Congratulations. You made it through your divorce. It’s all over now Right? It’s not?
Teresa thought she had made a good deal in her divorce settlement with Clark. Clark had agreed to pay her $55,000 as a property settlement and she would get to keep her pension plan worth $70,000.
She was happy when she got a check from Clark for the $55,000. But a year later, a letter arrived from the IRS. It said Teresa owed $15,000 for taxes and an early-withdrawal penalty from her pension plan even though she had not made any withdrawals.
When she called the plan administrator, she discovered that Clark had withdrawn the funds to pay her property settlement. He was able to do so because she had given him power of attorney during the marriage, which she forgot to revoke after her divorce. Now, Teresa is back in court suing Clark to get the money back, plus what she owes in taxes and penalties.
Use this chapter to make your postdivorce checklist so things like what happened to Teresa won’t happen to you.
The First Things to Do
The first order of business after your divorce is to revoke any powers of attorney in writing. Send copies of the revocation of your power of attorney to your ex, your bank, your broker, and your pension plan administrator. Update your will and the beneficiaries on your life insurance and pension plans.
Then, set up an IRA if you need to roll over any pension funds transferred by your spouse. After you get your pension orders, you will need to send them to the appropriate pension plan administrators and follow up to make sure you receive the money.
Next, close joint bank accounts and credit cards. Transfer bank accounts, stock, real estate, and automobile titles into the name of the spouse that gets them under your agreement or divorce decree. Notify the IRS and state that you have a new address if you have moved.
You may still have to cooperate with your ex to sell the house. It may need repairs in order to get the best price. If your spouse doesn’t want to move, he can make showing the house to prospective buyers difficult for the real estate agent. There may be deeds to prepare and record if you are refinancing, transferring the house to your spouse, or selling it to a third party. Household items may need to be transferred from one ex to the other. The court may have ordered a period of use and possession before sale or sale by a trustee is permitted.
Child Custody and Access
The court always maintains jurisdiction over issues affecting the children. If circumstances change, a parent may petition the court to change custody and access. Relocation is one such change. One parent may not be able to handle a difficult child and the other parent may be more capable of dealing with the child. Or the child may be having difficulty in school or be experiencing emotional problems.
If you file a petition to modify custody or access, you will have to serve the other parent with a copy of the petition and give her an opportunity to respond.
The court will hold a hearing, which is much like the custody trial you have already been through.
Child Support
A parent may petition the court to modify child support if there is a change in circumstances. A change in circumstances might include a change in custody, emancipation of a child, or fluctuation in the income of the parents.
You are not likely to get the court to modify child support for changes that you knew were coming, like the children having become more expensive now that they are older. The court is more likely to consider unexpected changes like, “I was fired when my company was sold and I haven’t been able to find a new job.”
If you are paying child support or alimony, you should pay by check so you will have a record. If you must pay in cash, get a receipt, or you will have problems proving you paid it. If you overpay, you probably won’t recover any of the excess. The court considers overpayments to be voluntary and in the best interests of the child. If you are receiving child support or alimony, keep good records so you can prove what you did not receive if you have to go back to court.
Note Federal law prohibits retroactive changes to child support.
Alimony
If you are awarded alimony by the court or it is agreed to by the parties, you may not realize in the first year of payment that taxes will be due on the alimony for that year. There is no withholding on alimony. So you must make quarterly estimated tax payments.
If the court has ordered alimony in a trial, it is modifiable in the event of a change in circumstances. Changes in income of either party qualify as changes in circumstances. The court may impute income to a party who voluntarily impoverishes himself.
Caution Make estimated tax payments quarterly if you receive alimony.
You and your spouse can change the terms of a separation agreement by a mutual agreement. The amendment must be in writing and signed by both parties. It should be executed with the same formality as the separation agreement, signed by witnesses and notaries.
A sample amendment looks like this:
AMENDMENT NO. 1 TO SEPARATION AGREEMENT
THIS AMENDMENT NO. 1 to the Settlement Agreement dated November 30, 2012 (hereinafter referred to as the “Agreement”), by and between John Keeling (hereinafter referred to as “John”) and Patricia Keeling (hereinafter referred to as “Patricia”), is made this 19th day of August, 2013.
