In Arizona, a “high net worth” divorce is defined as a divorce that has financial assets over $1,000,0000. However, it is important to understand the $I million asset threshold alone does not necessarily mean it is complex. For example: Is a $1 million dollar investment that needs to be divided simply high asset…or complex? It depends. If that asset was accumulated during the course of a marriage, its division is likely straight-forward. However, if that same investment account is a combination of pre-marriage contributions and contributions during the marriage, the tracing of the funds to separate the individual contributions versus the community contributions can make that asset division complex. Similarly, if the funds are held in a trust, that complication can also make the division more complex. Finally, if the investment account poses serious potential tax implications requiring the expertise of a CPA or tax attorney, the situation has escalated from high-asset to complex.
High net worth cases may be the result of one party having received the majority of the funds from a trust or inheritance, which at first glance seems not complex. However, depending on how the funds were received and what were done with the funds (e.g. commingling or transmuting of funds), this type of matter may be highly complex and need serious investigation by potential use of experts to protect the assets. Such issues are often highly contested and lead to significant litigation that needs to be fully supported through discovery and proactive advocacy.
Business interests are another area that can create a high asset divorce, but they do not always mean complexity. Businesses do more often lead to complex litigation, but there are exceptions normally with smaller businesses. Some businesses are not very valuable and are easy for the parties to divide. Similarly, some businesses were started well before the marriage and therefore the community may only have limited claims to the interest in the business that may or may not lead to litigation. However, this is an area that is fraught with landmines that can completely change the course of the property division in a divorce. Just a couple of examples would include fair compensation. In Arizona, when a party owns the business as separate property, the non-owning spouse may have a claim based on not being fairly compensated for his or her labors during the marriage. Another issue occurs when the business has grown in value; expertise is required to ascertain whether the growth is attributed to the business naturally growing or the results of the owning spouse. In the event there are any disputes in the business value, the parties will most likely need to retain a business valuator to review the financials and investigate the history to determine a range of values. Business valuations have a number of subjective considerations that a skilled attorney can address that may have a tremendous impact on the community value, and ultimately, the amount a party has to pay to keep his or her business separate.
High income earning parties can also lead to high net worth cases. This may not be very complex if both parties are equally high earning, but if one spouse is earning significantly more than the other spouse, that leads to a number of issues related to child support and spousal maintenance which may fall into the complex category. It is important for a party, in this type of situation, to have an experienced and skilled attorney willing and able to advocate for the appropriate application of income to be used in arguing these type of situations. We recently saw a great example of this when Kim Kardashian was awarded $200,000 a month in child support in California. Now, given the amount of money that is being earned in that matter, $200,000 may be appropriate, but in Arizona this award would be hard to justify, and would require a skilled attorney to fight for a reasonable amount that meets the children’s needs without what our state views as ‘punishing’ the high earning parent.
It is my opinion that everyone seeking a divorce should consult with an attorney to at least understand his or her rights and the strengths and weaknesses of their respective position. Moreover, when you start dealing with more complex issues or division of higher valued assets or debts, it is even more important to seek the advice of a skilled divorce attorney and other relevant experts that can help protect assets and avoid costly and unfair liabilities as you move forward into the next chapter of your life.
With the end of the year coming soon, it is normal to consider taxes. One question I often get is whether or not spousal maintenance is tax deductible. The answer now is no.
If this sounds incorrect to you, that's because there were recent changes to the tax law. If you had a spousal maintenance award issued prior to January 1, 2019 your spousal maintenance payments are tax deductible to the payer and included as income to the receiving spouse. The 2017 Tax Cuts and Job Act eliminated the ability to deduct spousal maintenance payments and the tax applied to spousal maintenance payments received for any spousal maintenance award post January 1, 2019.
If you had a spousal maintenance order prior to December 31. 2018, and you modified the award after January 1. 2019, the tax treatment will remain deductible unless expressly included in the new agreement/order that the parties will no longer be able to claim the deduction.
