Okay, so this wasn’t so much a question as it was a comment. Sometimes people simply want to share their story but without seeking advice. However, Penniless makes for a great case study, if you will, on divorce and what can go wrong and how to fix it.
Therefore, I’ll share her comment, my reply to her, and a breakdown of additional notes on her divorce. As you will see, divorce is a bit like a jigsaw puzzle.
*Note this is not legal advice.
I AM GOING THROUGH THIS VERY THING!
Spouse’s income is high. He falls into 1% of the population with his earnings.
He’s spent EVERYTHING while the divorce has dragged on for 3 years. Oh, did I mention he filed tax extensions for 5 years of taxes. When the court finally compelled him to produce, guess what my parting gift of this marriage is? A $300,000 tax debt! If we had separated everything the day the divorce was filed, I would have retained approximately $800,000. Of our assets. Now it looks as though I could be in debt to the IRS for a very long time! Of course he switched job positions in his company and is making .25% of what he was making during the marriage.
I was a stay at home mom for 18 years. The court refuses to hear any motions for temporary support, so on top of the tax debt, I’ve run up $35,000. In credit card debt supporting our children. Our oldest child needed new glasses and contacts, I put it in my credit card. I bought school supplies, I paid the school fees.
He cashed out 1/3 of his stocks and purchased his new home cash!
Yes I have a lawyer but I don’t know why. I’m just shoving money in her pocket to push around papers.
Penniless
Hi Penniless,
I’m sorry for your financial struggles due to your divorce. It seems there are all kinds of tricks whereby a spouse can reduce income and therefore reduce your support.
Sometimes if the marital assets are abundant and one spouse’s (both or one) income have been historically very high (as in the 1%), the courts will not order support to the dependent spouse because they have been awarded extremely high amount of assets. Also, if there is a $300,000 tax bill, it sounds as though your husband wasn’t filing income tax returns and therefore evading taxes. Unfortunately, as a spouse you are also responsible for debt (but it should only be 50% of the total debt). Have a conversation with your lawyer about your best action to take and whether going forward, you need a different kind of attorney to deal with the issues.
Hope that helps a bit. I know it’s so difficult to go through this especially when an ex is being devious. In the end he may have to sell his car and house (downsize) in order to help pay for half of the children’s expenses but that’s something your attorney can advise you on.
Wishing you the best and better future.
Sincerely,
Lisa Thomson
It is common for (payor) spouses to try to reduce their income in order to lower their spousal support payments. However, spousal support is determined by a combination of the need for it, and ability to pay it, not simply one’s income level.
This tends to throw some mud in the waters of spousal support awards. In fact, there was a case in Alberta, Canada where the divorcing couple were extremely wealthy. Their assets were so abundant that after the division, the dependent spouse (wife) was not awarded any spousal support because she simply did not have the ‘need’ for it. I do apologize that I don’t have the case name to link to it. It was about ten years ago and for the life of me, I cannot find any references to it via google searches.
In addition, this was to her benefit as she would not be required to pay tax on a monthly income of spousal support. Instead, she could liquidate assets and live on the worth of those without compromising her future wealth.
One exception would be taking RRSP’s in lieu of spousal support. The reason it’s not ideal is, the recipient would have to take out the funds to live on and pay a hefty tax penalty. That’s why a good lawyer would advise his client against taking such a deal where retirement savings substitute for spousal support.
Based on the Penniless email, obviously I have only a limited understanding of her divorce details. What stands out to me though, is that this couple were (are) very wealthy and in the 1% as she describes it. I can deduce from this that she may not have been awarded alimony support because she acquired a great value in assets, specifically, $800,000.
That may explain the mysterious statement that “the court refuses to hear any motions for temporary support.” My first thought is that the assets have been divided and some kind of agreement is already in place whereby spousal support has been deemed unnecessary or ‘waived’. The only way a court would refuse to hear a motion would be because there is already an agreement in place barring further action on the issue.
There is no reason for Penniless’ spouse to not be paying child support. In determining child support, the lawyer need only calculate his income, deduct her income (if there is any) from that, and come to a value of monthly payments. Of course, they will require financial disclosure. His change in jobs to a lower paying position needs to be looked into. If it is determined that he is doing the same job but has managed to change his salary to appear as though he has less income, he runs the risk of having his income imputed by the court.
