution only extends to marital property
Marital property is defined as property accumulated by either spouse from the date of marriage to the commencement of an action for divorce. However, there are exceptions.  For example, property gifted to a spouse from a third party, or monies awarded to a spouse as a result of a personal injury lawsuit are considered separate and not subject to equitable distribution.  Assets acquired before marriage are also not eligible for equitable distribution. A good family law firm in Garden City can help you determine what assets would need to be surrendered for equitable distribution.

2. Understand how marital property is valued
The home that you purchased together ten years ago is likely worth more than you paid for it back then. If a couple decides to their home, there is no need to obtain an appraisal.  If, however, a couple decides to “trade off” a pension for a house, there are experts in each field which must be retained to determine the value of each asset.  so as to avoid the idea of one party getting more of his or her share of the wealth. It is best, of course, to receive legal counsel from a family law firm in Garden City such as that of Fass & Greenberg before taking such drastic actions.

3. Be honest about your financial situation
Both parties are required to make financial declarations in equitable distribution. The document required to be exchanged between the parties is called a Statement of Net Worth. Such declarations serve as the basis for determining the manner by which assets are divided, and the Courts can impose severe penalties upon a party who is not truthful in this sworn document.  It is essential that you are completely honest with your attorney in preparing and executing this document. 

Are you divorced and paying alimony, i.e., “maintenance”, to your former spouse? Have you experienced a serious reduction in income due to loss of job, or medical infirmity? You may well find the amount of maintenance you are paying to be a serious hardship. What, if anything, can be done to reduce the payments?  Modifying an existing order or agreement regarding support is a difficult and potentially expensive process. You need to make sure your consult with the right attorney before going to Court. The Garden City firm of Fass and Greenberg can provide the advice and you need.

Under What Circumstances Could Your Alimony Be Changed?

If you have recently lost your job, or have been forced to take a lower paying job through no fault of your own, you may have grounds to seek a modification, or in some cases, a suspension of your maintenance payments. If, at the same time you lost your job, your former spouse receives a promotion, inheritance, or any substantial improvement in finances, you may have a case for a downward modification.   

If you consult with the Garden City firm of Fass & Greenberg, we will explain the legal technicalities surrounding your post judgement application. Specifically, there are different standards or thresholds involved if your maintenance obligation arose as a result of a court’s decision (judgement after trial), or written agreement (contract-based obligation) between you and your former spouse.

In the case of the former, you will need to demonstrate to the Court that there was a substantial change in circumstances from the time of the judgement to the time of your application, which would warrant a downward modification of your maintenance obligation.  Applications to downwardly modify maintenance payments have been granted where a spouse lost his or her employment due to the acrimonious and vindictive behavior towards him or her. Additionally, forced retirement, due to a leveraged buyout of a spouse’s employer, has been held to be a sufficient change in circumstances to justify a downward modification.

However, where the maintenance obligation resulted from a written agreement between you and your spouse, you will need to demonstrate more than just a change of circumstances to obtain a modification.  You need to demonstrate that compliance with said obligation creates an “extreme hardship” for the payor spouse (you). In these situations, downward modifications are granted in only very limited instances.  Even in the case of an attorney who was convicted of a federal crime and disbarred, the attorney (payor spouse), was held to have failed to demonstrate extreme hardship necessary to modify his maintenance obligations.  In this case, the Court reasoned that the payor spouse’s dilemma was created by the attorney himself, i.e., due to his  “volitional actions.”   

All potential clients need to understand that evidence of a loss of employment is not sufficient in and of itself to prevail. You need to demonstrate after losing your job that you made diligent efforts to obtain employment commensurate with your qualifications and experience. In addition, the Court will inquire if your reduction in income is in anyway voluntary (you decide to leave a lucrative job to become an entrepreneur, or artist), or can be attributed to your own behavior (such as engaging in criminal activity, or poor performance). In those cases, your application will be properly denied. 