WITNESSETH:
WHEREAS, on November 30, 2012, the parties hereto entered into the Agreement which provided, among other things, for child support for their three minor children, namely Dashiell Keeling, Joseph Keeling, and Lillian Keeling (hereinafter referred to separately as “child” and together as “children”); and
WHEREAS, the Agreement was incorporated, but not merged, with the Judgment of Absolute Divorce entered by the Court on January 26, 2013; and
WHEREAS, John has had a substantial increase in salary; and the parties believe that it is in the best interest of the children to modify child support accordingly, as more fully set forth below;
NOW THEREFORE, in consideration of the mutual promises made herein, it is mutually agreed by and between the parties that effective upon the date of this Amendment No. 1 as set forth above:
- John shall pay ONE THOUSAND TWO HUNDRED FIFTY DOLLARS ($1,250.00) a month, directly to Patricia by mail and not through payroll withholding, commencing September 1, 2013. Said child support payments shall continue on the first day of each month thereafter until the first to occur of the following: the death of a child, the death of John, a child’s marriage, a child’s entrance into the armed forces, a child no longer having principal residence with Patricia, a child obtaining full-time employment (other than employment during school recesses), or a child attaining the age of eighteen (18); provided, if a child has not graduated high school by his eighteenth birthday, child support shall continue until graduation or the nineteenth (19th) birthday of that child, whichever occurs first.
- The parties agree that no child support arrearage exists on the part of either at the signing of this Agreement.
- The parties will notify each other promptly upon any change in income or employment. The parties will exchange tax returns by May 1 of each year, or within fifteen (15) days of filing, if extended.
In all other respects, the Agreement shall remain unchanged, and bind the parties.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals to this Amendment No. 1 in one or more counterparts, each of which shall constitute an original thereof, having done so as of the date and year first written above, but each actually having signed and sealed on the date set forth below his or her own name.
_________________________ _________________________
John Keeling Patricia Keeling
Date ________ Date _________
State of __________________
) ss:
County of ___________________
On this ________day of _________________, 2013, before me a Notary Public in and for the aforesaid jurisdiction, personally came Patricia Keeling, personally known to or made known to me to be “Patricia,” who executed the foregoing instrument, and made oath under the penalties of perjury that the facts and statements contained in this document are true and that she acknowledged to me that she freely and voluntarily executed the same for the purposes named herein.
Notary Public ________________________________________
My Commission Expires _______________________________
State of ____________________
) ss:
County of ____________________
On this ________ day of _________________, 2013, before me a Notary Public in and for the aforesaid jurisdiction, personally came John Keeling, personally known to or made known to me to be “John,” who executed the foregoing instrument, and made oath under the penalties of perjury that the facts and statements contained in this document are true and that he acknowledged to me that he freely and voluntarily executed the same for purposes named herein.
Notary Public ________________________________________
My Commission Expires _______________________________
Consent Orders
If there is a court order, the only way to change it is by another court order. But you may agree to change it without filing a petition to modify, by means of a consent order.
If your ex tells you don’t have to pay child support for six months if, for example, you pay for braces, that does not change the court order for you to pay child support, and you could still be sued for contempt.
A sample consent order looks like this:
CONSENT ORDER
IN THE CIRCUIT COURT FOR COUNTY _______________ STATE _____________
JOHN KEELING *
Plaintiff *
vs. * Family Law 5555
PATRICIA KEELING *
Defendant *
CONSENT ORDER
The parties having consented to the passage of this Consent Order on this _____ day of _________, 2013, by the Circuit Court for Montgomery County, Maryland. it is
ORDERED, that the terms and provisions of the parties’ Amendment No. 1 to Settlement Agreement, dated August 19, 2013 (attached hereto), be and the same is hereby incorporated, but not merged, into this Consent Order insofar as the Court has jurisdiction; and it is further.
ORDERED, that if the obligor accumulates support payment arrears amounting to more than thirty (30) days of support, he shall be subject to service of an earnings withholding order; and it is further.
ORDERED, that the obligor is required to notify the Court within ten (10) days of any change of address or employment so long as his obligation to pay support remains in effect; and it is further.
ORDERED, that failure to comply with the foregoing requirements of notification of address or employment will subject the obligor to a penalty not to exceed $250.00, and may result in the obligor’s not receiving notice of proceedings for earnings withholding.
______________________________
JUDGE of the Circuit Court
THIS IS A PROPER ORDER
TO BE SIGNED
______________________
Family Division Master
AGREED AND CONSENTED TO:
______________________
Attorney for Plaintiff
________________________
Attorney for Defendant
The judge had just rendered her decision in Tom’s divorce trial. The judge had ordered Tom to pay child support and alimony. Tom was in the hallway outside the courtroom with his lawyer, Marcia.
“What happens if I don’t pay my child support and alimony?” Tom asked her.
