In many respects, the outcome of a divorce can feel entirely out of your control. You can’t make your ex be reasonable, agreeable, transparent—any of the qualities that would help make separation easier. You also can’t avoid the anger, sadness, depression and other emotions that accompany the end of a significant relationship. 

But what you can do is understand your rights, select the best partners and experts to support you on this journey, and weigh your options carefully in pursuing a resolution that gives you the best psychological, economic, social, and familial outcomes possible. 

Practice Self Care

Navigating a high-asset divorce can often feel like wandering through a rich and well-stocked bookshop. No matter who you talk to or which book you pull off the shelf, you get another piece of advice, some of which seems to contradict what you heard or read before. Short of reading every volume or talking to every divorce attorney, it can be hard to know when you’ve addressed the issues most important to you and your particular situation.

But knowledge is power, and when it’s time for you and your spouse to go your separate ways, it can save a lot of time, money, and headache to reflect on these six elements of a divorce and how they impact wealthy families.

Child Custody: Strive for Honesty and Flexibility

We’re lawyers. We have to start a blog post answering whether you have to pay income tax on alimony with a caveat. So, for the record, the answer is complicated and may change at any time. Thank you for your patience. Now that we have that out of the way, let’s take a look at why it is so complicated, and how you can know, right now, whether you will have to pay income tax on alimony (known as spousal support in California) payments.

Before we begin, you may want to open a second link to the Tax Cuts and Jobs Act (TCJA), a piece of legislation that went into effect in 2018 (and really affected divorcing couples starting in 2019). Not interested in reading the fine print of federal legislation? We do not blame you, but that is exactly why this question, “Do you have to pay income tax on alimony?” gets so complicated.

A Shifting Federal Tax Landscape

On the playground, our relationships with one another are guided by the Golden Rule: Do unto others as you would have them do unto you. This is where we learned to take turns with the jump rope, to push each other on the swings, and to jump off the slide when we reached the bottom to make room for the next kid.

In a marriage in California, however, we are held to an even higher standard than that of the Golden Rule: that of a fiduciary. Being a fiduciary to your spouse brings with it a moral, ethical, and legal obligation to act in good faith, to ensure fair dealing, and to avoid taking unfair advantage of the other. It is a heavy responsibility that impacts all elements of the relationship: the documents you keep, the information you share, and the choices you make.

In most cases, a rule like fiduciary duty only takes center stage when it has been broken. So what does a breach of fiduciary duty mean under California Family Law? Let’s take a closer look at when this duty applies, what it covers, and the penalties that exist under California law to hold spouses accountable to one another—both during the marriage and while separated.

If you are in the process of going through a divorce, you probably have a million questions running through your head. Some of these are practical, like who will keep the dining room set and where you filed all those important papers so long ago. Others are emotional, like how best to tell your friends, family, and co-workers and if this should have happened sooner or not at all. And some are financial, like whether you will be paying or receiving some money to help your partner or yourself live like you used to. 

One question you should not have to puzzle for long is what to call it: spousal support vs. alimony. Simply put: spousal support is the California legal system’s term for alimony. But how did we get here, and what does it really mean for you? Let’s take a look at its history, how it works in California, and what else you may need to know during this complicated time of life.

A Quick History of Spousal Support

The late Robin Williams knew how expensive going through a divorce could be. He once joked that they were, “going to call it ‘all the money’ but they changed it to ‘alimony.’” For the higher-income earner in a marriage that is headed toward divorce, “all the money” can feel all too real. Indeed, one of the biggest question marks surrounding couples considering a divorce is how much support payments will be—and how long they will continue.

Called spousal support in California, alimony reflects the amount of money the higher income earner pays to the lower- (or non-) income earning spouse during and after the divorce. These payments are intended to maintain the status quo of the marriage during the divorce process and help the lower-income earning partner become self-sufficient, if possible. 

