- Category: Child Custody
- Category: Relocation
- Category: Parental Alienation
- Category: Spousal Support
- Category: Child Support
- Category: Tax Issues
- Category: Business Ownership
- Category: Asset Division
- Category: Divorce & Credit Rating
- Category: The Divorce Process
- Category: Factors That May Influence Division of Assets
- Category: Client-Lawyer Relations
- Category: Alimony
- Category: Pensions, Benefits & QDROS
- Category: Division of Businesses and Investments
- Category: Appeals & Post-Decree Motions
How does a divorcing couple decide whether sole custody or joint custody would be best for their family?
The standard is the best interest of the child. Divorcing people need to understand the difference between sole custody and joint custody. In the state of New Mexico, joint custody refers to decision-making for the child regarding residence, healthcare, education, extracurricular activities, and so on. The parents communicate with each other and make a decision together in the best interest of the child.
Sole custody means that one parent has the ability to make all decisions for the child or children, which is quite important when you’re looking at residence. If one person has sole custody, that means they can make the decision to remove the child from the state, which they can’t do if they have joint custody with the other party. The courts generally say that it is in the children’s best interest to have both parents in their lives.
How can a parent increase his or her chance of a being awarded primary or sole child custody?
Primary custody means having the children more than 50% of the time. If the family’s arrangement is that one parent has been responsible for the children and the other parent hasn’t been as involved, that might be one reason for awarding primary custody. Domestic violence and anger issues in the family may be another reason for the court to say that one parent should be the primary caretaker of the children, while the other parent should be the visitor and may be supervised.
Are there any legal or practical reasons fathers should not be awarded child custody just as often as mothers?
There is absolutely no legal reason the father should not be awarded custody of the children. In today’s world, both parents are usually very involved with their children, so it depends on the age of the children and what their best interests are. If the children are older, then they are able to say with whom they would like to live. There are now more 50/50 custody arrangements, which work out well for the child if the parents live close to each other. They can stay in the same school and have lots of contact with both parents.
In cases where the mother is an alcoholic or has drug addiction issues, would the father be more likely to get custody of the children?
It is unfortunate that many families have one partner who’s an alcoholic or has a drug problem. However, it does not cut off the parents’ rights to their children. Either the father or mother might be the physical custodian of the children and the person who has the addiction might be able to see the children in a supervised situation. If the other party comes to the house to visit, we tell the custodial parent not to leave the children or to allow the visitation if there is any indication of alcohol or drug abuse. The court may arrange for the other parent to go through a treatment program and the court will set up how they are supposed to see the child, but usually it’s through supervised visitation.
If a child is living with one parent full-time despite the fact that the court granted joint custody to both parents, should that parent apply to change the arrangement from joint to sole custody?
Sole and joint custody are applicable to the decision-making for the child. If the custodial parent is trying to keep the child away from the other parent for whatever reason, then the parent who is not seeing the child can apply to the court to modify custody. Sometimes if one parent is actively keeping the child away from the other, the court can reverse custody – which is not something the custodial parent would want. Of course, it is the best interest of the child to be seeing both parents.
If neither parent is particularly responsible, do the courts ever award custody to grandparents?
They can award custody in the form of a guardianship to the grandparents if both parents are irresponsible, drug-addicted, neglectful, or not taking care of the child. When there is a danger to the child and the grandparents are standing right there wanting to help their grandchild, the courts can allow them to take custody of the child and it can be reviewed later on. If the parents get better, then they can come back in for a modification.
Many grandparents around the U.S. who were done raising children are now raising the next generation, because their own children cannot be responsible parents. In answer to your question: yes, grandparents are looked at first as potential caretakers for the children. It’s preferable to putting them into foster care.
Can you actually get a divorce without resolving all of your custody issues?
