The prince ran off with his secretary.  The princess sued him for divorce based on adultery and desertion.   She got custody, child support, alimony, lawyer fees, the castle and half the kingdom.  And then they lived happily ever after.

Although President Obama promises taxes will be lower for 95% of taxpayers, a question I get from time to time is, “Can I save taxes by getting a divorce and just living together?”

Many two-income family taxpayers pay more taxes as a married couple than they would by filing separate tax returns as single individuals.  That’s called the marriage penalty.

The answer is you might save a little bit on taxes, but how much will a divorce cost you, both in terms of dollars and the good will of your spouse?

First, Congress has eliminated the marriage penalty for married couples making less than $132,000 and roughly equal incomes.

If a married couple earns $150,000, with equal incomes and a standard deduction, the marriage penalty is $500.

If they earn $200,000 under the same circumstances, they will pay a marriage penalty of about $787.

And there are other financial benefits to staying married, including inheritance taxes, insurance and Social Security, that you would lose if you got a divorce.  Finally, if you divorce in one year and remarry in the next, the IRS may disregard the divorce and require you to file as married anyway.

Source:  Post by Sue Shellenbarger

In Lee v. Andochick, discussed in “Going Broke on 1.76 Million a Year”, the Maryland Court of Special Appeals reversed a $10,000 a month alimony award because the numbers just didn’t add up.  But the Court also found the trial judge erred in awarding indefinite alimony on the basis of unconscionable disparity.

Section 11-106(c)(2) of the Maryland Family Law Article provides that alimony may be awarded indefinitely if the court finds that even after the party seeking alimony will have made as much progress of  becoming self-supporting as can reasonably be expected, the respective standards of living of the parties will be unconscionably disparate.

Mr. Lee made $1,760,282 and Dr. Andochick made $267,000 in 2006.  But the appeals court said a disparity in income is not the same as a disparity in standards of living.

Dr. Andochick, the court said, did not explain or prove how her standard of living would be unconscionably disparate from Mr.  Lee’s if she did not receive alimony.  The court also said the trial judge did not discuss his analysis of why the respective standards of living of the parties would be unconscionably disparate.  Therefore the case was sent back to the trial judge to make further findings.

If you think that money buys happiness, or a little more money will solve your problems, I can assure you that more money will bring a whole new set of problems into your life.

Just ask Keith Lee and Lori Andochick of Frederick County, Maryland, who married in 1993, separated in 2004 and were divorced in 2007.   As a partner in the investment firm of Brown Capital of Baltimore, Maryland, Mr. Lee made $1,760,282 in 2006.  Dr. Andochick, a dentist, made $267,000 that year.

The Court awarded Dr. Andochick $10,000 a month in spousal support, $15,000 a month in child support for their two children, $2,200 a month in other costs for the children, a monetary award payable at $250,000 a year for five years and attorney fees.

Mr. Lee appealed the alimony award.  The Court of Special Appeals reversed the case.  The Court calculated the annual numbers on Mr. Lee like this:

Gross Income                         $1,760.282
Less Taxes                                ($762,282)
Less Debt Obligations             ($636,588)
Child Support and Alimony*  ($278,400)
Monetary Award                      ($250,000)

Total                                         ($166,988)

In other words, Mr. Lee would have had to borrow about $167,000 a year just to make ends meet and even then he would have nothing left over for food and personal expenses.  The Appeals Court found that the trial judge “did not do the math”.

* see comments

On the twelfth day of Christmas
The Good Court gave to me:
Twelve Years of Alimony
Eleven Grand for Attorneys
Ten Shares of Stock
Nine Options Vesting
Eight Years of Child Support
Seven Rooms of Furniture
Six Sets of China
Five Golden Rings
Four QDRO’s
Three Bank Accounts
Two Used Cars
and Half of the Remaining Equity.

?Which strategies do people and their lawyers employ during divorces? There are only two social strategies that human beings use, according to Herb Guggenheim writing for CapitalM, the local Mensa newsletter. Those strategies are:

1. Reciprocal Altruism.

This approach is based on the idea that if you do kind things for other people, they will do kind things for you. It is the psychological equivalent of the Golden Rule, that is do unto others that which you would have them do unto you. It is the American cliche, “You pat my back and I’ll pat yours.” It is the French saying, “You send the elevator up to me and I’ll send it back down to you.”

2. I’m Only in It for Myself.

These people see the world as a hostile place. It is dog eat dog. Only the strong survive. These social Darwinist believe that while the inferior, weak people are busy being nice to each other, they will swoop down and take what they want, when they want, no matter what the consequences may be.

If both parties use Reciprocal Altruism, the divorce can be settled rather handily. If both are using I’m Only in It for Myself, then it seems they are destined to have a long and costly litigation. What happens if they are each using a different strategy? It seems to me, the I’m Only in It for Myself strategist will walk all over the Reciprocal Altruism strategist and end up with the better part of the marital estate. Guggenheim says, that while he can sleep better at night as a Reciprocal Altruist, it is his observation that people who take what they want seldom suffer for it.

Perhaps the best strategy is a blend of both. Focus on what you want and ask for it. Be polite but firm in the asking — an iron fist in a velvet glove. Like the Eagle on the Quarter, hold out the olive branch in one hand (settlement) and the arrows in the other (litigation). Then your spouse can decide which strategy it is going to be.

