The Oregon Divorce Blog » Myths

Divorce Myths: Transferring Property On Divorce Will Create Income Tax Liability

C. Sean Stephens — Tue, 12 Apr 2011 00:23:56 +0000

In talking to Oregonians as part of my divorce law practice, I realized there is a lot of misinformation out there surrounding taxes and divorce. One “Divorce Myth” we come across is that there will be income tax consequences for transferring property from one spouse to the other at the time of divorce.

The transfer of property between spouses incident to divorce is treated for income tax purposes as if it was a gift. There are no income tax consequences to the transferring or receiving spouse, however, the recipient receives the property (appreciated stocks, real estate, etc.) at the transferor’s basis. So, the transferor and recipient would not pay income tax if appreciated stocks were transferred as part of a divorce settlement, but if the recipient sold them, the recipient could incur capital gains tax.

You should work with your lawyer and an experienced tax professional to make sure all of the tax consequences of your settlement or trial position are addressed. However, one thing you don’t have to worry about is income tax if you are the recipient of property.

Oregon’s Parenting Policy

C. Sean Stephens — Sun, 07 Feb 2010 22:35:10 +0000

When consulting with Oregon parents about parenting time and parenting plans, I get lots of questions about what kind of parenting time a judge might order. There is a lot of misinformation about what Judges do in setting or modifying parenting plans. A common concern I hear, even from very involved parents, is about loosing rights with the kids, or having very limited parenting time with their children. This has been made worse by some Oregon counties having restricted parenting plans posted as examples on their websites. It is actually the policy of the State of Oregon to provide substantial parenting time to good parents. ORS 107.101 provides that it is the policy of this state to:

(1) Assure minor children of frequent and continuing contact with parents who have shown the ability to act in the best interests of the child;

(2) Encourage such parents to share in the rights and responsibilities of raising their children after the parents have separated or dissolved their marriage;

(3) Encourage parents to develop their own parenting plan with the assistance of legal and mediation professionals, if necessary;

(4) Grant parents and courts the widest discretion in developing a parenting plan; and

(5) Consider the best interests of the child and the safety of the parties in developing a parenting plan.

Involved good parents should get substantial time with the children. If you have been a good involved parent and your ex is trying to limit your time, you should talk to an experienced family law attorney.

At what age can a child decide custody/parenting time?

Daniel Margolin — Thu, 04 Feb 2010 04:01:52 +0000

This is a trick question. There is no age at which a child can make these decisions, until he/she turns 18 and the court no longer has jurisdiction over them.

There are, however, a few methods by which a child can have input in the process. 1. An attorney can be appointed for the child. If the child is old enough, the attorney can advocate for the child’s wishes; 2. If there is a custody evaluation, the child will be interviewed and the evaluator may take the child’s views into account; 3. The child can testify in court. I never have children testify and am opposed to it. Judges do not want children to be involved in the process and it is generally thought that the less a child can be involved in the process, the better. That being said, an attorney can help a parent to advocate for their child’s wishes.

Divorce Myth: Oregon has common law marriage

C. Sean Stephens — Sun, 08 Nov 2009 05:10:30 +0000

As divorce lawyers based in Portland, Oregon, we get a surprising number of questions about common law marriage. Common law marriage is where a legal marriage is created without a marriage license or marriage ceremony. Usually the couple has to (1) live together for a significant period of time, (2) hold themselves out as a married couple, (3) and intend to be married. I am surprised by how many people believe Oregon has common law marriage. We don’t, hence the myth. If you live together in Oregon, to be married, you have to comply with the marriage statutes. A few states do allow for common law marriage. . Alabama, Colorado, Kansas, Rhode Island, South Carolina, Iowa, Montana, Oklahoma, Texas, and the District of Columbia recognize common-law marriages created within their borders.

