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Divorce: Savings & Retirement- Alimony Considerations

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At some point in the difficult divorce process you will be asked to fill out a CIS (Case Information Statement).

Divorce-Savings Consideration

The CIS is a financial disclosure document which, among other things, establishes your standard of living while married.

Schedule C of the CIS has a line where you put your historical savings/investments. Although the CIS shows monthly expenses (assuming 4.3 week/mo.), simply take your annual savings and divide by 52 and multiply by 4.3. Many people fund their retirement plans once a year, so it’s easy to forget this when filling out the form.

This includes all savings, not only what you may be contributing to your 401K or another pension plan. It also includes IRAs, Sec. 529 Plans, and non-retirement related investments.

Although this has been a long-established principle, it recently grabbed the attention of the legal community and the forensic CPAs who assist them. On September 12, 2016, the N.J. Appellate Division issued a ruling in the matter of Lombardi v. Lombardi.

The Court ruled:

It is well-established that the accumulation of reasonable savings should be included in alimony to protect the supported spouse against the loss of alimony…

We disagree with the court’s decision and hold that regular savings must be considered in a determination of alimony (emphasis added), even when there is no need to create savings to protect the future payment of alimony.

The decision is a good reminder that when meeting with your attorney it’s imperative to tell him/her about the pattern of savings you enjoyed during the marriage. If you have access to monthly or year-end statements from financial institutions holding your money, make sure you give them to your attorney.

Urbach & Avraham has almost a thirty-year history of providing attorneys and their clients tax, forensic, and other advice in current or post-divorce matters. Feel free to call or email if you have any questions.

Hot Savings for New Jersey Employers August Deadline to Reduce SUI Rates

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Did you check your NJ SUI rates?

Over the last few weeks, all New Jersey employers received a Notice of Employer Contribution Rates.  This is not a bill, but rather a summary of the manner in which the NJ Department of Labor calculates the employer contribution rate for unemployment and disability.  This form enables you to determine whether a voluntary contribution would save you money in the subsequent year. 

 Can I reduce the NJ SUI rate?

A voluntary contribution increases the reserve balance and may reduce your contribution rate.   Each employer should calculate the amount of the voluntary contribution required to reduce the rate.  The required voluntary payment should be compared to the savings realized from a lower rate. 

The unemployment expense is a substantial component of your labor cost. Business owners should give it careful attention. If you wish to make a voluntary contribution to your reserve balance you only have 30 days from the notification date (July 27, 2016) to do so. We recommend that you verify all the NJ DOL calculations including the amount of the employer contributions and the benefits charged to your account.  Report any discrepancies to the NJ Dept. of Labor. 

By making a voluntary payment, employers may reduce the NJ SUI rate for the coming year.  Please be aware that this payment increases your reserve balance and helps reduce the NJ SUI rate in future years as well.  

If you would like assistance in determining if a voluntary contribution will save you money, please do not hesitate to contact us immediately. We will provide you with an illustration of the benefits which you stand to reap from making such a contribution. Within the 30 day period you will be able to weigh the considerations and act accordingly.

NJ Alimony Duration Based On More Than Length Of Marriage

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A New Jersey Supreme Court ruling has provided much-needed guidance on determining the issues to be considered when a spouse in a divorce case requests alimony.

Divorcing Issues

This recent July 29, 2015  ruling applies to divorce filings prior to September 2014. Subsequent filings for divorce are subject to the NJ Alimony Reform bill (A845) as reported on our blog NJ Alimony Reform

In Elizabeth Gnall v. James Gnall (A-52-13) (073321), the state’s high court ruled that the length of a marriage is not the sole factor in deciding whether a spouse should get permanent alimony or limited-duration alimony.

 Here’s What Happened

The Gnalls were married for almost 15 years – with three children and substantial assets – when Elizabeth, who left her job as a computer programmer to care for their children, filed for divorce. James, the sole wage earner, earned more than $1 million a year as CFO of Deutsche Bank’s America Financial Group.

Following an initial trial court decision awarding Elizabeth limited duration alimony of $18,000 per month for 11 years, Elizabeth appealed. She requested permanent alimony, citing the length of the marriage and her diminished employability.

The Appellate Division reversed the trial court, ruling that a 15-year marriage is not short term and that an award of permanent alimony should be considered.