As for tax extensions, I’m not sure what those are and why she would be on the hook for them if he filed these post separation. However, if he avoided paying income tax for the last five years of their marriage, then she will be equally responsible for that debt (50%). This is where I advise women to become a financial investigator before ending the marriage. You want to have an honest picture of your financial status as a couple. Are there more debts than assets? Is that news to you? Sometimes it is a shocking reality to one spouse that there are debts that have been successfully hidden.
Selling stock while still married, garners a risk that a spouse can claim half of it. Again, Penniless has stated that her divorce has dragged on and so I gather it is not concluded yet. This means her husband may be legally obliged to share his stock liquidation, if he hasn’t already in the proposed settlement.
There is such a thing as a wrong lawyer. Penniless mentions; “… I have a lawyer but I don’t know why. I’m just shoving money in her pocket to push around papers.”
She needs to have a serious talk with her current lawyer to determine whether she can address the various issues. This sounds like the lawyer is not able to handle the intricacies of this case (i.e. tax debt, stock liquidation, income reduction). Some lawyers specialize in tax ramifications of divorcing couples for example, and Penniless may have more bang for her buck by retaining a lawyer with those specialties.
There are unique variables in each person’s divorce. For example, how the assets are divided may have a bearing on the spousal support award. Tax intricacies and debts have to be considered by both parties. An income earning parent is required to pay child support. Conversely, there is no reason that the economically dependent spouse should bear all the costs of the children. In sum, it’s important for a person to get a lawyer who can help with these unique variables in their case and not a generic lawyer who has no specific expertise.
Getting a divorce settlement is a little like putting a jigsaw puzzle together, figuring out where each piece fits and finding a solution that is satisfactory for each party and mostly, the children.
Any thoughts? Please do share in the comments.
Resources
Tax Implications for divorce in Canada -this includes a video on how to reduce tax costs for your divorce.
*I am not dispensing legal advice. I am simply providing general advice based on my experience and knowledge.
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Mahesh Nair
May 10, 2018 at 7:46 amGood advice, and great that you make it clear it’s not legal. With divorce comes the question of money, how it’s divided, who pays for what, etc. It’s painful particularly for the housewives – Penniless’ concerns are heart-wrenching. Helpful post, Lisa.
lisa
May 10, 2018 at 12:01 pmThank you, Mahesh. No, I’m not a lawyer so one must take my advice with a grain of salt. Houswives and househusbands are vulnerable during divorce, financially speaking. Penniless is not alone in her dilemma as there are too many savvy exes who cheat the system.
Mahesh Nair
May 10, 2018 at 1:01 pmAgreed, and I should’ve included househusbands. Thanks for doing that. Great weekend in advance, Lisa.
lisa
May 10, 2018 at 2:26 pmhaha, no problem, Mahesh. Have a good weekend!
Jane Thrive
May 4, 2018 at 12:37 pmGreat advice, Lisa! I was a little confused about the assets. I thought she said something about “she would have retained 800,000 worth in assets” does that mean she didn’t retain any assets….? Because now she has to share the 300,000 in tax debt! Ugh.
That’s really lame that the ex did that. It sucks when people act like this and makes me angry that people get away with doing stupid crap like that. What a jerk!!
Hugs to you and thank you for posting!! <3
lisa
May 7, 2018 at 5:10 pmHey Jane, I was a little confused on that point as well. I think her half amounted to that value but not clear on whether she actually got it. LAME, exactly. Brutal. Makes me angry, too. I hope she is able to get a better lawyer to help her through the puzzle. Hugs to you, Jane!
Marie Kléber
May 3, 2018 at 8:23 amLisa, your experience is key to help others in this critical situation. I guess the laws are different in every country.
In France it looks like many men were not paying for their kids, so now they put something in place so that when fathers are not paying, they take the amount directly from their salary.
