Dallas Divorce Law Blog by Michelle O'Neil

Well, we survived another tax year.  Hopefully everyone got their returns in on time and the process was relatively painless.   For our readers who were recently divorced, its important to ensure the name on your tax return matches the name registered with the Social Security Administration (“SSA”).

After a divorce, it is important for the taxpayer to contact the SSA to change their last name.  Although standing in line at the SSA is never a pleasant experience, you can reduce your time in line by downloading and completing the appropriate form to change your last name here.  Once the taxpayer turns in the form, the SSA it takes about two weeks for the the change to be completed.  If a taxpayer submits a return with a name that does not match the SSA records, the return will be rejected.

For a good overview of divorce tax tips, check out Sharon Drew and Gregg Herman’s Ten Divorce Tax Tips.

Finally, check out Cary & Lipponcott’s blog post on tax issues presented on spousal maintenance ordered by a Texas court.

It seems that the economy is having an effect on the child support system.  I have observed an increase in cases involving nonpayment of child support, as well suits to modify and lower child support obligations in the Dallas County Family Courts as well as the Collin County Family Courts.  I’ve talked to other Dallas area divorce lawyers and they report similar observations. 

When a person who owes child support (aka, the obligor) loses his job is having trouble paying his obigation for whatever reason, it is essential to file a suit requesting modification of the obligation as soon as possible.  Failing to pay child support according to the court order can subject a person to the possibility of going  jail for contempt of court for up to 6 months for each occurrence of a violation.  In other words, failing to pay child support per the court order for one month carries a maximum possible contempt sentence of 6 months in jail.  Each subsequent month where the obligator fails to pay child support can also carry a 6 month sentence. 

Once a suit for modification is filed to lower the child support obligation, the court has the ability to grant a temporary reprieve of the child support obligation and even, in some cases, make the child support decrease retroactive to when the suit for modification was filed.

Divorce has become the most recent victim of plummeting home values, says the New York Times in its article Breaking Up Is Harder To Do After Housing Fall.  Nearly 20% of homes are now worth less than the mortgages owed on them. Where couples once fought over who would keep the house, they now bicker over who will continue to pay for it.  As a result, divorce has become more complicated and often more expensive with lower prospects for a money outcome.  Some divorce lawyers say that some clients are electing to stay together because there are few assets left to help them start over.

In a normal economy, couples typically build equity in their homes, then divide that equity in a divorce, either after selling the house or with one partner buying out the other partner’s share.  But now, more couples own houses that neither spouse can afford to maintain and they cannot sell for what they owe. 

In the Dallas Texas divorce arena, we have been spared the worst of the housing bust, but our house values are, by most accounts, remaining stagnant.  That still creates the problems mentioned in the article in that houses are not the major cash-cow asset they once were.

For high net worth clients, now may be an optimum time to get a divorce, especially in the Dallas Texas area.  A down economy and devalued assets benefits the monied-spouse in a divorce.  The decline in house values means that the ratio of equity to debt is lower and the asset division is lower as well.  The same goes with division of retirement or brokerage accounts that hold stock or bonds.   The overall value of those accounts is lower, resulting in a smaller overall division of the estate.  Where once a monied spouse might offer the other spouse a cash buyout, more frequently Dallas divorce attorneys are seeing divisions in-kind, where the spouses share equally in the losses.

On the other hand, now may not be so good to get divorced if you are the non-monied spouse.  Frequently the non-monied spouse will suffer a decrease in overall economic stability as a result of a divorce, even in a good economy.  Now, in this bad economy, keeping the marriage together until the economy recovers might be a good financial plan.

The current economic crisis may be putting a strain on some couples.  According to the American Psychological Association, 83% of women and 78% of men are currently stressed out about money.  But what happens when one spouse lies to the other about money.  Take, for example, the Muniz couple interviewed on Good Morning America this morning.  When the wife was pregnant and due with their child, the husband changed insurance, resulting in no coverage for the wife and child at birth.  This caused the couple to incur significant medical bills for the hospital stay and some complications.