But the State Supreme Court said both lower courts got it wrong because they fixated on the length of the marriage. Instead, said the Supreme Court justices, NJ law (N.J.S.A 2A:34-23) requires that all thirteen statutory factors must be considered and given due weight.

 So What Does This Mean for Me?

Be aware that the length of your marriage will not be the sole determinant of the duration of the alimony you may receive. Among the factors the court will also consider are:

 

  • The actual need (of the recipient party) and ability of the parties to pay; 
  • The age, physical and emotional health of the parties; 
  • The standard of living established in the marriage ; 
  • The earning capacities, educational levels, and employability of the parties; 
  • The length of absence from the job market of the party seeking maintenance; 
  • The parental responsibilities for the children; 
  • The time and expense necessary to acquire sufficient education or training 
  • The availability of the training and employment;

Hot Savings – Reduce NJ SUI Rates in August

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What’s my New Rate?

In July all New Jersey employers received a Notice of Employer Contribution Rates.  This is not a bill, but rather a summary of the manner in which the NJ Department of Labor calculates your employer contribution rate for unemployment and disability.  This form enables you to determine whether a voluntary contribution would save you money in the subsequent year.  A voluntary contribution increases the reserve balance and may reduce your contribution rate.  In many circumstances a voluntary contribution represents an excellent opportunity to reduce labor costs. 

The Clock is Ticking

The unemployment expense is a substantial component of your labor cost. Staffing agencies should give it careful attention. If you wish to make a voluntary contributionto your reserve balance you have 30 days from the notification date to do so. In addition, we suggest that you verify the amount of the employer contributions and the benefits charged to your account.  Report any discrepancies to the NJ Dept. of Labor.

 Won’t my Payroll Company Take Care of This?

Outside payroll services generally don’t test the new rates for cost saving opportunities. We can assist you in determining if a voluntary contribution makes sense for you. We can provide you with an illustration of the benefits you stand to reap from making such a contribution. You will be able to weigh the considerations and act accordingly. 

 

 

 

Foreign Bank Account Report- Due June 30

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Got Unreported Assets Overseas? The Clock is Ticking

Foreign Bank Account Reporting (FBAR) Deadline June 30, 2015

Did Grandpa leave you his foreign bank account when he passed away? If you have foreign bank accounts holding more than $10,000 in the aggregate anytime during 2014, you are required to file an FBAR (Report of Foreign Bank Accounts) by June 30th (the 2014 FBAR must be received by the IRS by June 30, 2015). It doesn’t matter whether the foreign accounts generate income or not; just owning them, or having signature authority, requires you to file. There is NO extension to file the FBAR.

What’s the big deal?

Failure to file can result in serious consequences. The sanctions for not completing the FBAR include numerous severe civil penalties and potential prosecution followed by a term in federal prison.

What are your options for prior years?

No longer does one size fit all. Under the “Offshore Voluntary Disclosure Program” (OVDP), taxpayers must file 8 years of amended tax returns and FBARs and pay the additional income tax, penalties and interest as well as a 27.5% “FBAR-related” penalty on the highest balance of their foreign assets in the 8 year period. In June 2014 the IRS announced major changes to the program. Taxpayers who did not report foreign income or assets but whose non-compliance was “non-willful”, do not need to enter the OVDP, but can participate in the Streamlined Filing Compliance Procedures (“SFCP”) by filing only 3 years amended returns and 6 years of FBARs. No income tax penalty and only a 5% “FBAR-related” penalty are due. Under the new rules, any taxpayer seeking to participate in the OVDP, who at any point in the 8 year look back period had an account at a bank which has been publically identified as a target of an IRS criminal tax investigation or as having reached a non- prosecution agreement with the IRS, will be subject to a FBAR penalty of 50% (not 27.5%) on all foreign accounts and assets. Close to 100 Swiss banks are currently negotiating to enter into Non-Prosecution Agreements with the IRS, so the risk of facing a 50% penalty is growing.

We work with several law firms who specialize in this area and help their clients navigate the intricacies of the Voluntary Disclosure Program. For a summary of the Foreign Asset Reporting Requirements please click here: Foreign Asset Reporting . For assistance with your FBAR or entering the OVDP, please contact our Tax Manager, Steven Citron.