Texas divorce FAQ: Will my spouse be required to return to work?

As in many divorce situations, whether one spouse may be required to get a job depends greatly on the facts of that particular situation. Because post-divorce alimony is very limited in Texas, the reality is that most circumstances will require both spouses to work after the divorce. Where one spouse has not worked outside the home for a while during the marriage, there may be a period of time while the divorce works through the process that the money-earning spouse will be required to support the stay-at-home spouse to facilitate the adjustment to the new status quo.

Temporary Spousal Support

 

Temporary spousal support is different than post-divorce spousal support.

In Texas, temporary spousal support to be paid while a divorce is pending is based on the concept that each spouse has a legal duty to support the other spouse. So, until the divorce is final, the legal duty of support comes into play. Judges often base their decisions on issues of temporary support on a theory of preserving the status quo until the divorce can be finalized. So, if there is a history of the husband providing the income to pay the marital obligations, then that may likely continue. If there has been a pattern where both spouses make income that is used to pay the marital bills, then a Judge will consider making that part of the temporary orders. The main concern in reaching a temporary order is to make sure that both spouses have sufficient means with which to meet their reasonable and necessary obligations. A judge will allocate the income coming in to the marriage to accomplish this goal. This may be accomplished with an order for one spouse to pay the bills of the other spouse, for one spouse to provide a monthly stipend of spousal support to the other spouse, or with an order for each person to use their monthly income to pay certain obligations assigned to them.

Temporary orders usually last in duration for the entire pendency of the divorce. However, it is becoming increasingly popular for judges to limit a temporary spousal support award to a short period – say, 90 days – providing a sufficient time for the spouse needing support to obtain employment and resolve the divorce.

There are no statutory guidelines for temporary spousal support orders as there are with orders for post-divorce spousal maintenance.

It is important to note that temporary spousal support also differs from the legally required temporary child support.

Read more posts about temporary orders:Temporary Orders Hearing: Step 2 of the Divorce Proceeding

 

Eight Simple Rules for Tax-Deductible Alimony - Rules 3-5

 

How to determine whether payment of money to a spouse post-divorce qualifies as alimony under Internal Revenue Code §71 for tax-deduction purposes – Part 2.

This post continues discussion of Make the Tax Code Your Friend, an article from the Winter 2012 Family Law Advocate journal of the American Bar Association by Christopher Melcher.

Rule 3: Payments must be made under a divorce or separation instrument.

This means a written, formal agreement or court order. The written instrument must be in existence at the time the payments are made.

Rule 4: The instrument does not say that payments are non-taxable/non-deductible.

If the parties designate the payments as non-taxable, they will be bound by their agreement. On the other hand, saying a payment is taxable doesn’t make it taxable unless/until the IRS agrees.

Rule 5: The parties must not live together, unless the alimony is temporary.

If there is a legal separation of the parties, but they are not divorced, payments made for support are deductible even if the parties are members of the same household when the payments are made. Once a divorce is finalized, the parties cannot continue to share the same household for more than one month or the payments will not qualify as alimony.

For an overview of Texas alimony laws, please see our website O’Neil & Attorneys.

For additional information about alimony and maintenance in Texas, see the following blog posts here on the Dallas Texas Divorce Law Blog:

 

Eight Simple Rules for Tax-Deductible Alimony - Rules 0 - 2

 

How to determine whether payment of money to a spouse post-divorce qualifies as alimony under Internal Revenue Code §71 for tax-deduction purposes – Part 1.

Christopher Melcher provides a useful article on the tax-deductibility of alimony in this month’s Family Law Journal of the American Bar Association: Make the Tax Code Your Friend – and Alimony More Palatable. He points to eight simply rules to determine if payment of money to a former spouse post-divorce qualifies as tax-deductible alimony:

Rule 0: The label doesn’t usually matter.

Whether or not the payment is called “alimony” in the court order or something else does not affect its treatment as alimony under the tax laws. Likewise, a payment labeled as “alimony” may not qualify if the rules are not met. 

One exception to this rule is that payments labeled as “child support” cannot be considered alimony.

Rule 1: The payment must be made in “cash”.

Alimony cannot be paid in exchange for services, property, an I.O.U., or for the use of property. Treas. Reg. §1.71-1T. Of course, checks or other methods of paying “cash” are accepted.

Rule 2: The payment must be received by or on behalf of a spouse or former spouse.

The payment does not have to be made directly to the spouse or former spouse. It can be paid to a third party for the benefit of the spouse. For example, cash payment of rent, mortgage, tax, or tuition liabilities of the spouse or former spouse made under the terms of the divorce decree will qualify as alimony. Treas. Reg. §1.7-1T, Q&A, A-6.