Contact the Firm of Fass & Greenberg for More Information

When you have questions or concerns about your present or possible future rate of alimony, you can contact the firm of Fass & Greenberg. We are the leading family law firm in Garden City that can give you honest answers and top-notch legal assistance in this matter.

prenuptial agreement

Getting married means more than just signing a piece of paper or having a wedding. It means that you’re going to join your life with another person, and that your lives going forward are going to be legally entangled. Many couples consider signing a prenuptial agreement before getting married, but many aren’t sure if it’s necessary. According to the Garden City NY family lawyers at Fass & Greenberg, it’s something that many individuals should consider before getting married.

According to most family law attorneys in Garden City, you’ll want to consider signing a pre-nuptial agreement if you have any kind of property or assets that you’d want to protect in the event of divorce or death.  For young couples starting their lives together who have minimal assets, there is no need to sign a prenuptial agreement.  Even if one of the parties expects a significant inheritance in the future, that inheritance is considered “separate property” under New York State laws, provided any assets received are not transferred into joint accounts and transmuted into marital property.  

Couples who would be strongly advised to sign a prenuptial agreement would be those embarking upon a second marriage, where there are children from the first.  They may want to protect their children’s inheritances against the rights of the second spouse in the event of death. Also, in a second marriage, there are more often assets accumulated during the first marriage, such as a pension, a business, or an investment account, the appreciation of which, a spouse may want to protect with a prenuptial agreement.

In order to prevent a successful challenge to a prenuptial agreement, full financial disclosure must be exchanged and detailed in the agreement, and most importantly, the agreement must be fair to both parties.  If there is a lack of consideration in the agreement, i.e., the non-monied spouse waives any future right to maintenance or division of assets in the event of a divorce form a multimillionaire spouse, the agreement will be more than likely vulnerable to attack upon divorce.

Most important, both parties should be represented by independent, competent attorneys. Clients who try to save money by executing online forms for prenuptial agreements may be shocked later on to learn the ineffectiveness of these boilerplate templates.

divorce

The division of marital property during divorce can be complex, and the division of investments is no exception. But once it is determined what percentage of distribution between the parties is equitable (whether by the parties’ agreement or by a judge’s order), the division of these accounts can be quite simple. But if one party elects to keep an investment account in exchange for other property, capital gains taxes can make things more complicated.

Is the Investment Marital Property?

The first consideration is whether the investment is marital property.  This depends on whether the investment was purchased with marital funds, which is generally money that was earned during the course of the marriage. Therefore, if a spouse had an investment account before they were married, then that account is his/her separate property.  The increase in the value of separate property during the marriage is also considered separate property unless that increase is caused by the contributions or efforts of the other spouse. This contribution could be active management of the investment, or support as a homemaker while the spouse who owns the separate property actively manages the investment. Generally, if a separate investment increases in value during the marriage due to the active management of either spouse, the increase in value is marital property that is subject to equitable distribution.

Non-Retirement Investment Accounts

Like any other asset in a divorce, investment accounts that are marital property are distributed equitably between the parties.  In most cases, investment accounts are split evenly in equitable distribution. One way to divide marital investment assets is to distribute shares in the account evenly without liquidating the account; this is commonly referred to as “in kind.” This is a clean and simple way to divide an investment account. 

Another way to deal with investment accounts in equitable distribution is for one spouse to keep the entire investment account in exchange for other assets.  For example, if the account is worth $50,000, one spouse could keep the account and give the other spouse $25,000 worth of other assets.  In this scenario, the parties avoid the hassle of transferring shares into another investment account, but must consider the capital gains taxes that are incurred when the account is sold.  Both spouses are responsible for the capital gains taxes from the sale of marital assets.  Therefore, if the account is sold after the divorce has been finalized, the ex-spouse can still be liable for half of the capital gains taxes on the portion of the investment that was marital property.  This liability may depend upon how the parties file their taxes and whose social security number the account is under.  To avoid these complications, the parties should address the issue of capital gains in their settlement agreements.