As for the debt, we’d better think about matrimonial status when getting married. We are never sure of the future. Unfortunately.
lisa
May 3, 2018 at 9:53 amHi Marie, yes, the laws vary country to country. I’m happy to hear France has taken action on deadbeat dads (and moms). Here in Canada you can register your court order with Family Maintenance office. They enforce support payments and will garnishee wages if necessary. It’s a bit of a process to get registered but worth it when the paying parent is playing games and skipping payments. This woman didn’t have an order and that’s the first thing she would need to register her ex in the system.
As for finances, yes, we can’t predict the future and of course, no one thinks they will end up divorced. We have high hope and so we should, when we embark on our married life. A good lawyer will negotiate division of assets and debts to protect his client from damage caused by one party. At least, that’s the ultimate goal, I believe. Thanks for sharing your thoughts here, Marie!
Marcia @ Menopausal Mother
May 2, 2018 at 2:42 pmI’m in shock—-I had no idea that things like this go on during divorce proceedings. How horrible that the spouse earning the bulk of the income can spend it all by paying cash, skip paying taxes, and hold the other spouse responsible for paying off debts incurred while they were still legally married. Incredibly cruel and low-handed.
lisa
May 3, 2018 at 9:49 amYes, this is a particularly bad case, Marcia. But I do hear many stories of the bread winner ‘hiding’ his income to claim a lower child support and alimony payments. It is low and devious. Who wants the mother (or father) of their children to live in poverty and unable to provide for their children? S I C K
Chrys Fey
May 2, 2018 at 9:34 amWow. That tax bill is scary. I wish her much luck and hope things get worked out.
Your thoughts and advice are great, Lisa. I would have never considered a financial investigator, but that is so smart!
lisa
May 3, 2018 at 9:47 amYes, any kind of tax avoidance will be cause for penalties and unfortunately, a marriage means both parties are responsible. Thanks, Chrys!
Christine Carter
May 1, 2018 at 6:55 pmLisa. I’m so impressed with all your knowledge and insight in such a difficult and complex narrative that takes place with many couples who are divorcing. I love that you have offered such important information here and that you use your experience and your know-how to help those who are in need of your advice.
Her story sounds awful- and I know so many other women (not too many men, but I’m sure they are out there too) who have been through the financial ringer and struggled greatly because of it. It is BRUTAL. It just breaks my heart. Sigh. What a freaking mess…
lisa
May 3, 2018 at 9:46 amThank you, Chris. I truly hope my advice helps and of course, what’s always necessary is legal representation to ensure, t’s are crossed. This is quite common where one party of a divorce suffers financially. It’s to be expected though that the lifestyle will change but no one should be starving. Hopefully lawyers can clean up the mess, at least that’s what they’re supposed to do 😀
My Inner Chick
May 1, 2018 at 6:10 pm—-I agree w/ Balroop,
I love how you have utilized your experience to help others, Lisa!
About the man above, I have one word: J E R K!
xxx
lisa
May 3, 2018 at 9:44 amThank you, Kim. I hope it is helping others in this kind of nightmare. Yes, he is a JERK. And when I googled searched spousal/alimony support, several articles came up about “avoiding or paying less spousal support”—seriously.
ShootingStarsMag
April 26, 2018 at 5:47 amIt’s crazy how cruel people can be when going through a divorce, especially when there are kids involved. Hopefully a new, better lawyer will be able to help more.
-Lauren
lisa
April 27, 2018 at 1:56 pmRight? It’s shocking. It’s easy to lose sight of the goal and put the kids second. Not ideal but that’s where therapists, lawyers and divorce coaches can help people stay on track.
Kimberly @ Caffeinated Reviewer
April 25, 2018 at 2:33 pm*shivers* It really does get ugly. I cannot fathom it.
lisa
April 27, 2018 at 1:56 pmYup. Ugly is the right word.
