divorce 101

Divorce 101 What you need to know and how to

be prepared when getting a divorce.

Overview• No-Fault Divorce in Florida• Types and Costs of Divorce• Marital and Non-Marital Assets• Alimony• Child Support Guidelines• Imputing Income• Equitable Distribution• Tax Considerations of Divorce

© 2016 CARNAHAN ADVISORS

No-Fault Divorce in Florida• What is no-fault divorce?

– The spouse filing for dissolution of marriage does not have to prove fault on the part of the other spouse.

• A spouse must prove:– A marriage exists;– One or both parties has been a resident of Florida for at least six

months preceding the filing of the petition; and– The marriage is irretrievably broken.

• What is the purpose of no fault divorce?– To take the animosity out of the proceedings.

• A downside to no-fault divorce:– Factors such as abuse and infidelity are not generally taken into

consideration when making decisions.© 2016 CARNAHAN ADVISORS

Types and Costs of Divorce


Collaborative Divorce• What is collaborative divorce?

– Lawyers help clients resolve conflicts through cooperative techniques. If a settlement is not reached, the lawyers are not involved in any ensuing litigation. The goal of collaborative divorce is a negotiated outcome.

• The parties and their lawyers enter into a participation agreement. Some provisions of this agreement include:

– The parties will act in the best interest of their children.– Outstanding issues will be settled using interest-based negotiations.– All communication must be constructive and neither party can take

advantage of the other.– Neutral experts may be retained.


Collaborative Divorce, Cont’d


How long do collaborative divorces take?

The majority of cases resolve in under a year.

Impact of difficulty level on fees:

Fees in cases without children averaged $17,826, while fees in cases with children averaged $25,576.

Number of Months

% of Completed Cases

Less than 3 months

13.6%

3-4 months 12.6%5-6 months 18.1%7-8 months 13.7%9-12 months 20.9%13-24 months 18.1%More than 2 years

3%

Difficulty Level

Fees

Avg. total fees paid in easy cases

$12,127

Avg. total fees paid in moderate cases

$21,633

Avg. total fees paid in difficult cases

$32,588

Mediation vs. Litigation


Mediation vs. Litigation


These costs are based on an article by attorney and certified family law mediator, Diane L. Danois, J.D. Actual costs may be higher or lower depending on each individual’s circumstances.

Costs to Litigate Initial consultation (per hour) $250 - $500 Retainer $2,500-$5,000 Filing initial pleadings $1,200

Responding to answer and/or counter petition $1,000

Serving discovery $500 Responding to discovery $750

Preparing financial affidavits and mandatory disclosure compliance $1,800

Preparing motions $750

Preparing motion for attorney’s fees $750 Hiring experts $2,000 Hearings $4,500 Court ordered mediation $1,200

Parenting plan and co-parenting classes (if applicable) $500

Trial $7,500 - $10,000 Appeal $5,000 Approximate total cost $32,700+

* Typically ranges from $15,000 to $35,000

Costs to Mediate

Initial consultation $250 - $500

Follow up meeting $1,200

Preparation of mediated settlement agreement $500

Preparation of additional documents (if needed)

$500

Approximate total cost $500 - $2,500*

*Can reach up to around $3,000

Who Pays the Legal Fees?• Florida statute 61.16(1) allows courts to order one party pay the other party’s

reasonable attorney fees and some other expenses after considering the financial resources of both parties.

• For the court to consider awarding attorney’s fees to a party, that party must request the award at the beginning of the proceedings.

• Attorney’s fees must be reasonable. Situations where the fees may be considered unreasonable include:

– An attorney who asks for a high fee that is not in line with the legal community or the attorney’s experience.

– An attorney who files extraneous motions and pleadings or assists in the use of stalling tactics.

• Considerations the court makes when deciding who pays the legal fees:– Financial resources of both parties.– Scope, history, and length of the proceedings.– Merits of the parties’ positions.– Actual need.


Types of Dissolutions


Simplified Regular• Typically less

complex and expensive

• Generally more costly and time consuming

Simplified Dissolution of Marriage


• To get a simplified dissolution, spouses should contact their county’s clerk of the circuit court and get a book called “Simplified Dissolution Information”.

• Spouses wishing to obtain a simplified divorce must meet all of the following criteria:Hearing.

