Author: Miod and Company

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Understanding the Hardship Deduction: What You Need to Know

Most parents will do anything they can to provide for their children. Many will even forgo their own wants and needs to ensure that their kids can eat well and live comfortably. That said, sometimes money gets tight. Maybe one of the kids recently underwent expensive surgery and the family is now drowning in medical bills. Maybe hours have been cut at work, and it’s just become incredibly difficult to keep up with California’s sky-high cost of living.

Depending on the nature of your hardship and your financial situation, you may qualify for the hardship deduction. As is laid out in California Family Code section 4059(e), hardships may be granted to a parent who can demonstrate a tangible financial need. The hardship deduction essentially reduces the amount of money a parent owes in child support

In this article, we will explore in greater detail what the hardship deduction entails and what exactly qualifies as a hardship.

What Qualifies as a Hardship?

The Code identifies several very specific cases in which a parent may qualify for the hardship deduction. It’s also worth noting that facing one of these hardships does not automatically qualify one for the deduction. Any party seeking a deduction must show evidence of need in court.

Qualifying hardships are:

  1. Extreme financial burden from health expenses. It doesn’t take much to start an unmanageable pile of medical bills. Just one severe illness or injury will do it. That said, a parent seeking the hardship deduction for significant health expenses must demonstrate not only the extent of the healthcare expenses but also that they are responsible for paying for such expenses.
  2. Living expenses accrued by the parent and the family with whom they presently reside. Living in California is quite costly, especially when you have to take into account the needs of two different families. A court may grant a hardship deduction if the parent can produce evidence of steep living expenses for the “natural or adopted children” for whom they are financially responsible and who presently live with them.

 

What Factors Will Be Taken into Account When Calculating Hardship?

The judge may take several factors into account when calculating hardship. These factors typically include:

  • The incomes of both parents. The judge will likely first examine the financial well-beings of both parents to get a clear picture of what needs must be met. The judge may start by looking at the total gross incomes of each party (that is, what they make before any taxes or deductions have been accounted for). Beyond that, the judge may also consider the requesting parent’s net disposable income after deductions have been factored into the equation.
  • The number of children. It only makes sense to take into account the number of children for whom a parent is responsible when making such a decision. The judge will likely consider children presently living with the payor (biological and adopted) and children living with the other parent for whom the payor is financially responsible.
  • Tax obligations. The judge will also consider the payor’s tax liability (before any deductions are applied) and how these tax obligations affect net income.

The Hardship Deduction: A Complicated Code That’s There to Help

At the end of the day, caring for children is an immense responsibility, whether those children live under your roof or not. The hardship deduction is in place to ensure that a parent’s financial needs are taken into account when calculating child support, while also ensuring that the parent pays what they are legally deemed to be capable of paying to promote the well-being of the children.

Have any questions about the hardship deduction? We are ready to answer!

Reach out to the experts at Miod today!

by Miod and Company Miod and Company No Comments

Rehabilitative Alimony vs Limited Duration Alimony: What’s the Difference?

Alimony, also known as spousal support, refers to a designated payment that one spouse must pay to the other while they are going through divorce proceedings or once their divorce has been finalized.

The amount of money that a party is required to pay is determined by the amount the spouse receiving payment needs in order to maintain their standard of living and the amount the other party is financially able to give.

There are a few different types of alimony that parties may pay after their divorce is finalized: permanent alimony, rehabilitative alimony, limited duration alimony, pendente lite alimony, and reimbursement alimony.

Oftentimes, it is easy for people to confuse rehabilitative alimony and limited duration alimony, because these payments are only required for a specific period of time.

Here are the key differences between these two types of alimony:

Rehabilitative Alimony

Rehabilitative alimony is a spousal payment that must be paid for a specific duration of time, after which the spouse receiving alimony can be reasonably expected to no longer need this support. 

A judge might require this type of alimony for a couple of reasons:

  • The party receiving alimony already has the job experience or education necessary to maintain their current standard of living after the duration of the rehabilitative period and needs time to find a job
  • The party receiving alimony plans to become self-supporting by the end of the rehabilitative period and needs time to complete training or an education program in order to find a job

For example, a spouse with a college education who becomes a stay-at-home parent after being a part of the workforce for several years may receive rehabilitative alimony for a few months while hunting for jobs.

When the judge awards this rehabilitative alimony, parties must provide a plan detailing the rehabilitative time frame and the steps that the receiving party will take in order to return to the workforce or become self-supporting during this time period.