Retirement Accounts

Retirement accounts are distributed in divorce just like any other investment account.  If the retirement account is an IRA, many companies will allow you to divide the account, in accordance with the provisions of a judgment of divorce.  However, some IRAs and all 401(k)s and pensions require that the parties obtain a qualified domestic relations order (“QDRO”) from a court before they can distribute funds from the account. 

Once the QDRO is signed by the court, the alternate payee has a few options to choose from.  One option is to rollover the funds into his/her own retirement account.  This approach does not incur any immediate penalties or taxes.  Another option is for the alternate payee to receive a direct distribution with no penalty, but a 20% Federal Withholding Tax.  This option is available to spouses of all ages and is perfect for spouses in immediate need of cash.

To avoid these considerations, a payor spouse may elect to retain his/her retirement account and credit the value by exchanging other assets.  This approach requires that the parties consider the income taxes that will be incurred when the retirement account is paid out.  Accordingly, the value of the retirement account will be worth less in the exchange because it is tax affected.

Conclusion

In considering options for investments during a divorce and drafting the provisions of a settlement agreement, both parties must consider tax effects associated with retirement and non-retirement investment accounts.

alimony

The purpose of maintenance is to help the lower-income spouse become financially independent after a divorce.  While these payments are colloquially known as alimony, New York State law refers to them as maintenance.  The lower-income spouse may have given up a career in order to support the higher-income spouse, or they may have grown accustomed to a certain standard of living during the marriage and wish to maintain that standard.  Regardless of the circumstances of one’s marriage, receiving maintenance keeps the less monied spouse on his/her feet until he/she can become self-sufficient or until he/she remarries.

Under New York State Law, there are two types of maintenance: “pendente lite” or temporary maintenance and post-divorce maintenance.  Both temporary and post-divorce maintenance are determined by a set formula.  However, that formula caps the payor’s income at $184,000.

Temporary Maintenance

This type of maintenance provides the lower-income spouse financial support during the divorce action.  To determine the amount of temporary maintenance, the court uses a statutory formula which is based primarily on the spouses’ respective incomes.  The formula requires the court to take the following steps to calculate the amount of temporary maintenance:

  1. Subtract 25% of the supported spouse’s income (or 20% of the supported spouse’s income if there is no child support) from 20% of the paying spouse’s income (or 30% of the paying spouse’s income if there is no child support),
  2. Multiply the total income of both spouses by 40% and subtract the supported spouse’s income from that amount.
  3. Take the lower result of steps (1) and (2).  This is the correct temporary maintenance amount.

For example, if Spouse A earns $100,000 per year and Spouse B earns $50,000 per year, and Spouse A will pay child support to Spouse B, yearly maintenance payments would be:

  1. $20,000 (20% of $100,000) – $12,500 (25% of $50,000) = $7,500
  2. $150,000 × 0.4 (40%) = $60,000;  $60,000 – $50,000 = $10,000
  3. $7,500 per year in temporary maintenance.

Determining temporary maintenance can be complicated where he payor spouse has his/her own business.  Pending a completed business valuation, a determination of actual income can be tricky.

Under these guidelines, the payor spouse’s income is capped at $184,000.  If the payor spouse’s income is higher than the cap, and the judge finds that the temporary maintenance awarded by the income cap is unjust or inappropriate, the judge can adjust the guideline amount of temporary maintenance by considering a number of factors.  These factors are:

