The Importance of Expert Tax Advice in Divorce

Most people who get divorced do so without the benefit of a tax expert.  

They get tax information and/or advice from their divorce attorney.  However, as this Forbes article points out, divorce lawyers are not the best tax advisors.

In fact, most divorce lawyers go out of their way to disclaim any liability for tax advice in separation agreements and fee agreements.  

So, if you are getting a divorce, and you can’t rely on a divorce attorney for expert tax advice, what do you do? 

Collaborative attorneys figured this out a long time ago.  In a collaborative divorce case, expert tax advice comes from the financial neutral. 

The financial neutral provides unbiased neutral information and advice about tax issues that relate to divorce.  That way, both parties get the same information at the same time.  And, they are not getting in unnecessary conflicts due to differing tax advice from either their attorneys or their own individual tax advisors.  

And here’s the best part about financial neutrals in collaborative divorces:  A good piece of tax advice can save tens of thousands, if not more, for the couple.  One small piece of information can have a huge impact on the financial futures of both clients. 

On the other hand, the absence of that information can have a huge negative impact on both clients.  

Tax issues are another big reason to take advantage of the collaborative process and the financial neutrals that help clients in the process.

5 Tips for Protecting Your Kids in Divorce

The vast majority of my clients with children share one huge concern:  My divorce will ruin my children’s chances of being happily married. 

Fortunately, the research does not support the idea that divorce, by itself, negatively impacts the odds of a child being happily married. 

The research does show that the most important factor for kids of divorce is not that their parents were divorced, but the level of ongoing conflict between the parents.

So, if you want to protect your child from the negative effects of divorce, follow these guidelines:

1. De-escalate conflict between you and your spouse whenever possible;
2. Address conflict as quickly as possible so that mole hills do not become mountains;
3. Choose a divorce process that promotes peace and problem-solving, like collaborative divorce or interest based mediation;
4. Choose lawyers that promote problem solving and non-combative tactics;
5. Treat your spouse as the parent of your children, and not as your enemy.

These steps will not make your divorce easy for you or your child.  But, they will help insulate your child from the lasting negative impacts of divorce.  

Unpredictable Alimony Awards

Alimony has always been of the most unpredictable issues for spouses and attorneys.  The chair of the Family Law Section of the American Bar Association indicated in a recent article “Divorce law is one of the most discretion filled areas of the law…”

In many states, including North Carolina, judges have wide discretion in awarding alimony, both in amount and duration.  Compare this to child support awards that are largely determined by a formula in North Carolina.

A recent article in the February 2012 issue of the American Bar Association’s Journal highlights national efforts to create more predictable alimony awards. 

The article states, “Many agree that divorcing spouses deserve more predictable outcomes” and that the current alimony process in court “has been attacked as antiquated, unbalanced and unfair.”

Here are some of the proposals and efforts that have been undertaken by other states or legal groups according to the article:

• In 2011 Massachusetts passed the Alimony Reform Act.  The new law created a formula for calculating alimony awards.  The law also ends alimony when the paying party reaches retirement.  Further there is now a 12-year limit on alimony payments in that state.
• Oklahoma is trying to reduce a party’s ability to get military retirement pay as alimony.
• Rhode Island generally limits alimony payments to five years.
• In 2004, a Florida lobbying group tried to end alimony in that state forever.
• The American Academy of Matrimonial lawyers suggests the following formula:
  • 30% of the paying party’s gross income minus 20% of the receiving party’s gross income
  • The receiving party should not receive more than 40% of the couples’ total combined gross income
  • For example: If one spouse makes $100,000 and the other makes $50,000, the numbers look like this:  $100,000 x 30% = $30,0000; $30,000 minus $50,000 x 20% ($10,000) = $20,000.  So, the receiving spouse would get $20,000 a year in alimony.
  • And, the duration would be calculated by multiplying the length of the marriage by a fraction.

These efforts clearly indicate that there is a big problem for divorcing couples using the courts to determine alimony awards.  

Their outcomes are highly discretionary and therefore very difficult to predict. Of course, couples always have the option to opt out of the unpredictable alimony system currently in place. They are free to resolve alimony issues in whatever way they choose in processes such as collaborative divorce and mediation. 

As the current alimony system comes under further attack, wise couples may elect to do just that. 

Psycho Ex-Spouses

There is one big reason why I choose to represent divorce clients in collaborative divorce, mediation and other non-litigation processes:  Avoiding this. 