Limited duration alimony

Like rehabilitative alimony, limited duration alimony is only required for a specific period of time. However, this type of alimony depends less on the receiving party to complete certain steps to re-enter the workforce and more on the conditions surrounding the marriage and the receiving party’s standard of living.

Judges typically award limited duration alimony when the parties involved were only married for a short period of time, so it is unwarranted for one spouse to pay alimony permanently.

This type of alimony typically must be paid for a duration established by a judge until the person receiving alimony remarries. If the receiving party significantly improves their earning capacity to the point where it would not be appropriate for them to receive alimony, the original payment amount for this arrangement might be modified by a judge.

Regardless of whether a party receives rehabilitative alimony or limited duration alimony, there is always a set period of time during which the receiving party has time to become self-sufficient.

by Miod and Company Miod and Company No Comments

How Financial Experts Help With Family Law Cases

In the event of a divorce, both parties will be impacted financially by the results of their cases. Financial experts can help make sure that each party has a favorable financial outcome during property division, alimony establishment, and any other stage of the divorce process that involves the finances of the involved parties.

Here are five ways that financial experts can help with family law cases:

1. Identifying assets

Financial experts are able to use their expertise and resources to determine whether or no particular assets should be considered marital or nonmarital assets.

This will help ensure that parties are not forced to divide and lose money on assets that are nonmarital.

2. Determining alimony and child support

While ultimately a judge will create any alimony or child support orders, financial experts can assist by determining the true income of both parties. Sometimes calculating income requires more than just tax returns or financial statements. 

Financial experts can gather the information necessary to calculate each party’s income and each party’s current standard of living so that a fair spousal or child support order can be established.

3. Valuing and dividing property and assets

There are some marital assets that are challenging to value and divide, like pensions and retirement or business goodwill.

In a divorce, involved parties are not always able to value and divide businesses as if the business is already dissolved or to determine how pensions should be calculated into future alimony payments. It can be complicated for people to make sure that the existing and future income from businesses is calculated correctly so that there is a fair division of assets and no double-dipping on either party’s end.

4. Assisting with trial

Financial matters within a divorce can be complicated. If a judge or members of a jury are not able to fully understand the financial information they are presented with while in court, it might not bode well for both parties in a divorce.  Financial experts can help structure and explain this financial information and any finance-related exhibits in a way that makes it clear for the attorneys, jury members, and the judge presiding over a family law case. They can also use their expertise to help attornies develop depositions and useful cross-examination questions when challenging their opponent’s financial expert.

5. Handling taxes

Financial experts like CPAs who are well versed in property tax laws can help make sure both parties are able to divide assets according to their best interests come tax season. These individuals can make sure that their party avoids tax-traps and negative tax-related consequences during property division.

If you need help with a family law case, do not underestimate just how valuable a financial expert can be for your case. From offering advice about retirement plans and taxes to helping determine fair alimony and child support payments, a financial expert can make a world of difference when it comes to the financial impact of your divorce.

by Miod and Company Miod and Company No Comments

How Financial Experts Help With Family Law Cases

In the event of a divorce, both parties will be impacted financially by the results of their cases. Financial experts can help make sure that each party has a favorable financial outcome during property division, alimony establishment, and any other stage of the divorce process that involves the finances of the involved parties.

Here are five ways that financial experts can help with family law cases:

1. Identifying assets

Financial experts are able to use their expertise and resources to determine whether or no particular assets should be considered marital or nonmarital assets.

This will help ensure that parties are not forced to divide and lose money on assets that are nonmarital.

2. Determining alimony and child support

While ultimately a judge will create any alimony or child support orders, financial experts can assist by determining the true income of both parties. Sometimes calculating income requires more than just tax returns or financial statements. 

Financial experts can gather the information necessary to calculate each party’s income and each party’s current standard of living so that a fair spousal or child support order can be established.

3. Valuing and dividing property and assets

There are some marital assets that are challenging to value and divide, like pensions and retirement or business goodwill.

In a divorce, involved parties are not always able to value and divide businesses as if the business is already dissolved or to determine how pensions should be calculated into future alimony payments. It can be complicated for people to make sure that the existing and future income from businesses is calculated correctly so that there is a fair division of assets and no double-dipping on either party’s end.

4. Assisting with trial

Financial matters within a divorce can be complicated. If a judge or members of a jury are not able to fully understand the financial information they are presented with while in court, it might not bode well for both parties in a divorce.  Financial experts can help structure and explain this financial information and any finance-related exhibits in a way that makes it clear for the attorneys, jury members, and the judge presiding over a family law case. They can also use their expertise to help attornies develop depositions and useful cross-examination questions when challenging their opponent’s financial expert.