Similarly, I often get asked whether child support is taxed or tax deductible. The answer to this is also no. The child support payments are neither taxed to the receiving parent nor tax deductible to the parent paying support. Child support is considered “tax neutral”. Essentially, the IRS treats child support as a direct expense paid for the child that should not be taxed in a manner divergent from how married parents are able to fund child expenses without tax penalty.
Know what divorce is filled with? Bad news. For all that divorcing people gain, like new relationships, peace of mind, emotional health, and new beginnings, divorces are still filled to the brim with loss. Divorced adults lose money. Homes. Friends. Family members. Their sense of self. Confidence. Stability. I could go on and on. Having worked with divorcing people for nearly 20 years, I can tell you that most people go on to live better, more fulfilling lives that bring them joy…but that exciting future doesn’t change the difficulty of living through the divorce.
But here’s the good news! Divorce often comes with wonderful tax breaks for people…and this is the time of year to reap those benefits. About time, right?!?!? Exactly. In July of 2021, Kiplinger put together a wonderful article designed to make people aware of the most overlooked tax breaks for newly-divorced people. Keep in mind, these are not ALL of the advantages…just the most overlooked. To make sure that you reap every tax benefit available to you, please do work with your tax preparer, accountant, and financial planner.
The tax breaks identified by Kiplinger include:
Co-parenting both during and after divorce can be tough stuff. But in divorces that do not have significant domestic violence and abuse, substance abuse, or dangerous mental illnesses, co-parenting is the way divorced parents operate. It may get easier to manage over time, but there are always times that present more challenges and conflict than others, and school breaks are definitely one of those times. Ultimately, the divorce changes when and how you can spend time with your children, often greatly reducing that time, and that enormous life change is difficult for loving, involved parents. To help process this, take a moment to read Co-parenting and Joint Custody Tips for Divorced Parents from Help Guide.
A good divorce decree should clearly spell out how holidays and breaks are supposed to work, but before that decree is in place, those details need to be worked through by the parents (often with assistance from their lawyers). Even when you have a good decree, life can happen that presents challenges to plans, and co-parents need to pivot. Since this is the month of spring break, I thought I’d share this great spring break survival guide from Parently. And since we’re still contending with COVID, here are some great spring break ideas that can be done at home or some creative outdoor activities kids might enjoy in Phoenix. These are also wonderful, local options for parents whose plans include ‘splitting’ the break.
Is co-parenting tough? You bet. Is your ex still a selfish idiot who relishes making your life difficult? Possibly. Ultimately, however, it offers health and stability to your kids during what, for them, has been an overwhelming change in their young lives. Kudos to you for keeping that thought front-and-center as you continue to try and work cooperatively with the other parent.
Valentine's Day during divorce can be...the worst. I won't sugar coat it for you. The divorce process is already stressful in so many ways. It is a time of loss that taxes your time, money, relationships, and emotions for months (and, sometimes years). This sustained assault on so many different fronts may not leave you with much tolerance for expressions of love everywhere. Overpriced flowers delivered to gushing office colleagues. Tacky stuffed animal baskets at busy intersection corners. Hearts. Just everywhere. Chocolate-covered strawberries. Prix Fixe menus that ruin your meal plans. You. Just. Can't. WAIT - except the chocolate-covered strawberries. You might be able to choke those down.
If Valentine’s Day might be an emotional trigger for you, don’t let it sneak up on you. Have a plan! Honestly, this is true with all important dates and holidays during and after your divorce. Having a plan makes the difference between reinventing traditions in an enjoyable way and feeling victimized and hurt by the loss. What type of day and/or evening could you plan that might be enjoyable for you this holiday? What could drown out the obnoxious cupid-fest all around you? If paying the San Antonio Zoo to name a cockroach or rat after your ex (see my February 2021 blog), or repurposing your engagement ring don’t perk you up, perhaps some of these ideas, along with the sassy tone of the article from Midlife Divorce Recovery might!