  • The age and health of the parties;
  • the present or future earning capacity of the parties, including a history of limited participation in the workforce;
  • The need of one party to incur education or training expenses;
  • The termination of a child support award during the pendency of the temporary maintenance award when the calculation of temporary maintenance was based upon child support being awarded and which resulted in a maintenance award lower than it would have been had child support not been awarded;
  • The wasteful dissipation of marital property, including transfers or encumbrances made in contemplation of a matrimonial action without fair consideration;
  • The existence and duration of a pre-marital joint household or a pre-divorce separate household;
  • Acts by one party against another that have inhibited or continue to inhibit a party’s earning capacity or ability to obtain meaningful employment. Such acts include but are not limited to acts of domestic violence as provided in section four hundred fifty-nine-a of the social services law;
  • The availability and cost of medical insurance for the parties;
  • The care of children or stepchildren, disabled adult children or stepchildren, elderly parents or in-laws provided during the marriage that inhibits a party’s earning capacity;
  • The tax consequences to each party;
  • The standard of living of the parties established during the marriage;
  • The reduced or lost earning capacity of the payee as a result of having forgone or delayed education, training, employment or career opportunities during the marriage; and
  • Any other factor which the court shall expressly find to be just and proper.

Post-Divorce Maintenance

Determining how much maintenance will be paid after the divorce can also be complicated.  The best way to decide the amount of maintenance is for the parties to come to an agreement without involving a judge.  This way, the parties have control over the outcome and can use maintenance as one of many bargaining chips in divorce negotiations. However, if this cannot be achieved and a judge decides the issue, the parties have little control over the outcome. 

The same formula used to determine temporary maintenance is used to determine post-divorce maintenance. And if a judge wants to award maintenance that exceeds the amount awarded by the income cap, he/she must consider the same factors listed above with the addition of:

  • The equitable distribution of marital property and the income or imputed income on the assets so distributed; and
  • The contributions and services of the payee as a spouse, parent, wage earner and homemaker and to the career or career potential of the other party.

With so many factors to consider, it is very difficult to predict how a judge will rule on post-divorce maintenance.  Furthermore, the duration of these payments can be a contentious issue.

How Long Does Post-Divorce Maintenance Last?

In most cases, a judge will decide the duration of maintenance payments based on these guidelines:

Length of the marriage Percent of the length of the marriage for which maintenance will be payable
0 up to and including 15 years 15%–30%
More than 15 up to and including 20 years 30%–40%
More than 20 years 35%–50%

For example, if a couple was married for 10 years, maintenance payments would be paid for 1.5 to 3 years.  But if a couple was married for 30 years, maintenance payments would be paid for 10.5 to 15 years.  And much like the amount of maintenance paid, the parties will only have control over the exact duration of maintenance if they come to an agreement without judicial intervention.  Even so, the parties only have “guidelines” to aid in their negotiations, not hard and fast rules.

Tax Considerations

Before the Tax Cuts and Jobs Act of 2017, which went into effect January 1, 2019, maintenance payments were tax deductible for the payor spouse and reported as taxable income for the payee spouse.  Now, there is no deduction for the payor spouse and the payee spouse does not need to claim the payments as income.  This issue is explored in further detail in a previous blog post on our website titled “How Does the New Tax Law Affect Divorce?”

Conclusion

Maintenance can be a great way for a less monied spouse to ease their way into self-sufficiency. But if the parties want to have some control over the amount and duration of maintenance, they should avoid leaving the issue to be decided by a judge. The best outcome is for the parties to come to an agreement on the amount of maintenance that is paid. A capable matrimonial attorney will make every effort to settle the issue of maintenance before it goes before a judge.

divorce casees

Some people seeking a divorce question whether or not they need legal representation. More people are asking this question now that divorce documents can easily be accessed online. However, a divorce entails much more than filling out paperwork and drafting agreements. Dealing with the emotions, the complexities of laws, and custody disputes that come along with a divorce can be overwhelming. It would be in your interest to hire a lawyer to ensure that your rights and interest are properly represented and accounted for. Always remember the famous quote by President Abraham Lincoln who once said “He who represents himself has a fool for a client”.

Emotions

Going through a divorce can bring out a variety of emotions. These emotions can affect your decision making abilities. It is beneficial to have the perspective of an outside legal expert to help keep your emotions in check so you can make rational, well informed, and thought out decisions and agreements.

