Minnesota Divorce and Family Law Blog

Taxable Alimony, Nontaxable Child Support

The tax consequences of child support and alimony (spousal maintenance) are different.  Child support has no tax consequences, which is to say that child support is not taxable to the recipient, and not deductible from the income of the payor.  Typically, however, spousal maintenance is taxable to the recipient, and deductible from the taxable income of the payor. 

If a court order provides for one party to pay child support of $1,500 per month, and maintenance of $750 per month, on paper that combines to be $2,250.  Assume that one's combined state and federal taxes are at a rate of 33% of total income.  Since the payor will save approximately $250 on taxes (due to deducting the $750 from taxable income) and the receiver will incur approximately $250 in taxes (due to including the $750 in taxable income), the net amount of the $2,250 in combined payments is closer to $2,000.

If the court order instead provides for the party to pay child support of $750 per month, and maintenance of $1,500 per month, on paper that combines to be the same $2,250.  But the net amount is closer to $1,750, due to the approximately $500 in tax on the $1,500 in maintenance.

Moreover, if the party paying the support and maintenance is in a higher tax bracket than the party receiving the payments, the parties can mutually enjoy a net benefit.  Assume that the payor is in a tax bracket that results in a 33% tax liability, and the receiver is in a tax bracket that results in a $20% tax liability.  In the first example above, if the payor saves $250 on tax, the net effect to the payor is a combined expense of $2,000.  At the same time, the receiver may incur tax of only $150, so that the net effect to the receiver is a combined receipt of $2,100.  Together, the parties save $100 per month in taxes.

The net benefit increases with the second example ($750 child support, $1,500 maintenance).  If the payor saves $500 on taxes, the net expense is $1,750.  But if the receiver incurs tax of only $300, the net receipt is $1,950.  Together, the parties save $200 per month in taxes. 

New Child Support Law Reduces Disputes About Parenting Time

The new Minnesota child support law that came into effect in January 2007 has helped to improve the dynamics between divorced, separated and unmarried parents.  In the past, a parent in the midst of a dispute with the other parents about visitation or parenting time might not want to agree to the other parent having more parenting time, because that might result in a lower amount of child support paid by the visiting parent.  Conversely, a parent in the midst of a child support dispute might insist on having more parenting time for the sake of paying lower child support. 

The new law encourages parents to keep separate the issues of the parenting schedule and the money.  Under the new law, there is no distinction in the child support obligation between a parent who sees the child(ren) eleven percent (11%) of the time and one who sees the child forty-four percent (44%) of the time.  Such a parent is given a break on their child support to reflect the time that the child is in that parent's care. 

If a parent sees the child less than ten percent (10%) of the time, there is no such reduction.  And if the parent sees the child more than forty-five percent (45%) of the time, both parents pay day-to-day expenses of the children, and a smaller amount of child support is transferred between the parents. 

Relatively few children have parents arguing about which kind of parenting schedule applies, i.e., whether it is 10%-or-less; 45%-or-more; or between 10% and 45%.  Consequently, fewer children suffer the conflict that results when parents squabble over "money for parenting time." 

Settlement Versus Trial

Why do some divorce and child custody cases settle out of court, and some cases have to go to trial?  There are many factors that determine whether a family law case will settle outside of court, the most important which involve the willingness of the parties to compromise, and the willingness of the attorneys for the parties to facilitate that compromise. 

Preparing for and proceeding with a family court trial is a long, expensive process.  If the parties are close to reaching an agreement, but are unable to arrive at the final stipulated terms, both parties are likely to spend more on the expense of going to trial than they would if they EACH accepted the other party's terms. 

Conversely, if the parties are not close to reaching an agreement, there most likely is a principal issue that needs to be addressed by the family court.  Examples are whether there should be any spousal maintenance at all; whether an antenuptial agreement is void or not; or whether a third party is entitled to visitation with a minor child. 

In the first example, the AMOUNT of spousal maintenance might be resolved by compromise, but only if both parties presume that there will be spousal maintenance.  Otherwise, the dispute about whether there should be spousal maintenance at all may need to be decided by the court.  In the second example, how to apply the terms of an antenuptial agreement can be negotiated and compromised.  But if there is a fundamental question about whether the antenuptial agreement is even valid or not, the family court may need to render a decision.  In the third example, discussions about a visitation schedule cannot take place if there is disagreement about who is entitled to have the court-ordered right to have the subject minor child in their care in the first place.