Yes. If you are able to resolve all the issues with property and spousal support, the court can have a temporary order entered for custody, child support, and visitation and can award the divorce. In the actual marital settlement agreement, it will say that this is a temporary arrangement pending a full child custody evaluation. The court can grant a divorce and keep the child custody part separate under a temporary order.
At what age is a child able to choose with which parent they wish to live?
The court may allow the child to have a reasonable say in which parent they want to live with by the age of 14. It is very hard to force anybody who is 14-years-old to do something they don’t want to do, so the courts will listen if they prefer to stay with one party.
Are siblings ever split up between the parents in custody arrangements?
Only where there has been an agreement between the parties themselves. The courts will not split up the children. Splitting up the children would mean they are not only losing their mother or their father in some way, but also losing their sibling in the same proceeding. If the parties decide to split up the children and they stipulate how it is going to be done, the court generally won’t intervene. However, the court itself will not, and has never to my knowledge, split up the children.
What is the best way to proceed in a high-conflict custody case involving serious allegations against one or both of the parents?
High-conflict custody cases often involve allegations by one or both parents that may raise concerns regarding the emotional or physical safety of a minor child. Those cases can involve sexual abuse allegations or addiction allegations claiming that one party has a problem with alcohol or another drug – often prescription pills. Domestic violence, physical abuse, or emotional abuse issues may also be raised.
The attorney’s first task is to discover whether there is truth and foundation to the allegations, because the child needs to be protected first and foremost. If the allegations are true, you want to work with the parent who has the issues to reduce and hopefully remove the issues. The conflict is very difficult for the parents, but the turmoil caused by the conflict is very damaging to the child – so the goal should be to reduce the conflict.
What factors will the judge take into account when considering a recovering alcoholic or drug addict’s request to regain child custody now that he or she is sober?
When a party is in recovery from substance abuse addiction, the judge is going to look at several factors to be sure that the child is protected and that the parent is maintaining his or her sobriety. The first factor the judge will look at is the period of sobriety, because judges know that recovery often comes with a relapse. Secondly, they’re going to look at whether the person is attending an A.A group, outpatient treatment, or counselling with a substance abuse counsellor as a support.
What measures can be taken to ensure a child’s safety when a parent who is a recovering alcoholic or drug addict is permitted to regain partial custody?
Often the other parent who is not in recovery will ask for additional protective measures, such as an interlock being placed on a vehicle. There are handheld interlocks you blow into that are mobile, so you can take them into your home or workplace. Sometimes interlocks are used for a period of time to be certain that the parent is not drinking. If it is a drug issue, the court can put random drug testing in place for a period of time. If there has been a severe substance abuse problem, then the judge will look into protective measures for up to a year to be certain the person is not relapsing.
How do courts determine best interest in suits affecting the parent-child relationship?
Best interest can be subjective, but the courts look for whether a parent is impaired in any way by an addiction or mental illness and whether the parent has the ability to care for the child and meet the child’s basic needs. Those are just the foundational issues. Domestic violence and abuse are also issues that the judge looks for and the parent suffering with those issues would have to prove, as with a mental illness, that they are on their medication and that they are functioning. If it’s a domestic violence issue, they would have to go through anger management and counselling as well as maintain a level of zero abuse or violence.
Parent-child bonding is very important and the best interest standard also looks at the age of the child. If the child is particularly young, the court looks at which parent is the anchor parent; which parent the child goes to when they’re sick, when they’re feeling upset, or when they wake up in the middle of the night; and which parent has served as the primary parental figure for the child. It used to be that the stay-at-home parent was who the child went to to meet their daily needs. Now you often see both parents in the workforce and the children being bonded to both parents more equally. Bonding is a factor that the courts will consider.
Do all custody issues need to be resolved before a divorce can be granted?
No. In New Mexico, custody is in flux until the child reaches 18. You must have a temporary custody plan in place when the divorce is granted, but custody and visitation schedules can be modified up until the child is 18 years old – so the divorce decree can be final and custody can be ongoing.