Melcher says the tricky part of these arrangements is to make sure that the payor does not benefit from the payment; otherwise the payment will not qualify as alimony. Sometimes making payments on behalf of the spouse, such as mortgage payments, can implicate more than one set of tax rules and create some confusion. If the house and the mortgage are in the name of the payor, the payor cannot take an alimony deduction for paying the mortgage even if the payee has exclusive possession. “Any payments to maintain property owned by the payor spouse and used by the payee spouse (including mortgage payments, real estate taxes, and insurance premiums) are not payments on behalf of a spouse, even if those payments are made pursuant to the terms of the divorce or separation instruments. Treas. Reg. §1.71-1T; Q&A A-6.

Simple enough: the payor is responsible for making those payments as the owner of the property or debtor under the mortgage and, thus, payment of those obligations cannot be treated as alimony to his or her spouse or former spouse.

On the other hand, where the payee owns the house and the mortgage is in his or her name. Since the alimony recipient is solely obligated for paying the mortgage, the parties can agree that his or her alimony will be paid to the mortgage company. The payee spouse can take an itemized deduction for the mortgage interest and property taxes paid, since these were made with his or her alimony money. IRS Publ. 504, p. 13 (2008).

If the spouses jointly own the residence and mortgage and the alimony order says that one spouse will pay the mortgage as alimony to the other spouse, the IRS will only recognize one-half of the payment as alimony. IRS Publ. 504, p. 12 (2008).

For payments of property taxes and home insurance in the form of alimony on a residence held in joint tenancy, none of the property tax or insurance payments qualify as alimony, but the payor spouse can take an itemized deduction for all of the property taxes. IRS Publ. 504, p. 12 Table 5 (2008).

Sometimes, spouses agree to require life insurance as a form of security for the loss of alimony if the payor dies. If the divorce agreement requires the payor spouse to maintain life insurance for the supported spouse as security for alimony, the premiums are deductible if the supported spouse is both the owner and irrevocable beneficiary of the policy and has all incidents of ownership under the policy. Stevens v. Comm’r, (1971) 439 F.2d 69; Rev. Rul. 57-125; Rev. Rul. 70-218; Treas. Reg. §1.71-1T, Q&A, A-6.

For an overview of Texas alimony laws, please see our website O’Neil & Attorneys.

For additional information about alimony and maintenance in Texas, see the following blog posts here on the Dallas Texas Divorce Law Blog:

 

Maintenance in Texas - Part 3: Amount, Duration, and Enforcement

 

How much can an award of maintenance be in Texas? How long can it last? What happens for nonpayment?

 The duration of a maintenance order is determined by the length of the marriage. If the spouses were married to each other for less than 10 years, but maintenance is awarded based upon the criminal conviction for family violence, maintenance is limited to 5 years duration. If the spouses were married at least 10 years and not more than 20 years, the duration of maintenance is also limited to 5 years. If the spouses were married to each other for at least 20 years, but not more than 30 years, duration is limited to 7 years. If the spouses were married to each other for at least 30 years or more, the maintenance order cannot exceed 10 years.

 Judges are further limited in the right to award maintenance by state law that says support can continue for no longer than necessary to earn sufficient income to provide for the spouse’s needs unless the ability to provide for the spouse’s needs id substantially or totally diminished because of a mental or physical disability of the spouse, the duties as custodian of an infant or young child of the marriage, or another compelling reason.

The amount of maintenance is limited to the lesser of 20% of the paying spouse’s average monthly gross income (before taxes) or $5,000. Generally, alimony is tax deductible to the paying spouse and included as income to the receiving spouse.

The obligation to pay maintenance under the statute terminates earlier than the above limitation upon the death of either spouse or the remarriage of the spouse receiving maintenance. It can also be terminated based upon the romantic cohabitation of the receiving spouse.

A maintenance order remains modifiable during the duration of the order and can be reviewed for continued eligibility of the receiving spouse until terminated.

For an overview of Texas alimony laws, please see our website O’Neil & Attorneys.

For additional information about alimony and maintenance in Texas, see the following blog posts here on the Dallas Texas Divorce Law Blog:

 

Maintenance in Texas - Part 2: Eligibility

Who is eligible for “maintenance” in Texas?

Determining eligibility for an award of maintenance in Texas begins with evaluating whether the spouse seeking maintenance will lack sufficient property after the divorce to provide for his or her minimum reasonable needs. If so, then a spouse can be awarded alimony/maintenance under the Texas Family Code only if one of two specific conditions exists.