“First, your wife can ask the court for an ‘earnings withholding order’ requiring your employer to take the support payments out of your paycheck and send them directly to her. Or your wife can file a lawsuit for breach of the separation agreement and get a judgment against you,” replied Marcia. “The case is fairly straightforward. You promised to pay and did not. She can use the judgment to seize your assets or wages. And don’t forget the part of the agreement that says she can also recover her attorney fees if she has to sue you.”
“Then, I will just file for bankruptcy,” Tom said.
“I’m afraid that won’t work. Alimony and child support obligations are not dischargeable in bankruptcy.”
“That sounds bad,” remarked Tom.
“It gets worse.”
“How can it get any worse?” asked Tom.
“She can file a ‘show cause’ petition,” Marcia explained to him.
“What’s that?”
“It’s full name is ‘petition to show cause why defendant should not be held in contempt of court.’ The basis of the petition is that the court ordered you to pay and you did not. Therefore you violated a court order.”
“What’s so bad about that?” inquired Tom.
“If the court finds that you had the ability to pay, it can order what’s called a purge provision.”
“What’s a purge provision?” Tom asked.
“A typical purge provision,” Marcia explained, “might require that the defendant be incarcerated for sixty days unless he pays support within the next thirty.”
Tip A willful failure to pay child support or alimony or other violation of a court order can have dire consequences including jail time.
You will have a certain number of days to file a notice that you intend to appeal the judge’s decision. After that, the judge’s decision becomes final and unappealable.
In order to do so, you will have to order a copy of the trial transcript or as much of it as you wish to contest. And you will have to prepare an appeal brief, which is your argument about what errors were committed by the trial judge.
The court of appeals is a panel of judges. They do not retry the case. They will review whatever decisions of the trial judge you ask be reviewed and determine whether the trial judge was clearly erroneous or not.
If they find no error, they will affirm the decision. If they do find an error, they may correct the error, or more likely, they will send the case back to the judge for more proceedings.
Many divorced people get married again. Even those who say, “Never again.” If you find yourself contemplating remarriage, your experience with your divorce should be enough to convince you to at least have a prenuptial agreement the next time.
After divorce, you may decide that you prefer to live together instead of remarrying. You may feel burned by your divorce or burned out on marriage. You may be receiving alimony you don’t want to lose that would terminate upon remarriage.
Whatever the reason, cohabitation in a marriage-like relationship carries its own share of problems. In the case of a breakup, who owns the furniture that was purchased together? Can the partner who doesn’t own the house recover anything for the money contributed to the mortgage?
The best way to deal with these problems is with a cohabitation agreement, similar to a prenuptial agreement for married people, that sets forth what happens in the event of death or separation.
If you file a tax return that is inconsistent with your former spouse’s tax return, the IRS computers will probably pick it up. One of you will be assessed additional tax and a penalty.
For example, if your ex takes a deduction on her tax return for alimony payments, the IRS will expect to find that alimony reported as income on your tax return.
If both of you report the same child as a tax exemption, your returns are likely to be matched and an investigation triggered. The IRS will give the exemption to the parent who has the child with him most of the year and adjust the taxes of the other parent accordingly.
Watch the Records: Property Sales and Other Indicators of Improved Finances
If you have an award of child support or modifiable alimony in your case, you will want to know when and if there are any significant changes in your ex’s income.
The Internet is a good starting point for keeping a watch on your ex’s finances. Many states have put their real-estate and corporate records on line. You can now find the salaries of any federal government employee online at www.fedsmith.com. You can also find some corporate and association employees’ salaries and bonuses online as well as some pension-plan balances and other perqs.
You can also build financial-updating mechanisms into your separation agreement. For example, you can agree to a provision that the parties will exchange tax and supporting financial documents and recalculate child support each year by a certain date. Some people prefer to recalculate every other year or according to some other period. Another example of a mechanism you could suggest is that alimony and child support will increase by the same percentage as the payor’s income or the cost-of-living index, whichever is higher.
Keep After Your Ex to Live Up to the Agreement
It will be up to you to manage your separation agreement. If you spouse fails to pay support or follow the access schedule, you can ask the court to enforce those provisions. The law helps those who help themselves.
If your ex has been difficult all of her life, a divorce can end your marriage, but it will not make her less difficult. You will still have to deal with her after the divorce, whether because of the children, alimony property, debt, or taxes. Your spouse will probably still be difficult to deal with when solving postdivorce problems.
Summary
Even after your divorce, you will still have issues you have to deal with. Use this chapter as your checklist for following up on all the matters addressed in your agreement or decree of divorce.