Unfortunately, there is no hard and fast rule or formula that determine the appropriate amount of alimony, called “spousal support” in California, for every couple in the long-term. Fortunately, however, spousal support is something couples can agree to as part of the divorce process: both the amount and the duration. Knowing what spousal support is and what it is intended to do can help both you and your partner come to an agreement that does not feel like you are paying all the money to your partner. Let’s take a look at the definition of key terms around spousal support before examining typical spousal support arrangements—as well as your alternatives.

If you are in the process of getting a divorce or wondering what the outcomes of one may be, you are probably thinking about what your alimony payments (called spousal support in California) might look like. Typically, as you know, the higher wage earner pays regular amounts to their spouse while the lower-wage earner collects these payments.

What you might not know is how many factors influence spousal support in California. The law around alimony in California is informed by dozens of factors, including the length of the marriage and your relative incomes as well as “any other factors the court determines are just and equitable.” That can feel like a big question mark.

If you end up meeting with a divorce attorney to understand your options, good lawyers will ask for many facts about your marriage. These will include your date of marriage, the date you separated or plan to separate (and whether this could be disputed), plus information about you and your partner’s finances. Understanding these central pieces of information will help establish whether the marriage was short- or long-term and set the stage for the terms of any potential spousal support agreement.

When you were thinking about getting married, you probably looked at your accounts and obligations to determine how many guests to invite to your wedding or how long your honeymoon vacation could last. You might have considered your assets when deciding on the house to buy or the remodeling expense to undertake. But now, as you are thinking about a divorce, the calculations probably seem a lot different. Indeed, getting a divorce in California may entail a lot of spreadsheets, calculations, and hunting down old account statements to understand what was yours when you went into the marriage, what belongs to the community, and what reimbursements you may be entitled to.

Whether you are considering your options or the paperwork has been filed, you should know your separate property reimbursement rights. Here are three key reimbursements to consider. Please note: For each of these reimbursements, there are complex limitations and considerations to consider, and reimbursements are just one element of many divorce settlements. If you have any questions about your rights, you should speak with an experienced divorce attorney to understand the extent and limitations of your particular situation.

#1: You Contributed to the Community With Your Separate Property—And Can Prove It

Perhaps the best part of traveling with others is the great meals and shared experiences with a special friend. And perhaps the worst is sorting out who paid for what, who consumed what, and who owes what to whom at the end of the trip. This sorting and separating is challenging enough with friends whose company you enjoy and for whom you do not mind buying dinner. But when you need to sort and separate assets and debts accrued over the course of a marriage with your soon-to-be-ex, the challenge is that much greater. 

Property like real estate, furniture, jewelry, vehicles, checking and savings accounts, retirement accounts, investments, and business interests—as well as any associated debts—can fall into three potential buckets during a marriage in California: Yours, mine, and ours. 

If you are thinking about a divorce in the Golden State, you may need help understanding which assets and debts are yours, which belong to your ex-spouse, and which belong to the community (both of you). That is because, in California, the court presumes that all property acquired during a marriage is community property (and the court strives to divide community property equally in the event of a divorce). Keep this in mind as you are listing assets and debts and examining your ex-spouse’s disclosures for evidence of omitted assets.  However, if you spent separate property to acquire or improve community property, you are entitled to get that money back—so long as you can prove it. 

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Choosing the best divorce lawyer may well be the second biggest decision of your entire marriage or domestic partnership. It is often an emotional time with a lot of challenging issues to address. You will need to know what assets and debts are considered community and which are separate property—and you will need to be confident that no assets have been omitted (or hidden). You will have to establish whether anyone should be paid spousal support and how much. And if there are children, you will need to establish custody and visitation arrangements as well as determine any appropriate child support payments. 

Whatever is at stake in your divorce, you need to choose an attorney best equipped to work with you and your particular situation. Before making a decision, we always recommend our clients take a step back and reflect on what we have seen to be the three most important steps in finding a divorce attorney who can achieve the best outcome for you.

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