Knowledge of the law

A divorce case can involve many aspects of the law in addition to domestic relations. Divorces often involve laws pertaining to tax, bankruptcy, real-estate, and trust and estates. It is hard for one to have or gain the knowledge of certain laws in these various fields that would allow them to effectively represent their interests in a divorce case.

It is also important to remember that a divorce case deals with issues that are not only pertinent to your life now but also in the future. Many may not know the laws pertaining to future and unanticipated issues that may arise. These issues need to be considered and addressed. A lawyer will be familiar and anticipate these possible issues and bring them to light in your case. Divorce lawyers have experience and knowledge in dealing with these issues of law and are able to aid in making more informed and favorable agreements for the present and future. 

Custody

When there are children involved in a divorce it is important to have legal representation to help come to a custody agreement that is in the best interest of your child/children. Even if you and your spouse agree upon the custody and decision making arrangements now, this may not be the case in the future. Having a lawyer will likely result in the creation of a more effective custody agreement that will help maintain a functional and stable environment for your child/children in the present and future.  Also, if problems arise later on with the agreement that you had made with your spouse, you may need to return to court to settle a custody dispute and may need to hire a lawyer anyway. Hiring a lawyer during your divorce may help you avoid making ineffective custody agreements and reduce the chances of going through future custody disputes.  

Affordability

Even if you believe having a lawyer is important to help you with your divorce, you may be worried about legal counsel fees. There are affordable avenues you can take to obtain legal counsel for you divorce case. You can reach out to legal aid societies, your county or state bar associations, or simply, your local law schools to get assistance from legal experts.

You will serve yourself and your family well by contacting the Garden City NY family attorneys at Fass & Greenberg right away after you or a family member become the victim of a family offense. You have every right to have a qualified and respected New York family attorney at your side throughout any court proceedings. Contact our office today to begin building your defense.

divorce do and donts

If you are a party in a divorce case, there are things you should do and things that you should avoid. By being mindful of your words and actions during a divorce, you can improve your chances of receiving your desired outcome. Because each divorce case is unique, you should confer with your attorney before taking any action.

What should you do in a divorce case?
During the divorce process, following are a few general suggestions of what you should do:

  • Contact an attorney: an attorney will provide you with legal advice and can represent you in court. By working with an attorney, you will have an advocate on your behalf to assist you in the process.
  • Be careful about what you do and say during a divorce, your words and actions may be under scrutiny. Be careful about what you say, text, and post online. Make sound decisions and avoid doing things that could be detrimental to your case.
  • Be respectful and professional: when you are in court, dress appropriately (a suit for men and clean pressed slacks for women; no jeans ever). be respectful to the judge and other court staff. Be professional in your words, actions and appearance. By showing respect, you will hopefully gain the respect of the judge.
  • Be thorough and organized: as you gather information and prepare for divorce hearings, gather as much information as possible. The more detail you can provide, the less work your attorney has to do, and the less your fees will be.. Organize your information, so as to make your case more efficient.

What you should not do in a divorce
The following are things you should avoid doing in a divorce:

  • Don’t lie or misrepresent: if the truth is revealed, even on a small and seemingly meaningless matter, it could ruin your credibility to the judge
  • Don’t be rude or combative:  It will get you nowhere with your spouse, your spouse’s attorney, and most important, with the court. Don’t say or do dumb things (like run up credit card charges for massages, trips with a paramour, and fancy restaurants, non a card which your spouse is obligated to pay. while it may be difficult to give in to the conflict of a divorce, keep a level head and made good decisions
  • Don’t represent yourself: The Court does not favor the unrepresented, and will not provide advice.  Representing yourself is the best example of being penny wise and pound foolish. 

At Fass & Greenberg our Garden City NY divorce lawyers can provide legal advice and representation. Call us to learn more.

tax law after divorce

The 2017 Tax Cuts and Jobs Act (“TCJA”) made significant changes to the Federal Tax Code.  This act affects divorce settlements by eliminating the taxability of alimony payments and personal exemptions for children, while increasing the child tax credit to $2,000 for each child under 17.