The story of The Psycho Ex Wife blog is awful.  It is the story of a couple with two children who were divorced but could not stop fighting.

Eventually, Anthony Morelli started the blog to essentially derogate his wife and say all of the nasty things about her that he could imagine.  And, to spread the love, he got his new wife involved in the fun.

I’m not sure how he thought this blog was in the best interests of his children.  As the judge in his case correctly pointed out, it seems unlikely that Morelli can adequately focus on both the best interests of his children and destroying their mother on the internet. 

In fact, child psychologists will tell you that one parent’s out of control anger towards the other will almost always have seriously negative implications for the children. After all, what kind of anger management is he modeling for his kids?  And, who really comes off as psycho?

However, based on the 200,000 visitors a month, and the number of visitors sharing their anger about an ex-spouse, it seems that this kind of nightmare divorce scenario is all too common these days. 

The good news is that there are good ways to get divorced without generating so much anger and hatred.  Is anger a natural emotion in a divorce?  Absolutely.   But, through collaborative divorce and mediation, the anger is processed and managed so that both parents and children can move on without having to live in the anger of the divorce for years down the road.

After all, what is the point of getting divorced if you are going to spend the rest of your life letting your ex-spouse still control so much of your time and energy?

Can you imagine what Anthony Morelli and his new wife could accomplish if they spent less time focusing on how angry they are, and invested that time into something more productive?   How much more time could they devote to their kids, their marriage, their careers, or, here’s a crazy thought, doing something constructive in the world?  And, how must the new wife feel about her husband being so wrapped up in his ex-wife? 

Bottom Line:  If you want to spend your days blogging about how crazy your ex is, then by all means, choose an adversarial process for your divorce.  Court rooms and hostile attorneys are the perfect recipe for that kind of post-divorce misery.

But, if you would actually like to move on from your divorce in some sort of healthy way so that you can focus on something other than how much you hate your ex, then collaborative divorce or mediation may be your answer.  

Divorcing? Learn From LeBron

In emotionally charged situation, its not so much what you do, but how you do it.

Just ask LeBron James.

One of my colleagues is a Cleveland native.  I never understood why the people in Cleveland hated James so much after he left.  After all, he had created a lot of money and good will for Cleveland for years (about $300 million per year according to one estimate). Then I talked to my colleague.  He explained that it wasn’t the fact that LeBron left.  Rather it was how he left that caused the hard feelings.  James’ timing, and the show he made of his signing with Miami kind of rubbed it in Cleveland’s face.  Clevelanders feel that James hurt his old team as much as he could on the way out.  At the very least, they feel that he was coldly disrespectful in his departure process.

As a result, James is a pariah in Cleveland, and even in Ohio at large.  In case you didn’t know, James is a Cleveland native.  But, now he can’t even go home without hearing it from local fans.  He literally went from hometown hero to public enemy number one.  And only recently has he acknowledged this mistake.

James could easily have preserved his name and reputation in Cleveland if he had handled things in a more effective manner.

What does this have to do with divorce?

I don’t know of a much more emotionally charged situation than divorce. 

Like the James situation, divorcing couples are facing changes.  However, divorcing couples are facing a much more personal and emotionally charged situation than the melodramatic James debacle. 

The repercussions of a divorcing couples’ divorce process will have far more serious consequences for their children, families and financial lives than a sports story.

Therefore, the “how” of a divorce typically has a far greater impact than the actual decision to divorce.  Couples can choose to resolve their differences in the co-parenting and financial aspects of a divorce without losing their dignity or the respect of their spouse.  Or, they can choose to go about things in a deceitful, combative, and positional fashion. 

Couples can choose to work together in a collaborative divorce or even mediation.  Or, they can choose to go after each other in court. 

Child specialists will tell you that the way a couple divorces typically has more impact on a child than the fact that the parents are divorced.  Mental health experts will tell you that this is true for parents as well.

If you are considering a separation or divorce, then give some serious thought to how you handle that divorce. 

After all, as LeBron James learned, it’s not necessarily what you do, but how you do it.

Randolph (Tré) Morgan III is an avid sports fan and an experienced family law and collaborative divorce attorney accepting cases in Raleigh, Cary, Apex, Garner, Fuquay-Varina, Clayton, Smithfield, Wake Forest, RTP, Durham, Chapel Hill, Holly Springs and surrounding areas.  He focuses his practice in divorce, child custody, alimony, child support, equitable distribution, property division, paternity, guardianship and other family related matters.