What is financial infidelity?  It is a subtle form of cheating — disloyalty to your spouse.  Many people think it is benign because you just leave out some information — like you bought a new dress and told your husband it was on sale when it really wasn’t.  Or, your spouse gets a credit card that you don’t know anything about and hides it, with the purchases, from you.  But, any lie can be damaging to the trust relationship in a marriage and can cause cracks in the foundation.

As a Dallas divorce lawyer, I see many couples who have issues of infidelity or lying about finances.  It is too common to see a wife who has zero information about the finances.  This causes such disparity in the divorce process.  The divorce lawyer for one spouse cannot get vital information from that spouse, so the information must come, unreliably, from the other spouse.  That can also raise the expense of the divorce because the other spouse may not be forthcoming in turning over the information.  This can leave the spouse without the information, usually the wife, in a vulnerable position, subject to the dictatorial demands in negotiations of the other spouse, usually the husband.

So, if you are married, encourage your spouse to be forthcoming about the finances.  If you find out that your spouse is withholding information or lying about the finances, carefully examine the relationship for other cracks in the foundation. 

If you are contemplating divorce in Dallas, Collin, Tarrant, or Denton Counties in Tx or anywhere else for that matter, gather information about your finances and educate yourself on your marital estate before you get taken advantage of!

According to an article on KSAT website out of San Antonio, divorce lawyers nationwide are seeing a trend away from divorce in light of the recent economic woes.  We are seeing the same trends in Dallas divorces.  Usually bad economic times increase the stress on marriages, causing a rise in divorce rates.  But this time, it seems that couples are not splitting up as a result of the poor economy.  It isn’t that couples are rekindline their marriages, but more that they cannot afford to get divorced.  Housing values have falled, 401K values have fallen, and there is just not as much to divide.  Debt values may outweigh assets values, leaving nothing positive to gain from the divorce.  Spouses may not be able to get credit cards or personal loans to finance attorneys fees to obtain a divorce.  In fact, most credit card companies have reduced the credit limits on credit cards, leaving less available credit to borrow from.  I’ve even seen some spouses who cannot obtain new housing post-divorce, leaving them few options but to stay in an unhappy marriage just for a place to live.

A recent article in the American Bar Journal confirms what Dallas divorce lawyers are seeing — the downturn in the economy is making divorces more difficult.  For many couples, their primary assets are the house and the 401K.  House values are declining and so the asset is not worth as much to the divorcing couple.  Also, the physical division of a house as an asset is more difficult because home sales have slowed and mortgage refinances are more difficult to get.  This makes it more difficult for a spouse to receive the division of the equity from that asset.  Some couples are already so heavily mortgaged that there is no equity in the house, so when the value falls, they may have negative equity.

With the sharp declines in the stock market, 401K values are also tumbling.  This leaves less to divide of a normally fairly liquid and divisible asset.

In many cases, a divorce that would have once been a split of an estate with a positive net worth is now an argument over division of debts.  Some couples are even staying together because of the bad economy.  Or… worse… getting a divorce, but continuing to live together.

I recently spoke at the UT Family Law on the Frontlines Seminar in Galveston on the Topic of helping clients deal with debts in divorces.  Debts can be a huge issue in any divorce. However, the divorce lawyer is very limited in her ability to change the liability on the debts. When two people get a divorce, the debts can be apportioned between them, but the liability to the creditor cannot be altered. So, for example, if two spouses purchase a car together and both names are listed as liable on the debt, the divorce will only order one of those people to pay the debt. It cannot change the fact that both people owe the finance company for the car. If the spouse that is supposed to pay the debt does not do so, then the creditor still has remedies against the other spouse, regardless of the language of the divorce orders. If you need advice about dealing with debts in your marriage or divorce, please contact us for an appointment.