Taxability of Alimony Payments

For decades, spouses who make alimony payments were able to deduct those payments from their federal taxes.  When this deduction was taken, the spouse receiving the payments was required to report them as income on their federal taxes.  This fundamental rule was reversed by the TCJA.  Effective January 1, 2019, alimony payments are neither deductible by the payor spouse, nor reported as income by the payee spouse. 

Essentially, the tax burden of alimony payments has shifted from the payee to the payor.  The difference here is that, in most cases, the payor spouse is in a higher tax bracket than the payee spouse.  Therefore, the money being transferred between the spouses is taxed at a higher rate.  In this way, the TCJA creates a tax savings for payee spouses and a larger tax burden for payor spouses.  To compensate, it is likely that alimony payments will be smaller in future agreements. 

New York State Taxes

To mitigate the effect of the TCJA on alimony payments, the New York State Legislature has maintained the rules of the prior tax law.  For purposes of state taxes, alimony payments are still deductible for payor spouses and taxable as income for payee spouses.

Agreements Signed Before 2019

If a divorce agreement was signed before 2019, nothing will change; these agreements are grandfathered in under the prior tax law.  However, if these agreements are updated after 2018 and the parties want it to be governed by the TCJA, they can stipulate that in the updated agreement.  If the agreement is updated and the new tax law is not referenced, in most cases, it will still be governed by the prior tax law.

Personal Exemptions for Children

Before the new tax law, a taxpayer with dependent children under 19 (or under 24 if full-time students) received an exemption of $4,050 per child.  An exemption, much like a deduction, decreases a taxpayer’s taxable income.  Under this rule, the taxpayer’s savings were dependent on their tax bracket.  For example, if they were in the 24% tax bracket, their tax savings would be $972 per child; if they were in the 32% tax bracket, their savings would be $1296 per child.  However, the TCJA eliminated this exemption in favor of increasing the child tax credit.

Child Tax Credit

Before the TCJA, a custodial parent received a $1,000 credit for every dependent child under 17.  A tax credit decreases a taxpayer’s taxes owed dollar for dollar.  This gives the taxpayer a flat savings, regardless of which tax bracket they’re in.  This credit was available to single taxpayers who earned between $2,500 and $75,000 per year ($140,000 for joint filers), at which point the credit would phase out (gradually decrease to $0).  The TCJA increased this credit to $2,000 and increased the “phase out income” for single taxpayers from $75,000 to $200,000 ($400,000 for joint filers).

These changes are good news for lower-income custodial parents.  Any custodial parent who is in the 24% tax bracket ($82,501 to $157,500) or lower will save more money under the TCJA than under the previous law.  For example:

Taxpayer A:  Single custodial parent of two children under 17, earning $50,000 per year (22% tax bracket).

Prior Tax Law:

($1,000 credit × 2 children) + ([22% of $4,050 personal exemption] × 2 children) = $3,782 Tax Savings

Current Tax Law:

$2,000 credit × 2 children = $4,000 Tax Savings

Conversely, higher-income custodial parents will see their tax savings reduced.  For example:

Taxpayer B:  Single custodial parent of two children under 17, earning $250,000 per year (35% tax bracket).

Prior Tax Law:

($1,000 credit × 2 children) + ([35% of $4,050 personal exemption] × 2 children) = $4,835 Tax Savings

Current Tax Law:

$2,000 credit × 2 children = $4,000 Tax Savings

In short, these two changes mean that parents who earn $157,500 per year or less will save more on their taxes for each child under 17 than they previously saved.  However, this does not account for the lost savings for children under 19 (or under 24 and full-time students) and over 16 that the personal exemption for children would have provided.  While this change won’t likely be a determining factor in divorce negotiations, it’s something to consider when discussing child support.

For a more personalized account of how the new tax laws will affect your divorce, contact Fass & Greenberg today to schedule a consultation. Our experienced matrimonial attorneys are prepared to help you have the most successful case possible.

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