First, where the other spouse was convicted of a crime involving family violence within the two years prior to the filing of the divorce suit or while the divorce is pending, the victim-spouse may be eligible for an award of maintenance.   This includes class C misdemeanor convictions if the allegation involved family violence. It also includes occasions where the defendant received deferred adjudication in exchange for a plea of guilty.

The second eligibility category for maintenance requires a minimum of a 10-year marriage. Then, a spouse can be eligible for maintenance where the spouse seeking maintenance lacks the ability to earn sufficient income to support his or her minimum reasonable needs lacks sufficient property (including property awarded in the divorce) to provide for his or her minimum reasonable needs. Or, alternatively, the spouse can be eligible for maintenance if he or she is the custodian of a child of the marriage of any age that requires substantial care and personal supervision because of a physical or mental disability that prevents the spouse from earning sufficient income to provide for the spouse’s minimum reasonable needs.

Most alimony claims rely on the second of the conditions. But for the request to be successful, the spouse must be able to show a reasonable attempt to find an appropriate job or get job training.

For an overview of Texas alimony laws, please see our website O’Neil & Attorneys.

For additional information about alimony and maintenance in Texas, see the following blog posts here on the Dallas Texas Divorce Law Blog

Maintenance in Texas - Part 1: History

Where did “maintenance” in Texas come from? Is it the same thing as “alimony”?

Traditionally, Texas law did not favor awards of alimony and the Texas Constitution specifically prohibited it. In 1967, the Texas Supreme Court distinguished between court-ordered alimony and agreements between spouses upon divorce to pay alimony, allowing agreements to stand even where a court could not order them. Then, in 1995, Texas became the last state to pass a statutory scheme for court-ordered alimony – now called “maintenance” in Texas. Thus, in Texas, use of the term “alimony” implies the right of spouses to agree upon post-divorce support in accordance with Section 71 of the Internal Revenue Code; whereas, “maintenance” implies a court-ordered obligation under the Texas statutory scheme found in Chapter 8 of the Texas Family Code.The main distinction under Texas law involves the enforceability of alimony as opposed to maintenance. Alimony is a contractual obligation only and enforceable only by contractual remedies – usually by entry of a judgment. On the other hand, the remedy for failure to pay maintenance can be income withholding, wage garnishment, or even jail time.

The Legislature continued to tweak the rules in the years following 1995, adding provisions for enforceability by contempt/jail, wage garnishment, and income withholding. Then, in the 2011 Texas Legislative session, the provisions for maintenance were broadened the provisions for duration and amount of maintenance significantly.

For an overview of Texas alimony laws, please see our website O’Neil & Attorneys.

For additional information about alimony and maintenance in Texas, see the following blog posts here on the Dallas Texas Divorce Law Blog:

Reasonable Expectations Set the Stage for Success

A perfectly reasonable result may be perceived as a total failure if the client’s expectations were unrealistic from the start.

I read an article in the latest Family Law Journal from the American Bar Association about education as the way to reasonable expectations for what will happen in a family law case. (Read When the question is alimony, the answer is client education by Kathleen A. Hogan, editor.) Ms. Hogan pointed to the often misunderstood issue of alimony entitlement by way of example. Clients often think they understand the issue of alimony before their case begins, but are mistaken as to how it really works. Sometimes these mistaken assumptions come from “lay-lawyers” – those who expound on the law as if they were lawyers but really don’t know what they are talking about – or, increasingly more often, clients who attempt to educate themselves using the internet but fail to understand the nuances of the information found. Mistaken assumptions often result in the client failing to listen to the attorney when the lawyer’s explanation does not fit with their preconceived notions. Or, a client may refrain from asking questions because he or she thinks she knows the answer already.

Ms. Hogan points out that if the client had asked the necessary questions, he or she might have heard things like “yes, real men can get alimony” or “yes, the court will expect you to get a job” or, “no, the fact that she cheated does not affect the outcome”.

In many cases in divorce, a client’s perception of success or failure will be influenced largely by his or her expectations. A client may have little or no knowledge of what a reasonable outcome will be unless the lawyer provides education as to what to expect. Emotions in divorce and negotiating a settlement can also intervene in perceptions. Instead of approaching alimony as a transaction to transfer money to a spouse that provides tax benefits, feelings of hurt, anger, fear, betrayal, and the like often come to the forefront. It is challenging to keep focused on the after-tax cash flow when emotions are running rampant and the client lacks accurate information upon which to base a decision.

For an overview of Texas alimony laws, please see our website O’Neil & Attorneys.