Divorce Myth: Remaining Jointly Liable for a Mortage Loan Will Prevent Me From Getting A New Mortgage

C. Sean Stephens — Thu, 29 Oct 2009 03:58:52 +0000

One “Divorce Myth” we come across is the belief that if a spouse cannot remove you from a mortgage loan at the time of divorce, it will prevent you from obtaining a new loan. This is a divorce myth because it is a commonly held belief (even by some lawyers) and is completely false. In today’s real estate market and economy, more and more people are remaining on loans with an ex because the ex can’t refinance because of tightened lending standards and decreased home equity. There are some problems remaining joint on a loan with your ex if they have been or they may turn into a late payer. While your credit could be damaged if your ex doesn’t pay the loan timely, you should still be able to get a new mortgage loan if you would otherwise qualify to do so. HUD Document 4155 outlines the requirements for FHA underwriting in regards to excluding a joint mortgage from consideration on a new mortgage application. Per the HUD rules, for FHA transactions, joint mortgages can be excluded from consideration in a new credit application if:

(1) the divorce judgment contains a release of liability for the borrower or the assumption of liability by another party

(2) title has been transferred to another party

So what does this mean to divorcing parties with real estate? Try to get off the loan if your ex has a history of late payments or you expect a future of late payments. If you can’t get off the loan because your spouse can’t refinance, but he or she has good credit you expect to continue, insist on an indemnification clause, and don’t worry so much about being unable to get a new loan.

Facebook and Divorce

Daniel Margolin — Tue, 16 Jun 2009 15:02:09 +0000

Time magazine ran an article on the use of social networking sites like Facebook in divorce cases. The article can be reviewed here.
When going through a divorce or custody case it is very important to be careful about what is posted on social networking sites, in Twitter posts or in emails and letters sent to the other party. All of these can be used against the poster/sender in court. Also, scrutinizing the other party’s posts and correspondence can be very helpful in a case.
Stephens Margolin P.C. prides itself on keeping up with technology and its role in family law matters. For more information, contact the firm.

Dissatisfaction With Property Distribution in the Current Economy

Daniel Margolin — Thu, 11 Jun 2009 18:44:49 +0000

The New York Times published an article regarding a top London divorce attorney named Raymondy Tooth. The article describes how Mr. Tooth makes a living representing the wives of wealthy British men.
The article describes a case in which Mr. Tooth represented Ms. Myerson, whose husband was worth around $44 million at the time of the divorce. Ms. Myerson elected to take less than half of the assets in case and some properties, while Mr. Myerson received $21.7 million worth of stock in his investment fund. Mr. Myerson was very disappointed when, some months later, the global economic downturn reduced his stock holdings by 90%. He filed a petition with the court to overturn the property distribution and make his ex-wife return the property that she received. The court declined to do so.
Under Oregon law, property distributions in a divorce cannot be modified post-judgment, as opposed to support awards and custody/parenting time determinations. It is crucial to have competent legal counsel’s advice in deciding on a strategy for division of assets. Mr. Tooth considered the volatility of the market, while Mr. Myerson just looked at the bottom line, to his misfortune.
If you have questions about the division of assets and property awards in an Oregon divorce, contact Stephens Margolin P.C. for a consultation.

The house is mine, or is it?

Daniel Margolin — Wed, 10 Jun 2009 15:28:29 +0000

During initial consultations, a spouse often says to me “He/She signed the house over to me two years ago” or “The house is only in my name.” They expect that this means that they will be awarded the house free and clear and that the other spouse has no interest in the house. This is not true. ORS 107.105(f) provides, in part, as follows: “Subsequent to the filing of a petition for annulment or dissolution of marriage or separation, the rights of the parties in the marital assets shall be considered a species of coownership . . .” This means that regardless of whether a house is titled in only one spouse’s name either because it was purchased that way or because the other house signed a deed transferring ownership solely to the other spouse, the house is still a marital asset subject to equitable division. There are many factors that can play a role in the actual division of the property, including in whose name the house is titled, but that fact is not dispositive.