What types of decisions must parents share in a joint custody situation?
New Mexico has a presumption that joint legal custody is in the best interest of the child. Joint legal custody involves joint decision-making authority for the major decisions in your child’s life, including those related to education, extracurricular activities, residence, religion, and elective medical decisions – such as orthodontic work. The presumption in New Mexico is that both parents should have equal input in the major decisions that have an impact on the child’s life. Emergency decisions are to be made by the parent who has the child in their care at the time.
How often is sole custody awarded to one parent?
Sole custody is awarded very rarely, such as in cases where a parent is impaired by addiction, where they are not able to communicate or function, and in severe domestic violence cases. In incredibly high-conflict cases where the parties cannot agree on anything, sole custody is sometimes awarded; however, the judges will often put in place a guardian ad litem – an attorney for the child to help make decisions when the parents cannot agree in the major decision-making areas.
Does filing for bankruptcy affect one’s obligation to pay child support or spousal support?
Under the tax bankruptcy format, any obligation that arises under a divorce decree is not dischargeable in bankruptcy. There might be certain limited exceptions, but that’s something a bankruptcy attorney should be asked about because it is such a specialized area. Most family lawyers do not practice bankruptcy. They all have a general knowledge of it, but will refer to the specialist who knows the ins and outs of bankruptcy court, which is its own entity separate from state courts.
If a couple has a separation agreement but has not yet finalized their divorce, will the agreement prevent one spouse from taking a child and leaving the state or county?
When parties petition the court for divorce and they are separated, they have a temporary domestic order that says neither of the parties shall remove the child from the state they are living in.
One way a parent can take a child out of the state is by getting permission from the other party. However, there’s nothing physically preventing one party from snatching the child and leaving the state or the country. Unfortunately, it is all too prevalent. It is in the newspapers, it’s on the talk shows, and it’s very difficult to get a child back once they have been snatched and taken to another country. States are different and states will return the child. The countries that sign onto the Hague will return the child, but if the parent takes a child to some other country that is not a Hague signatory, it’s almost impossible to get the child back.
If one spouse has full custody of the children, can he or she move to a different state with the children without the other parent’s permission?
A parent who has sole custody may move, because he or she has the decision-making power to move with the child. However, they need to give notice to the other parent and to the court. Even if they have joint custody and one party is a primary physical custodian of the child, they can apply to the court to allow relocation. The standard is whether the move is in the children’s best interest or is an attempt to keep one parent away from the children.
If you have joint custody and one parent won’t agree to a move, you have to petition the court for relocation. It would involve working with a child custody evaluator to determine if the move would be good for the child.
If the custodial parent is planning a move in good faith, is it possible to change the visitation schedule for the non-custodial parent to have longer holidays with the children?
The visitation schedule would change. When relocation is granted, visitation is decided at the same time. If a child is in another state, weekend visitation is not practical. How much visitation time there is in the summer depends on the age of the child. Sometimes there are as many as eight weeks in the summer; sometimes there are alternating Christmas holidays and winter breaks. If the states are contiguous or close, it might be practical to have visitation during long three-day holidays.
If the court grants permission for an ex-spouse to take the children to another state, can the non-custodial parent appeal the judge’s decision?
Yes. They can appeal if they think there has been a mistake of law or the judge has made a mistake. They can also ask for a reconsideration, where the judge looks back over the decision or takes new testimony as to why it was not a good idea to let the custodial parent go. Or if it’s just not working out for the custodial parent with the children in the new location, the parent who has been left behind can file for a modification.
If one state awarded a parent sole custody of the children, can the other parent file for custody in another state if they relocate?
The activity has to take place where the child resides, and the states offer full faith and credit to another state’s determination. If New Mexico says that custody belongs with the mother in New Mexico, then the father can’t just pick up and file in Nevada. You have to go back to the court of original jurisdiction to file there.
How is parental alienation defined and how is it dealt with?