“Most of the time, change is a good thing. Now, I think that’s what it’s all about. Embracing change. Being brave. Doing whatever you have to, so that everyone in your life can move forward with theirs.” ~ Ted Lasso
In September of 2021, The New York Times reported that divorces are on the rise. It’s unclear whether this is a direct result of the pandemic, a side effect of the courts being slowed by it, or a combination of both, but the surge is real in many cities and states. Add to that reality that January, in a non-pandemic year, is so notorious for presenting a significant increase in divorce filings that it has been nicknamed 'divorce month'. Although the pandemic has changed people’s lives and perceptions, the core reasons for divorce remain constant.
If you’re wondering why people seek divorce, Laura Wasser, the famous California attorney who represented Kim Kardashian, Ryan Reynolds, Maria Shriver, and others, has a robust article, including research, that answers that question: conflict and arguing, lack of commitment, infidelity, lack of intimacy, poor communication, domestic violence, irreconcilable moral views, lack of shared interests, substance addiction, absence of love, financial problems, marrying too young, and inequity of responsibilities in the relationship. The Power of Two dials in on some dangerous relationship situations that are signs a divorce is healthy when one or both partners refuses to change: emotional abuse, physical abuse, addiction, repeated cheating, mistreatment of children, and an untreated mental disorder.
Whatever the situation in a particular relationship, DivorceMag has some helpful advice about steps to take once someone decides that efforts to save the marriage have not worked. They suggest that people:
Know what makes the holidays tough? Supply chain problems. Amazon delivery theft. Parking snarls at large malls. Procrastination in general. If you’re like me, you’re trying to cross everyone off of your list to show your love and appreciation this holiday…but coming up short. During a year of personal upheaval, there’s extra pressure to show your biggest supporters how much you appreciate them.
If you’re in a pinch right now, I have ten low-stress, fast gift ideas for you that could help you overcome the overwhelm this holiday season! These are some of the favorite things in my own family, so I hope you can find a thing or two that would be just the right fit for someone in yours. I hope alleviating the shopping crunch will allow you to enjoy your most beloved humans this holiday season and enable you to be mindfully present in its most wonderful moments.
Recently, I was reminded of just how wrong these situations can go when a client, despite having an order of protection, was killed. An unfair truth of domestic violence is that victims often become responsible for keeping themselves safe. In the face of this reality, recognizing abuse and awareness of the real danger it poses is critical for victims, survivors, and their loved ones. At the end of the day, an order of protection is only a piece of paper. If the 'recognizing abuse' signs above apply to your own situation or that of a loved one, please work closely with professionals to ensure safety.
When you have children with an abuser, even after divorce, these situations become even more dangerous and difficult to manage if there are exchanges of children that force you to be in vulnerable situations. I highly recommend, if you are in this position, that you have someone make the exchanges on your behalf, have the exchanges at a public place, and conduct the exchanges without any communication or interaction. Finally, I strongly recommend that you visibly record the exchange. You want an abuser to know the exchange is being recorded to minimize the chance of his or her acting out.
Join me in standing up for domestic violence victims and survivors by supporting the Governor’s Office of Youth, Faith, and Family in bringing awareness to our domestic violence crisis through a variety of #LightingAZPurple events this month. It kicks off with the October 4th Purple Kickoff Event and offers a variety of ways you can bring visibility to the cause...along with helpful resources for anyone seeking safety from domestic abuse for themselves or a loved one.
There have been many articles published in the past few months that ilIustrate the toll that COVID has taken on families. I recently read an article in U.S. News titled "A Vaccine or This Marriage: Conspiracy Theories Are Tearing Couples Apart" by Jesselyn Cook. In it, one of the interviewed parties reported that her husband said, “If I take the vaccine I could pack my bags and leave his kids here.”
As a divorce attorney I have not heard this exact scenario, but it also did not surprise me. The COVID pandemic, and all that has come with, has caused a tremendous amount of stress in families, and many Americans are polarized about the vaccine. A marriage with a highly opinionated spouse that is convicted to a belief very easily could put a partner in a position whereby they have to choose whether or not they are equally convicted. This tension very well may lead to one spouse filing for divorce.
