ALIMONY REFORM

Alimony: Florida Statute 61.08 prior to 2012 Relied on case law to determine term of marriage 10 Factors Argued to determine amount Findings of facts needed to determine both

Alimony: Florida Statute 61.08 post 2012 (modified) Names specific types of alimony (temporary, bridge-the-gap, rehabilitative, durational and permanent) Can be paid periodically or by a lump sum, or both 10 Factors considered to determine type and amount

Florida Alimony Reform …Legislative Battle Begins 2013 – SB/HB included different types of alimony, but eliminated permanent alimony. – Vetoed (retroactivity) 2014 – No statute proposed – election year. 2015 – Alimony types eliminated. Formula presented. SB/HB was same, but for SB adding equal time-sharing. Never agreed never made it to Governor for signing. 2016 – Same language as submitted in 2015 with equal time-sharing language – Vetoed (equal timesharing language)

Governor Scott’s Letter April 15, 2016 (Veto of SB 668)

Proposed Formula Language highlights Amount: Low End (0.015 x years of marriage) x difference between monthly gross incomes of the parties High End (0.020 x years of marriage) x difference between monthly gross incomes of the parties Duration: Low End 0.25 x years of marriage High End 0.75 x the years of marriage –This calculation is based on PROPOSED legislation in 2017. It is NOT CURRENT LAW –If years of marriage is 20 years or more, the “years of marriage” shall be 20 years –––If alimony is awarded at 50% or less of the length of the marriage, use the actual years of marriage, up to a maximum of 25 years, to calculate the high end –Marriages 2 years or less – presumption = NO alimony –Alimony & child support award cannot constitute more than 55% of payor’s NET income

Florida Alimony Reform in 2017 SB 412/HB 283 Mirror Image Bills Same as 2015 with equal time-sharing language Chair of Senate Children, Families and Elders not interested in hearing

Future of Alimony Reform Will be back Talk of possible economic studies on the sociological effect of alimony reform. (Gubernatorial Commission)

2017 Tax Cuts and Jobs act – h.r. 1 As of JANUARY 1st, 2019 - Alimony payments will NO longer be deductible 26 U.S. Code Section 215 allows the alimony payment deduction. Section 11051 of the Tax Cuts and Jobs Act repeals the deduction for alimony payments by striking this section

If a marital settlement agreement is entered on December 12th 2018 and the final judgment is entered January 6th 2019, is the alimony deductible?

NO! It is not tax deductible unless an order ratifying the marital settlement agreement was entered prior to January 1st 2019.

Section 11051. Repeal of Deduction for Alimony Payments (c) Effective Date. – The amendments made by this section shall apply to – 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 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.

26 U.S. Code Section 71 – Alimony and separate maintenance payments General Rule. Gross income includes amounts received as alimony or separate maintenance payments. Alimony or separate maintenance payments defined. For purposes of this section- In general The term “alimony or separate maintenance payment” means any payment in cash if – Such payment is receive by (or on behalf of) a spouse under a divorce or separation instrument. The divorce or separation instrument does not designate such payment as a payment which is not includible in gross income under this section and not allowable as a deduction under section 215, In the case of an individual legally separated from his spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made, and There is no liability to make any such payment for a period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse. Divorce or separation instrument. The term divorce or separation instrument means – A decree of divorce or separate maintenance or a written instrument incident to such a decree, A written separation agreement, or A decree (not described in subparagraph (a)) requiring a spouse to make payments for the support or maintenance of the other spouse.

Flash to the future Wilma and Fred get divorced on April 1st, 2018. Fred is paying alimony to Wilma, but luckily got his final judgment entered prior to January 1st, 2019 so it is deductible to him. Fortunately, or unfortunately, for Fred he makes foreman for the rock quarry in 2020 and gets a big raise. Wilma’s friend Betty tells her that Barney (her husband) told her that Fred is making “big stone” at his new job. Betty tells Wilma that she should call attorney Diamond Ruble to ask for more money from Fred. If Diamond Ruble files a Supplemental Petition for Modification and gets more money for Wilma, will the higher amount still be deductible to Fred even though it is after January 1st, 2019?

Yes! If the Final Judgment of Dissolution of Marriage is entered prior to January 1st, 2019 then future modifications should be construed under the tax law prior to January 1st, 2019.

Temporary Order made permanent If a temporary order on alimony is entered prior to January 1st, 2019 and that order is made permanent after January 1st, 2019 is the alimony deductible?

?

Tip: Put language in your agreement and financial judgments that state any modifications are based on the tax law prior to the tax cut and job act of 2017. Make it clear that the tax cut and job act of 2017 DOES NOT apply to modifications in this agreement, final judgment or order.

The overall effect of the tax cut and job act of 2017 is an overall reduction of cashflow to both the payor and the receiver of alimony.