Parental alienation is talking to the child and “badmouthing” the other parent, making them see the other parent in a very negative way, alluding to things like mistreatment or inappropriate activity between the parent and the child, and scooping out the bottom of the relationship with the other parent. The child may start to really believe the other parent is not suitable and is bad. When they no longer want anything to do with the other parent, that’s when parental alienation happens. It is very, very serious. It takes counselling and professional therapy to reverse all those years of talking poorly about the other parent.
Are there any legal measures a parent can take to prevent or stop parental alienation?
They can ask for a change in custody due to parental alienation. Then the court will have a professional child custody evaluator do an assessment of the parents and of the child or children. If this is really going on, the court will probably change custody with a component of counselling or reintegration with the other parent.
How does a judge determine the amount and duration of spousal support in New Mexico?
The statutory factors a judge uses to determine amount and duration of spousal support include the length of the marriage, lifestyle of the parties during the marriage, and the parties’ earning capacities. However, the crux is the need and the ability to pay. The court will look at the reasonable monthly bills of the person who’s asking for spousal support, and what is considered reasonable depends on the context of the income and the lifestyle during the marriage. Ability to pay depends on the payor: what is the earning capacity or income of the payor and what ability does that person have to pay spousal support?
Does New Mexico have permanent spousal support?
The judges in New Mexico do not order permanent spousal support. They order what is called indefinite support. Rarely is permanent support seen in a judgement or decree, because spousal support is typically modifiable. Spousal support can be indefinite in long-term marriages, but it’s indefinite because you cannot predict the future circumstances of either party. If you make a permanent support award and the payor becomes disabled in such a way that ends or diminishes their income, then they would have to go back to ask the court to modify or terminate the spousal support because the circumstances have changed. The judges don’t order permanent spousal support, but will order indefinite support in certain circumstances.
What are the pros and cons of modifiable versus non-modifiable spousal support?
Non-modifiable spousal support comes with the benefit that you know exactly what you are going to pay or exactly what you’re going to receive and for what duration, so there’s predictability to a non-modifiable spousal support award. The downside is that it is non-modifiable even if your circumstances change. You take a risk in entering into a non-modifiable support agreement. With a modifiable agreement – although you don’t have the predictability and you may end up back in court – the benefit is that if your circumstances change drastically, you can change the spousal support award.
If the spousal support recipient is financially irresponsible, can the payor make payments to a third party for the mortgage on the home in which the recipient is living and have it qualify as spousal support?
Yes, because they would be paying on behalf of the recipient spouse. This is not seen very often because judges like the recipient to be in control of his or her own funds. However, if there’s an addiction and the bills are not being paid, a judge could order payments to the third party. The judge could also order that when the payor’s name is still on the mortgage or still on a debt and their credit is in jeopardy.
Do men ever receive spousal support?
The factors in our statute should be applied equally to men and women. However, I have only seen it a handful of times – in three to five cases out of over 100 cases.
What can the spousal support recipient do to protect against the payments ending with the payor’s death or disability?
You can secure your spousal support award through life insurance or by placing liens on any real estate that the payor owns in the state where the spousal support is awarded.
Do spousal support payments end if the recipient remarries or moves in with a new romantic partner?
In New Mexico, if the recipient remarries, the spousal support payments do terminate. If the payor remarries, it probably will not have an impact on the spousal support award. Regarding cohabitation, the spousal support payments will not necessarily terminate if the recipient moves in with someone. However, if bills are being shared and income is coming in from the new partner, then that would be taken into consideration as a reason to modify or possibly terminate the spousal support award.
Do child support payments end if the recipient remarries or moves in with a romantic partner?
No. There’s no impact whatsoever. You cannot take the new spouse’s income into consideration under New Mexico law because, unless they have adopted the child, they have no legal obligation to support the child.
Do the New Mexico child support guidelines take extracurricular activities into account?