5. Handling taxes

Financial experts like CPAs who are well versed in property tax laws can help make sure both parties are able to divide assets according to their best interests come tax season. These individuals can make sure that their party avoids tax-traps and negative tax-related consequences during property division.

If you need help with a family law case, do not underestimate just how valuable a financial expert can be for your case. From offering advice about retirement plans and taxes to helping determine fair alimony and child support payments, a financial expert can make a world of difference when it comes to the financial impact of your divorce.

by Miod and Company Miod and Company No Comments

How Marital Fraud Affects a Divorce Case

We hear the word fraud thrown around all the time when it comes to business and taxes. But what about when it happens within your own marriage? Fraud can play a huge role in divorce settlements. If you’re in the process of getting a divorce, this is definitely an issue you should keep in mind, and it’s more common than you probably think. In fact, the National Endowment for Financial Education has found that roughly one-third of couples who file for divorce engage in some sort of marital fraud. So what exactly does that mean, and how might it affect your divorce case? We’ll cover everything you need to know. 

What is Marital Fraud?

Marital fraud is a lot like business fraud– only it happens within a marriage. It most often involves lying about the value of or hiding assets, and in some cases, a family business also plays a role. Officially, three things must be evident in order to prove fraud: false representations by the party being accused of fraud, knowledge that these representations were false (or made with a lack of care for the truth), and an intent to make the other party act a certain way (or to make them not act a certain way). 

In the case of divorce, marital fraud is very common, because the spouse committing fraud has a lot to gain by shifting the divorce settlement to work in their favor. A deceitful spouse may hide assets in a secret bank account, sell assets at a low value and buy them back after the divorce, commit forgery, or commit tax, credit, loan, or insurance fraud. They may also manipulate the income and expenses of their business. This involves fraudulent behavior such as not disclosing cash sales or fabricating payroll entries to lie about their income. 

Marital Fraud’s Effect on a Divorce Case

Obviously, if your spouse is committing fraud against you, you’ll want to call them out and ensure that they face repercussions and you get all the value you deserve. However, it’s important to think about the overall effect this will have on your case– especially the cost and the amount of time it will take to get through. This all depends on the type of fraud at hand. Many are straightforward and won’t be too much of a hassle to investigate, but some types will take a very long time (multiple years!) and a ton of effort, which may be more of a headache than it’s worth. The process includes a great deal of case management, interviews, and gathering documents. Typically, the most involved investigations stem from more complicated fraud cases, like ones that involve a family business. Divorce is already an expensive and exhausting process, so you should consider how much your spouse’s fraud is costing you, as well as what you’re willing to go through to get that value back. You should also consider the amount of evidence available, and how likely it is that the fraud will actually be uncovered. Remember that it’s very possible that even after an investigation, you won’t recover the cost: while allegations of fraud are very common in divorce cases, evidence is only found 10% of the time. At the end of the day, investigating marital fraud often costs more than it’s worth– in money, time, and effort. 

If you do decide to go through with a fraud investigation in your divorce case, you should be sure to hire a good lawyer that knows a lot about financial valuation and classification. The investigation process involves the following: 

  • Detailed interviews with both spouses, any of their adult children, business employees, and any other relevant people. 
  • A flowchart of all the property you and your spouse have acquired throughout your marriage, which will show the sources of where money came from for all of it as well as any cash made from sales
  • Recovery of records and documents. These will include basic one like tax returns (which can actually be very helpful in the process) and financial statements, but smaller statements will be demanded as well for an in-depth analysis.
  • Lifestyle analyses based on this data
  • Research in public records
  • Subpoena to financial institutions
  • Depositions from the spouse and other relevant people

If it looks like this involves a lot of time, that’s because it does! But it could be worth it in the end. Many states have laws to control marital fraud that include huge rewards for the defrauded spouse, like a California law that awards an entire property to the defrauded spouse if they’ve been deprived of the property or rights. Many laws also include severe punishment for fraudulent behavior. It should be enough to keep anyone from attempting marital fraud. But, unfortunately, a spiteful spouse will always try their hand at twisting the divorce settlement, so it’s important to be aware of the risks at hand and to stay vigilant throughout your divorce case. Always have a good lawyer, keep an eye on the warning signs, and be prepared for the process.

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