TGC Attorney, Nelson Garcia, appeared on WUSA TV Channel 9 News yesterday to discuss the Christie Brinkley vs. Peter Cook divorce case with Derrick McGinty. “Being a bad spouse,” Nelson said, “doesn’t necessarily make you a bad father. The judge has to consider parenting skills, not marital misconduct, in determining what’s in the best interests of the children.”

It all started over dinner at the Isla Del Sol yachting club in St. Petersburg, Florida, according to John Barry at TampaBay.Com. Bob Luzenberg was having dinner with his second wife. Marlene Forand was their waiter. Bob came back a few nights later without the wife, said he was soon to be divorced. He told her he was an inventor with patents. Marlene was a licensed practical nurse, but she said if he could make something, she could market it. Bob Luzenberg and Marlene Forand got married in 1984.

Their businesses together prospered, but their marriage did not. Their divorce started in 1995. They’re still fighting over the money in court. They’ve run through 10 judges and 16 lawyers and their courthouse files fill 13 volumes.

The Florida divorce judge ordered Bob to pay Marlene a lump sum of $240,000, permanent alimony of $6,000 a month, medical insurance of $500 a month, 29 percent of Bob’s interest in a company called World Drink USA, and half of Bob’s interest in seven other companies, half interest in all of Bob’s patents, and all of Marlene’s attorney’s fees.

But Bob moved to Alabama, and when Marlene finally got him to pay over $200,000 in 2003, she netted only $80,000 after attorney fees. She has now fired her attorneys and is representing herself.

As Marlene has discovered the hard way, getting a judgment is not the same as getting the cash. You become a judgment creditor and can use the tools of the court to collect your judgment like attachment of assets and garnishment of wages. But if your spouse is unemployed or without assets, he is said to be judgment proof and you can’t collect. I wish I had a nickel for every noncollectable judgment in my file cabinet.

The IRS said audits for last year rose 7 percent for individuals, 14 percent for taxpayers earning more than $100,000, and 30 percent for those making $200,000 or more according to this article. Millionaires had a 1 in 11 chance of losing at audit roulette.

A test to see if divorced couples were correctly reporting alimony in California concluded that 40 percent of the taxpayers flubbed it, usually over several years. On average, they owed the state an additional $5,800 — and that was just tab before the IRS was notified.

Auditors commonly found recipients of alimony and family support failed to report it as income. Meanwhile, the spouses cutting checks often wrote off alimony that the divorce decree stipulated was neither taxable nor deductible, or erroneously deducted child-support payments.

Alimony in Maryland terminates automatically on remarriage, but not on cohabitation, unless the parties agree otherwise. There are various ways to “agree otherwise”. Here are some sample cohabitation clauses from the case of Gordon v. Gordon, 342 Md. 294, 301-303 (Md. 1996).

1. This is the clause that was in dispute in the Gordon case:

Husband shall pay to Wife as alimony the sum of $ 6,000 per month in advance, commencing on the first day of December, and continuing on the first day of each and every month thereafter. The said payments shall terminate upon the death of the Husband, the death of the Wife, the remarriage of the Wife, or at such time as the Wife reaches the age of 59 1/2, whichever first occurs. The said payments shall also terminate in the event the Wife resides with any unrelated man without the benefit of marriage for a period continuing for beyond sixty (60) consecutive days.

2. This clause defines remarriage to include cohabitation:

For the purposes of this agreement the term “remarriage of the Wife” shall be defined as either a ceremonial civil or religious marriage or a situation whereby the wife habitually and continuously resides with another man without benefit of a marriage ceremony for a period of 120 days consecutively or 120 days cumulatively within a sixteen-month period.

S. SCHLISSEL, 2 SEPARATION AGREEMENTS AND MARITAL CONTRACTS § 19.28, at 511 (1986 & 1992 Cum. Supp.).

3. Cohabitation as a separate terminating event:

The payor shall pay to the payee, for her support, maintenance, or alimony, the sum of dollars per week, until the death of either party, or the remarriage of the payee, or the payee’s cohabitation with another person, whichever event shall first occur. For the purposes of this Agreement, the term “cohabitation” includes any shared occupancy of a dwelling, whether or not the occupants engage in sexual relations.

A. LINDEY & L. PARLEY, 1 LINDEY ON SEPARATION AGREEMENTS AND ANTENUPTIAL CONTRACTS 15A-6 (1995) (Form 15A.05) (emphasis added). See also S. GREEN & J. LONG, MARRIAGE AND FAMILY LAW AGREEMENTS 372-73 (1984 & 1994 Cum. Supp.) (Appendix 3).

4. Another example:

Support shall continue until the death of the husband, the death of the Wife, her remarriage, or her cohabitation with another person with whom she has a romantic relationship.

5. Requiring a financial relationship between the cohabitants as a condition for terminating support:

The Wife shall also be deemed to have remarried for the purpose of this Article if she shall live with an unrelated adult male to whom she is not legally married in the same abode in a situation where the parties are, in effect, living as Husband and Wife and the unrelated adult male should be supporting, or contributing to the support, of the Wife.

SCHLISSEL, supra, § 19.31, at 513.

6. Requiring a common residence for a specific length of time to establish cohabitation:

Remarriage shall be defined so as to include her cohabitation or residing with an unrelated male for either thirty (30) consecutive days or ninety (90) days in any one hundred eighty (180) day period.

TURNBULL & WASE, supra, at 256.

Even when you have a cohabitation clause, disputes can still arise. In the Gordon case, the wife lived with another man for 60 days, but the court of appeals sent the case back to the trial court to determine if that was really cohabitation or not.