When the guidelines were legislated in New Mexico, they stated that extracurricular activities were considered in setting the baseline child support. In our case law, extracurricular activities are technically not supposed to be added on top of the baseline child support award. The judge will often allocate both parties 50/50, meaning each parent will pay for half of the agreed-upon activities.
What if one parent enrols the child in an activity that the other parent can’t afford to support financially?
If one parent in a joint custody situation makes a unilateral decision without the consent of the other parent to enrol the child in horse riding lessons and the other parent can’t afford it, the judge will often make the parent who unilaterally enrolled the child in the activity pay for 100% of it. However, jointly agreed upon activities or activities that the child had engaged in while the marriage was still intact are called status quo and should continue. The court will either order a 50/50 cost allocation between the parents or they’ll look at each parent’s income and have them pay pro rata, based upon their proportionate share of the total income.
What happens if a parent is genuinely struggling to make child support payments? Can child support be modified if there’s been a change in circumstance?
Absolutely. Under the New Mexico law, the buzzwords are material and substantial circumstances. If you’ve lost your job or were laid off and you are making good faith efforts to either receive unemployment income or seek a job, you can file a motion with the court asking to modify your child support obligation based upon a change of circumstances. Or if the other parent gets a better paying job, you can go into court and ask to modify the support based upon the change in income.
Does filing for bankruptcy affect one’s obligation to pay child support or spousal support?
Under the tax bankruptcy format, any obligation that arises under a divorce decree is not dischargeable in bankruptcy. There might be certain limited exceptions, but that’s something a bankruptcy attorney should be asked about because it is such a specialized area. Most family lawyers do not practice bankruptcy. They all have a general knowledge of it, but will refer to the specialist who knows the ins and outs of bankruptcy court, which is its own entity separate from state courts.
How can income taxes be affected by divorce?
Section 66 of the Internal Revenue Code says that because New Mexico is a community property state, each party is required to report one half of the income. They also get credit for one half of the withholding taxes against the income.
The year of divorce is very difficult for the parties, because getting them to exchange the information needed to file a tax return is difficult. Rule 122 under the New Mexico Rules of Procedure provides that the community income shall either be divided between the parties or a written waiver must be filed in court.
When the parties do file tax returns, they usually file with a primary name. If they file a joint return, the second name will not be noticed by the Internal Revenue Service after a divorce unless they follow up with a notice of changing their mailing address. It affects the primary spouse if they move out of the house, because they may not get notices from the Internal Revenue Service unless they file a notice of change of mailing address.
If the divorce will be final by the end of the year, should the parties sign one last joint tax return?
If you’re still married on December 31st, you have permission to file a joint return or you can file married separate. If you’re divorced on December 31st, you each must file individual returns as if you were unmarried for the whole year. You may be able to claim head of household status if you have a qualifying dependent, such as a child. Claiming head of household status has advantages, such as lower rates to be applied against your income as well as a higher standard deduction amount from your income.
If the spouse who earned the income during the marriage has prepared a joint tax return, should the other spouse sign it? Are there any risks or benefits to doing so?
The first benefit of filing a joint return is that your income taxes will be lower. New Mexico is a community property state, so if you file a joint return then you are able to treat the non-working spouse’s income as if they had earned half the income. You get to use the progressive rates of the income tax table to reduce taxes.
In filing a joint return, you assume the liability of both parties to a joint return or jointly and separately liable for the complete amount of unreported or unpaid tax to the Internal Revenue Service – which is a tremendous risk of filing a joint return. If you generally file a W-2 for income, then you probably will not have much difficulty because there is no hidden income.
If you have business income, we would suggest filing married separate. Filing married jointly means that if the wage earner is hiding income, the other spouse is liable. If you were unaware of the hidden income, you can try to claim you’re an innocent spouse or seek other forms of equitable relief the Internal Revenue Service could grant. However, it’s doubtful they will grant it unless it’s obvious you did not know about the income.