Over the years, I have seen the issue of whether or not to have a child vaccinated lead to litigation. In a divorced family in which the parents share joint legal decision-making authority, if the parents are not in agreement on whether or not to have the child vaccinated and both parents are strongly entrenched in their respective position, it is left the court to make that decision. The truth is that judges have different opinions on the necessity to vaccinate or not, and in Arizona, there is no standard, consistent response required by the court. One thing that is consistent is that disagreements like this often lead to high litigation costs that may or may not be seen as reasonable by the court.
In a situation whereby one parent has sole legal decision-making authority, the court will decline to override that parent's choice, as there is a strong argument that making the decision infringes on that parent’s Constitutional right to parent. I only add this to highlight the fact that there is a very fine line between government intrusion into the parenting rights and the court having the right to make decisions regarding what is best for the child.
If you have a story that you are willing to share, I would love to hear how this pandemic has affected you and or your family.
I recently read a HuffPost article about Brad Pitt and Angelina Jolie that shared Mr. Pitt finally (after 5 years) obtained ‘joint physical and legal custody’ in California. You read that correctly: FIVE YEARS. If you haven’t been following, Mr. Pitt and Ms. Jolie were divorced in 2016 and have 6 kids together. During the original divorce, Mr. Pitt’s alleged acts of domestic violence and substance abuse problems led to him being denied joint legal decision making and custody. Upon this new, recent ruling, Ms. Jolie has stated she will appeal on the grounds that the judge improperly excluded her evidence relevant to the children’s health, safety, and welfare. Reading this quick article made me think of a few points to consider for families in similar situations:
It is never over.
1. Despite any divorce being ‘final’, the fight can continue for years. These post-decree battles normally (but not always) involve children.
2. In Arizona, any time there is a change in circumstances that affects the children’s best interest, a modification can be made by the court regarding legal decision-making, parenting time, and/or child support.
3. When a trial court issues a decision, the parties are able to continue litigating either by motioning for a new trial or seeking an appeal. Also, although rarely done, a party can petition the Arizona Supreme Court to hear the case after an appeal.
Domestic Violence & Substance Abuse
1. These are two very significant issues that can have a major impact on the court’s decisions affecting the health and welfare of children...but don’t assume they automatically will. These issues are something that need to be introduced, evidenced, and fought for in court.
2. It’s shocking for clients, but you cannot assume that judges will understand the complexities of either of these issues or the impact they have on a child’s health and wellness. When these issues are relevant to your case, it is important to get experts involved to help educate the court about the specific facts and evidence in your case and the impact they have on the children.
3. The court’s handling of substance abuse in family law cases varies widely. Some judges strictly order random testing and treatment. A number of courts/judges, however, will essentially dismiss the substance abuse issue if the addicted party does something to seek treatment...even if it’s not completed. There is no standard practice. Few judges understand addiction and therefore misunderstand treatment methods and/or the necessity for ongoing monitoring to ensure the children’s safety.
4, Similarly shocking, regarding cases with domestic violence, the court often lacks understanding of current research of it, and there is no standard practice. Judges can be focused exclusively on the physical evidence (broken bones and blood) and not give proper weight, in my opinion, to the psychological, emotional, and financial trauma that occurs with controlling and coercive control. Again, it is important to bring in an expert to help educate the judge about your case and the need to protect the health and well-being of the children.
The complex issues of substance abuse and domestic violence, as found in the Mr. Pitt and Ms. Jollie case, can drag a case out for years. This is because they require the court to be involved over time as one or both parents receive the treatment and services they need to address the substance or domestic violence issues in the case. Ultimately, the goal of the courts is to restructure the balance of power to ensure everyone is safe.
Jason Castle is a family lawyer who specializes in high-conflict cases. He's also a former prosecutor & social worker. Hear his latest divorce thoughts!