– The couple cannot have minor or dependent children (including adopted children).– The wife cannot be pregnant.– At least one spouse must have lived in FL for the past six months.– The parties have agreed upon provisions for the division of assets and liabilities.– The parties agree the marriage is irretrievably broken.– The parties agree to use simplified dissolution.– Both parties are aware that: after the dissolution is final neither spouse can expect money

from the other, both spouses waive certain legal rights, and both parties must be present at the hearing.

Regular Dissolution of Marriage


• Regular dissolution begins with a petition filed with the circuit county court in the county where both spouses last lived or the country where either spouse resides

• The spouse who files the petition is the petitioner. The receiving spouse must answer within 20 days. They may file a counter-petition to request the court addresses additional issues.

• Each party must provide the other with certain financial documents and a financial affidavit.

• Uncontested cases occur when parties reach an understanding on outcomes and sign a written agreement.

• In contested cases, spouses do not agree on all issues and a final hearing is required where the judge enters a final decision.

• In regular dissolutions, unlike simplified, each spouse can cross examine the other financial disclosure in mandatory.

Marital and Personal (non-marital) Property


• Personal Property– By marital property agreement registered in court (pre-nuptial agreements).– By gift from others to one spouse.– By inheritance.– By nomination of a beneficiary in insurance.– By substitution of a property with one that was separate.

• Marital Property

Non-Marital Assets


• Non-marital property: not subject to division by the court. Whichever spouse owns the non-marital asset will retain it after the divorce, generally these include:

– Assets acquired before the marriage.– Property acquired by inheritance or gifts not given between spouses.– Income as a result of non-marital assets: this situation typically occurs when

one spouse owns rental property before the marriage. – Assets and property excluded by agreement.

Marital Assets


• Marital property: Divided by the court during divorce (FL Statute 61.075)– Assets acquired during the marriage: these assets are considered marital

property even if the asset is only in one spouse’s name and was purchased with his or her money.

– Enhancement in value and appreciation of non-marital assets: if a non-marital asset increases in value because one or both of the spouses helped improve it, the enhancement may be marital property.

– Inter-spousal gifts during the marriage.– Real and personal property held as tenants by the entireties.– Certain retirement benefits.

Business Considerations


• A business is typically considered marital property if it was started or acquired by one or both spouses during the marriage.

– A business started during the marriage may be awarded to the operating spouse, while the other spouse receives other property or monetary compensation to make up for it. Other times, a portion of the business is awarded to one spouse and the rest to the other.

– In order for assets to be divided and awarded to both spouses, a non-biased valuation of the business must occur.

• A business will generally be considered non-marital property if it was owned or inherited by one spouse prior to the marriage. These businesses may become marital property in certain situations such as:

– When the income from a business is used to support the marriage or is commingled with other marital property (deposited in a joint bank account).

– If the value of the business increases during the marriage, the amount of the increase will become marital property and subject to equitable distribution.

Equitable Distribution


• When setting apart non-marital assets and liabilities and in dividing marital assets and liabilities, courts begin with the idea that distribution should be equal. There are some circumstances that would warrant an unequal distribution of assets and liabilities. These include:

– The contribution to the marriage by each spouse.– The economic conditions of both parties.– The duration of the marriage.– Any interruptions of careers or educational opportunities.– The contributions of one spouse to the career or education of the other spouse.– The desirability of retaining any asset.– The contribution of each spouse to the acquisition, enhancement, and production of income or the

improvement of, or liabilities to, both marital and non-marital assets.– The desirability and feasibility of keeping the marital home as a residence for any dependent child of

the marriage.– The intentional waste, depletion, or destruction of marital assets after the filing of the petition or

within two years prior.– Any other factors necessary to do equity and justice.

Spousal & Child Support


• Spousal Support:• Spousal support (alimony) is a court-ordered allowance for support by a

former husband or wife to their ex-spouse. Spousal support is generally paid by the spouse who was the chief provider during the marriage.

• Child Support:– Child support payments are court-ordered and generally made by the

noncustodial divorced parent to support one’s minor child or children.

Alimony in Florida


• Alimony is awarded on a need and ability to pay basis. Factors used to determine alimony include:

– Standard of living established during the marriage.– Duration of the marriage.– Age and physical and emotional condition of each party. – Financial resources of each party.– Earning capabilities, skills, and employability of each party.– Contribution of each party to the marriage.– Responsibilities each party will have to any minor children of the marriage.– Tax treatment and consequences to both parties of any alimony award.– All sources of available income to either party.– Any other factor necessary to do equity and justice.

