Divorce, Separation and Selection of Tax Status for Filing

I have previously discussed some of the tax issues related to divorce, maintenance and dependency exemptions.  As the tax season approaches, here is some additional information that may be of assistance.

In a typical divorce, unless the parties have been legally separated prior to December 31, they are still able file a joint return.   By filing a joint return, both spouses will be jointly and separately liable for any errors, omissions or deficiencies on the tax return.   If the parties are going through divorce, the issues related to division of any tax refunds may also become complicated.

If you are legally separated from your spouse, you are able to file as a head of household if you provided more than half the cost of keeping up a home for a child, dependent parent, or other qualifying relative for more than half the year.  According to the IRS, to claim head of household, you must either be unmarried or considered unmarried on the last day of the year.  In addition, the Abandoned Spouse rule may be applicable.   In order to qualify under the rule, if you and your spouse lived apart for the last six months of the year, you would be considered unmarried for the purpose of this filing status under the Abandoned Spouse rule.  If you meet the other two requirements for this status, you would be eligible to file as Head of Household.  The other two requirements are as follows:  1) paying more than half of the cost of keeping up a home as of the last day of the tax year;  2) a dependent child or other relative lived with you for more than half the year or you have a dependent parent (dependent parents are not required to live with you).

A party is required to file as single if he or she was unmarried as of December 31, or if legally separated as of the end of the year and does not qualify for another filing status.

There are other tax advantages and disadvantages that depend on the filing status elected by the party.  Please note that the above discussion is not tax advice, and these issues should be discussed with your tax professional.

Long Term Separation, Maintenance and Problems of Proof

I have previously discussed how the courts determine maintenance amounts in divorce cases. One of the critical factors in court’s evaluation of whether maintenance is appropriate or necessary, is the parties’ standard of living. However, there are many situations where the parties have been separated for a significant period of time. Under those circumstances, in Dowd v. Dowd, 58 A.D.3d 1057 (3rd Dept. 2009), the Appellate Division, Third Department, held that where the parties were separated for a long period of time, their pre-separation standard of living should not be considered.

In Dowd, the parties were married in 1976, were separated in 1999 and were divorced in 2007. According to the court, the standard of living during marriage was not a consideration given parties’ long separation. During the separation, the wife, who was 49, was supported, in part, by her live-in boyfriend, and had sporadic employment history involved low-wage jobs. Neither party graduated from high school. By time of trial, the husband, who was 50, was earning approximately $60,000 per year, working for manufacturer of heavy equipment. The wife also received distributive award of $100,000.

Supreme Court initially awarded defendant wife $500 maintenance per month until she is eligible for Social Security retirement benefits at age 62 in 2019 and, thereafter, reduced it to $250 per month, until she is eligible for health care benefits through Medicare at age 65 in 2022. The Appellate Division reduced the duration of the maintenance award to 5 years. It held that the standard of living during marriage was not a consideration given the parties’ long separation. Further, since the purpose of maintenance is to provide financial support for recipient spouse, while spouse gains skills and employment necessary to become self-sufficient, that particular factor was not applicable in this situation since the wife should be able to support herself. The court also noted that there was no competent medical proof with respect to the health problems claimed by the wife.

It should be noted that the Appellate Division split 3 to 2 in this case. The vigorous dissent stated that the lower court did not abuse its discretion in its award of maintenance to the wife, arguing that she was suffering from several medical conditions, impairing her ability to work and making it unlikely that she would become self -supporting.

It is worth noting that Dowd may have been decided the other way, if there was admissible proof that the wife was suffering from a medical condition, or conditions, that would prevent her from being gainfully employed. Such admissible proof inevitably involves testimony of a medical professional. Any divorce lawyer who is making an argument that his or her client is unable to work for medical reasons must be ready present testimony of a medical professional. Similarly, if a claim for rehabilitative maintenance is being presented to the court, an attorney must be prepared to present testimony of a vocational expert. While experts can charge significant fees, the case may turn on such testimony.