Tamara
April 25, 2018 at 9:41 amWow. I wouldn’t know where to begin. Finances are tricky and there’s a lot here I don’t understand. I hope what your other reader said is correct – that it always does catch up to them.
lisa
April 25, 2018 at 10:00 amExactly, Tamara. Trust me, I learned the hard way but also that’s what the lawyers are there for. To help divorcing parties navigate through the financial situation so that no one is starving. I believe it’s true about things catching up to people, especially overdue child support. Thanks for sharing, Tamara and hope I didn’t scare you off with this post 😀
Balroop Singh
April 24, 2018 at 7:13 pmI have read this as another distressing story…a situation only a person who experiences would understand. Financial crunch is very difficult to handle and people can stoop so low is an eye opener! You are so kind Lisa…by helping those in anguish, with your advice. Stay blessed!
lisa
April 25, 2018 at 9:58 amYes, there’s far too many of these stories, Balroop. Financial adjustments have to be made all around by everyone during divorce. The trick is to make it smooth and livable for everyone (sigh, hard to do when one party is being dishonest and spiteful). I hope my tips indeed help. Thanks, Balroop!
dgkaye
April 24, 2018 at 6:28 pmWow, great research and information Lis. So many tricky factors involved in this. I admire you for even taking this one on. I feel so bad for that woman. 🙁
lisa
April 25, 2018 at 9:56 amThanks, Deb. It made an interesting case study. Yes, I feel bad for her, too. I get too many comments and emails with similar nightmare stories, many involving children that were not returned. I can’t help, except to provide some objective advice. Always, I refer them to legal counsel tho. Also, I’m only being given selective facts and so have to consider that there may be things that are not shared and unknown to me. The missing puzzle pieces.
dgkaye
April 26, 2018 at 4:08 pmExactly. You can’t know about what isn’t being said. But your approach is perfect, and generous. 🙂 x
lisa
April 27, 2018 at 1:55 pmThanks you, Deb! I really hope so. I’ve had people not like what I suggest though but that’s ok. Sometimes people don’t want solutions but only to complain… 😛
W
April 24, 2018 at 8:56 amI have many thoughts:
1- honestly- there are right and wrong lawyers. It truly is hard to find a good and honest one. I see that even with my ex’s lawyer. It is sad, because as much as she charges, she/they make critical/rookie mistakes (maybe its an intern in the office? but regardless…)
2- You will die if you dont live day by day. Live in the now.
Think about how your dog lives… he/she doesnt remember what happened 2 days ago. Stop beating yourself up. Stop worrying about that court date that hasnt happened. The anxiety will kill you. Dont take a poison pill expecting it to kill someone else. They are not worth it.
3- Do the right thing. I spent 3 years almost starving and living off of leftover protein powder, so that my kids could eat (and not know my financial situation). The IRS took all of my tax refunds to pay old back taxes because he was extending out his taxes and dragging the divorce out. He stole 72K from my parents, wrote it off in a bankruptcy, and then originally got away with paying almost nothing for child support.
It eventually caught up to him. Something/Someone always does. The IRS took his taxes – even though I said I would pay the tax debt. They also took mine. (The IRS doesnt care and doesnt discriminate, they take and sort things out later). He ended up having to pay a lot more in child support, and now, because he is skipping out on the medical, I get to take him to court on contempt.
Aint life grand?
In the end, just be sure you show your friends, your children… everyone…
This is how I should be treated.
With dignity and respect, end of story.
lisa
April 25, 2018 at 9:52 amHi W, first, thank you so much for sharing your thoughts so candidly here. Others will definitely benefit from your advice and honesty. Second, I’m sorry you’ve gone through hell. Third, I’m so relieved to read that your ex finally paid you support!! Karma gonna get you…as John Lennon said. Basically, no one can screw with the IRS or they are a fool to. Well, I’m glad you have a chance to get the children’s (and your) medical back but I’m sorry you’ll be back in court for it. No rest for the wicked.
This: “In the end, just be sure you show your friends, your children… everyone…
This is how I should be treated.
With dignity and respect, end of story.”
YES! Thanks again for sharing your wisdom xoxo
Beth
April 24, 2018 at 8:43 amFinances are tricky enough to deal with even in a healthy marriage, money is just tough. I can’t even imagine navigating it with a divorce. Seems like you gave some good advice and other information here though!
lisa
April 25, 2018 at 9:48 amYou make a good point, Beth. Divorce just puts finances front and center and forces parties to take an honest look at their situation. It’s the honesty part that gets hard for some…
Thanks, Beth!