Alimony in Florida, Cont’d


I. Permanent alimony: – The goal of permanent alimony is for the lower earning spouse to maintain the

standard of living enjoyed during the marriage. It is mostly awarded in long-term marriages (greater than 17 years in duration). Permanent alimony ends immediately if the recipient remarries or if either spouse dies.

II. Rehabilitative alimony:– The goal of rehabilitative alimony is to assist a party in re-establishing their

capability for self-support through: the redevelopment of previous skills and the acquisition of education or training. A person seeking rehabilitative alimony must present their plans and provide a timeline to accomplish these plans. This is typically awarded in medium- and short-term marriages.

III. Durational alimony:– The goal of durational alimony is to provide one party with financial assistance for a

set period of time following the marriage. There is no rehabilitative plan in this case, and it is typically awarded in short- and long-term marriages.

Child Support Guidelines


• The amount of child support to be paid is based on guidelines which are found in Florida Statute 61.30.

• Child support guidelines consider: – The income of both parents.– The child’s health care and child care costs.– The standard needs for the child.

• For additional information on calculating child support, see the “Financial Side of Divorce” or Florida Statute 61.30.

Imputing Income


• Imputing income occurs when the court assumes a party earns a certain amount of income.

• Two factors typically lead to the imputation of income: – Voluntary unemployment: a person purposefully terminates his or her

employment for no good reason. This can also occur when a person deliberately acts in a manner that causes them to be fired.

– Voluntary underemployment: a party has the potential to earn more income but does not pursue this opportunity.

• In most cases, a court will not impute more income than a person has historically made. Imputed income can impact child support and alimony payments.

Hidden Assets


• In Florida divorce cases, each spouse must file a financial affidavit. Financial affidavits are in-depth lists of each spouse’s income, expenses, assets, and liabilities. Occasionally, one spouse may attempt to hide assets on their affidavit to avoid having to share them with an ex-spouse. This occurrence may lead to several issues on the affidavit such as:

– Assets that are greatly undervalued.– Debts run up on credit cards with no supporting evidence.– Reported expenses that do not exist.– Reported gross income that does not match up with their payroll.– Monthly net deficits that do not result in building debts.

• For more information on financial affidavits, see the “Financial Side of Divorce.”

Common Methods of Hiding Assets


• There are several ways to hide assets and misrepresent income during a divorce. Here are some of the most common methods:

– Transferring assets to a separate account.– Transferring assets to a friend or relative.– Deflating income.– If the spouse is self-employed, he or she can write himself or herself lower

paychecks or manipulate the business ledgers to make it seem as though the business is not doing well.

– Overpaying the IRS or creditors.– Purchasing items that could be overlooked or undervalued.– Creating fake debt/overspending– Transferring stock.

How to Uncover Hidden Assets


• There are several methods to attempt to expose hidden or diverted assets/income. These methods include:

– Demands for production of financial documents: this is known as a “production request.” It is a formal document filed by one spouse with the court that contains a list of requested documents from the other spouse.

– Deposition: this is a court-sanctioned question and answer session. There are no judges present, but it provides an opportunity for one spouse to determine if the other is hiding assets by exposing inconsistencies.

– Requests for admission or denial of key financial facts: this puts a spouse on the spot to admit or deny a critical financial detail. If it is discovered that the spouse lied, they may have to pay certain attorney fees.

– Interrogatories: written questions directed towards a spouse in the hopes of uncovering financial information. The spouse has 30 days to respond to these questions, which need to be very specific in order to elicit helpful answers.

– Subpoenas requesting financial information from a third party, such as documents directed towards employer’s, financial institutions, medical providers, and businesses. Whoever receives a subpoena must provide the requested records.

Tax Considerations for Divorce


Tax Considerations for Divorce


• In general, alimony is taxable to the recipient spouse and tax deductible to the paying spouse.

– Sometimes paying or receiving alimony can put a paying or receiving ex-spouse in a different tax bracket, which results in a lower or higher income tax.

• Child support is tax free for purposes of federal income tax. Child support is also not tax-deductible for the spouse paying the support.

– Dependency exemption: the parent with the majority of custody is entitled to a dependency exemption for each child they support, which decreases their taxable income.

• With a qualified domestic relations order (QDRO), an ex-spouse can get a share of the working spouse’s retirement benefits without causing any taxable event or tax penalty.

• The transfer of one spouse’s interest in the marital home to the other is not taxable.

For more information, please review our separate tax-related matters presentation.

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