Modification of Spousal Support – Part 1 (a few thoughts)

Jon Berman — Tue, 14 Apr 2009 23:15:08 +0000

Though my girlfriend might be insulted to discover that my attention can, in fact, be diverted from the madness of college hoops in March, that’s exactly what happened last Saturday as I watched A.J. Price drain his forth 3-pointer of the game, sealing yet another Final Four berth for the Huskies. Let me clarify. First, though the Huskies of Washington put forth a valiant effort this year, I’m a UCONN man, so I’m talking about the Connecticut Huskies. Second, my attention was only diverted after UCONN took an insurmountable lead. Nevertheless, the clock was still ticking, and instead of watching the screen, I found myself staring at my french fries, contemplating something that I had just overheard at the table next to mine.

“I don’t know what to do… I won’t be able to make my spousal support payment this month… I feel horrible.” The man who spoke these words was well-dressed, middle-aged and an obvious sports fan. By all accounts, he was a “regular guy.” This does not surprise me, because if there is one near constant among family law matters it is this: folks don’t like paying spousal support.

The payment of any monthly obligation can be tedious; keeping up with consumer obligations (paying high interest credit cards), or even providing for more basic needs (paying the mortgage), is a dreary process which is constantly eating away at our disposable income. Nevertheless, whereas we have presumably derived some benefit from accruing consumer debt (e.g., the purchase of new clothes, an automobile, vacation, etc), and whereas we derive current and future benefits by making our monthly mortgage payment, there does not appear to be any comparable benefit derived from the payment of spousal support. This seemingly thankless obligation, coupled with the probability that the person to whom this obligation is owed is often someone who we may not particularly like very much, can make the payment of spousal support particularly loathsome.

And so this is exactly what struck me about the comment made by this “regular guy.” I got to thinking that, perhaps, for some, once the obligation to pay support has “sunk in”, and after the pain and hurt feelings associated with divorce have passed, the payment of spousal support may appear different to the person paying it then it once did. Perhaps the notion of helping out a former (or maybe even a current) loved one starts to feel pretty good.

The economy is clearly in bad shape and the downturn has affected everyone. While many companies are trying to avoid lay-offs by reducing employee salaries, other employers are having to take more drastic measures. For some, this means lay-offs and severance packages. For others, it means unemployment checks. Whatever the situation, for many, the economic downturn means a decrease in income.

Please continue to parts 2 and 3 of this post: Part 2 (http://oregondivorceblog.com/wordpress/?p=407); Part 3 (http://oregondivorceblog.com/wordpress/?p=409)

Divorce Myth: The Police Will Enforce My Parenting Plan

C. Sean Stephens — Sun, 11 Jan 2009 02:06:52 +0000

One “Divorce Myth” we come across is the belief that the police or sheriff will help with parenting time and custody disputes. We hear stories of parents who call the police if the other parent was late returning a child, only to be told that it is a “civil matter” and that they should call a lawyer. Some manage to convince an officer to do a “civil standby” where the officer is present, but the officer cannot forcibly retrieve the child without special permission from the court. The myth is that law enforcement will help enforce your parenting plan immediately. The reality is that no immediate remedy exists for parenting time violations, and law enforcement can only assist to return a child to the custodial parent with special permission from the court.

For the non-custodial parent, law enforcement won’t help. The non-custodial parent can file a motion and set a hearing for remedial contempt or for enforcement of parenting time, but weeks may pass before the court actually hears the matter.

Custodial parents can get law enforcement to retrieve a child, but they need a special order from the court called an “Order of Assistance.” ORS 107.437 allows a person entitled to custody parent to appear ex parte in a county:

In which a child is located if the person is entitled to the physical custody of the child under a valid and current order issued in this state; or
In which a valid and current foreign custody order has been filed with a petition.

A certified copy of the court order must be presented with the motion or petition. If the court finds that the applicant is entitled to physical custody under a valid and current order, and that the child is being withheld in substantial violation of the order the court may issue an order directing local law enforcement to use any reasonable means and force to deliver the child as directed by the court, including directing forcible entry into specified premises.

The Order of Assistance is a heavy handed remedy, and should not be used lightly, considering the impact on a child of being forcibly retrieved by police. However, it will get you the help of law enforcement in retrieving a child.