One key advantage to a settlement out of court is the fact that the parties have the final say in the terms of their divorce or child custody dispute, rather than the court.  In all likelihood, the parties will be assenting to a conclusion that is not as favorable as their best possible result in court.  But it may be worth avoiding the risk of going to court and not getting the best possible result.

Parenting Time Expeditor

A parenting time expeditor is a neutral third party who is brought on board after a custody arrangement or parenting plan is in place to assist parents with the parenting schedule. The family court appoints the parenting time expeditor, but in many cases, the court's appointment is a result of the agreement of the parents.

The parenting time expeditor (I've also seen it spelled expediter) can help in situations such as this: Mom is entitled to spend her birthday with the children. Dad is entitled to spend Memorial Day Weekend with the children. Once or twice every few years, Mom's birthday occurs during Memorial Day Weekend. The first time this occurs after the parents are no longer living together, the parents are at an impasse as to how they allocate their time with the children throughout the holiday weekend.

Before parenting time expeditors existed, parents in this situation might have to arrange a family court hearing before a judge if they were unable to reach agreement on the issue. With a parenting time expeditor involved, there can be a discussion at a conference table, and the parenting time expeditor can help facilitate an agreement, or even make a binding decision, to resolve the dispute.

I have served as a parenting time expeditor in the past, and often was able to handle the process by communicating with the parents by electronic mail. Handling things that way made the dispute resolution process even more time-efficient and less expensive than it would otherwise have been.

Most of the time the parenting time expeditor's services are paid for by the parents in equal shares. Many parents find it to be money well spent.

Child Custody: Where does the kid WANT to live?

If I had to name the question that comes up most often, it would be this one: how old does a child of divorced, separated or unmarried parents have to be to decide which parent the child wants to live with? In typical manner, the answer is not a simple one. There is no fixed age when a child celebrates a certain birthday and suddenly holds the trump card to influence a family court judge's decision regarding child custody. It is safe to say that a 3-year-old is too young to decide. And a 17-year-old with car keys and an attitude can wield a certain amount of control over where they spend the night.

It is the ages in the interim that make things more complicated. At some point between age three and seventeen, most youngsters gains sufficient maturity to express to a guardian ad litem or custody evaluator a preference to live with one or the other parent. The guardian ad litem or custody evaluator may pass that information on to the family court judge if it believed to be sufficiently reliable and not based on the undue influence of the "preferred parent." But that point in time is not the same for every child. Therefore, it is something that is considered on a case-by-case basis.

Moreover, in most cases, if the child expresses a reliable preference for one parent, there will be other factors that support placing the child in that parent's custody. The family court might be informed that the child has such a preference, but also that the "preferred parent" provides the child with a more stable home environment, has a significant other or extended family members with whom the child has a good relationship, and/or is more inclined to support the child's contact with the other parent.

That gives the family court impetus to award custody to the "preferred parent" without resorting to the child's preference as a basis for the custody decision. Family court authorities and children's therapists are loathe to place a custody decision on the shoulders of the subject child. A child custody arrangement is required by law to be based upon the child's best interests as a whole, and if at all possible, the family court will avoid rendering a custody decision that can be said to be based primarily on the child's preference.

Family Law Prologue

Greetings from St. Paul, Minnesota. Having returned to my office after a week away, this is my opportunity not only to dive back into working on divorce and family law cases, but also to dive into the world of blogging.

As a family law attorney, I spend a great deal of my time answering people's questions. That is an obvious and important part of rendering legal advice to a client in the midst of a divorce or child custody dispute, or arguing a case in family court. Other attorneys will often post questions on listserves that have recently popped up on the internet, and friends and family members will often pick my brain about family law issues that they have encountered, or just out of plain curiosity. This blog is meant to serve as a place to post questions and answers on important family law issues.

It is my hope that this blog will serve as a helpful resource on the subject of Minnesota divorce and family law. Please feel free to post a question (with due regard for the disclaimer on the sidebar) by clicking on the comments link below.