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<xTITLE>Don’t Dread Divorces this December</xTITLE>

Don’t Dread Divorces this December

by John Fiske
October 2018 John Fiske

Thanks to the 2017 federal Tax Cuts and Jobs Act of 2017, (“TCAJA”), divorce lawyers and mediators know that December will be a busy time and some of us may be working right up to the close of the courthouse on Monday, December 31st.   Under the TCAJA the alimony exclusion has been repealed for all separation agreements executed after this December (technically you could say the alimony exclusion is suspended, because the TCAJA repeal expires on December 31, 2025). We can only imagine the conversations we will be having in December with clients who call us looking for a divorce and learn they have less than a month to write a separation agreement if they want to preserve the ability of the payor of alimony to exclude the payments from his or her taxable income.  This article prescribes aspirin and a possible solution.

What if we could write a simple “placeholder” Separation Agreement to be executed before the end of this December, wherein one or both spouses agree to pay a defined amount a month to the other as alimony subject to an agreement of modification which defines all the terms of their divorce, including the alimony agreement, in a Separation Agreement to be filed in court in 2019 for approval? How can this be?

Section 11051 of the TCAJA reads in its entirety as follows: “(c) EFFECTIVE DATE.—The amendments made by this section shall apply to (1) any divorce or separation instrument (as defined in section 71(b)(2) of the Internal Revenue  Code of 1986 as in effect before the date of the enactment of this Act) executed after December 31, 2018, and (2) any divorce or separation instrument (as so defined) executed on or before such date and modified after such date if the modification expressly provides that the amendments made by this section apply to such modification.”

A divorce or separation instrument is defined as “(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree, (B) a written separation agreement, or (C) a decree (not described in subparagraph (A)) requiring a spouse to make payments for the support or maintenance of the other spouse.” Since Section 11051 states that any divorce or separation instrument executed before December 31, 2018 is not affected by TCAJA and such an Agreement may be modified after that date, all that is needed is the signed Separation Agreement.

So the clear language of TCAJA does not require court approval or a divorce filing in court before December 31, 2018 if you have a written separation agreement that preserves the alimony exclusion. This step appears to satisfy the federal statute and gives the clients time to work out a sensible Separation Agreement without ruining their holidays or yours.   Based on this analysis I will be suggesting to my mediating clients Bill and Sally that if they want to have taxable and excludable alimony in their Agreement they consider writing a simple divorce or separation instrument and execute it before the end of December, 2018. A divorce instrument which contains the following sentence should be sufficient to satisfy the requirement of the TCAJA:

“SEPARATION AGREEMENT UNDER TCAJA SECTION 11051

On or before the first day of each month after the date of this Agreement Bill shall pay Sally one third of the difference in our incomes during the prior calendar year or $10.00, whichever is greater. Such payment shall be considered alimony excludable by him and taxable to her for federal and state income tax purposes. Such obligation shall terminate upon the first to occur of the death or legal remarriage of Sally or  …(a date specified in accordance with Mass. G.L. c. 208 section 53). If we do not have the time or readiness to provide any further provisions in our Separation Agreement before December 31, 2018 we shall modify this Agreement as soon as we agree on such terms and provisions after January 1, 2019 and until such modification this Separation Agreement shall remain in full force and in effect.”

Dear reader, you should feel free to adapt and improve upon this language as you wish, and sleep better knowing that your clients need not take away any remaining holiday spirit and activities in order to rush to sign much more than this simple paragraph before the end of 2018.

Biography


Partner in Healy, Lund and Fiske, now Healy, Fiske, Richmond, & Matthew, since September 1, 1979. From being lawyer and mediator about half and half in the beginning, I am now about 99% mediator and 1% lawyer. I also conduct mediation trainings.

My wife and I took our 3 children, ages 17, 14 and 12, out of school in June, 1978 and we bicycled through Europe and backpacked in Asia for a year, deciding in about April 1979 that when we returned to Boston I would become a divorce mediator. Back home I started  talking to judges, lawyers, therapists, ministers, teachers and anyone who would listen. People thought I was a meditator because no one knew what mediation was, back then. When I said, "I help couples sit and talk and listen to each other and get divorced peacefully," the almost universal response was "That makes so much sense."  Harvard Law School Professor Frank Sander said, "You are riding the crest of a wave, but don't give up your day job."

A Massachusetts probate judge, the late Sheila McGovern, recommended I join the law firm of Healy and Lund. Regina Healy and Diane Lund did what she said, and they changed the name of the firm to Healy, Lund and Fiske. They taught me family law and I taught them mediation. Probate Judge Edward M. Ginsburg believed in the process and sent cases to me. My first mediation began with the wife addressing her husband, their two lawyers and me: "We understand we are some sort of experiment!"

After two years of mediating divorces I had my first mediation training when John Haynes and Steve Erickson came to Worcester. Then Margaret Shaw joined with the Mass. Bar Association in 1985 to provide more divorce mediation training, and Chris Moore did the same in 1987. Diane Neumann, Phil Woodbury and I founded Divorce Mediation Training Associates in 1988 and we have been training people in divorce mediation ever since.  

I have probably mediated about 2,000 divorces, separations and contracts to stay married since 1979. In response to requests from families I have expanded my mediation practice to include a broad range of disputes, from siblings trying to decide questions of care of a relative to a father and son reaching a financial agreement. I have volunteered my services as a mediator to my town government: in one case I helped to resolve a dispute between citizens and a town official. The point: mediation is a creative, efficient process for addressing  human conflict. You get a place to talk. You stay in charge of your life.



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