Filing a joint return with a spouse will reduce both parties’ taxes. If it’s wage income, then it’s assured you know what the income is. You will be able to take advantage of the progressive tax rates the Internal Revenue Service offers you.
Are there any tax or financial consequences to keeping the marital home when dividing property during divorce?
There are some concerns if it’s a highly appreciated home. Prior to 2007, there were cases where homes were bought for $70,000 in 1960 and selling for $900,000. The Internal Revenue Code provides that each party is able to exempt $250,000 of gain on a residence. If one party decides to keep the residence and it has more than $250,000 in gain reflected in its value, then that party is going to pay a capital gains tax upon the sale of the house.
Most homes are covered by mortgages in joint names. Upon the divorce, the courts have a tendency to say the former community credit needs to be terminated and the person who wants to receive the house will have to refinance it to get the former spouse off the mortgage. Their credit is not affected by the continuation of the mortgage.
However, the spouse who is willing to trade their equity in the house for other assets should be concerned. If the other spouse is keeping the home and they do not insist upon the house being refinanced, then this payment will affect the former spouse’s income. With the tough regulations and financing requirements that have occurred since 2007, it’s unlikely the non-homeowner spouse will be able to obtain a new mortgage because their ability to receive favourable rates and credit have been affected.
The other financial consequence is that you cannot keep the house and eat it. When parties are getting divorced, New Mexico law requires the community estate to be divided equally between them. If one spouse receives cash and the other receives the house, there is a disadvantage to the homeowner because their financial resources are tied up in the house.
The custodial parent should receive most of the tax reductions pertaining to children, but can the non-custodial parent deduct any child-related expenses on their tax return?
There are certain tax benefits relating to children that can only be taken by the custodial parent, with the main one being childcare tax credit. For medical expenses, the parent who paid the expense is the one who can claim the deduction if they meet the threshold, which is 10% of adjusted gross income. Unless you have a very ill child, medical expenses are not a tax advantage.
If some of the credits are tied up with the exemption of the custodial parents as defined by federal law rather than state law, the federal law discount stays. If one or both of the parties have a child for more than six months of the year, then whichever parent has more time than the other with the child can claim the tax exemption. However, there is a right to waive it. The New Mexico Supreme Court ruled in the Macias case that the court can award the exemption. It’s a practical matter of who has the higher income up to a certain level that it can be advantageous to the family.
There are other advantages to being able to have the exemption. To have the wealthy pay more in taxes, certain items are reduced as your income goes up, including the exemption. At a certain income threshold there is a phase out. For every $2,500 you earn greater than their base, you lose a percentage of the child exemption. It would be better to give the exemption to the parent who may not be working or has limited income or spousal support so they can take advantage of the deductions.
Since spousal support is deductible to the payor, how can you prevent someone from declaring that all payments to their ex – including child support – are spousal support?
When they passed Section 21 of the Internal Revenue Code in 1984 – the domestic relations reform act – they knew people were going to try to deduct child support. Not all alimony is deductible. You have to meet the requirements of Section 71, which exempts child support.
The federal government also requires the states to have guidelines for welfare. If the Internal Revenue Service wants to become extremely aggressive, they can say it is your obligation under state guidelines and the federal government requires the guidelines to be mandatory. They could attack what the taxpayer paid and end up disallowing the full amount from any of the alimony.
Even though alimony is deductible, the payee pays income tax on it. If there is a child support element, they don’t want to pay taxes on child support. Child support is neither deductible by the payor nor income to the payee. You can declare it, but you’ll face penalties, interest, and other sanctions from the Internal Revenue Service because the recipient spouse is unlikely to report it. You are asking for trouble if you try to deduct child support.
If two spouses own a business together, how will a judge split it during divorce?
The business must first be valued. One party may be willing to take the business and pay the former spouse for their share in cash or in other property. The difficulty for the person taking the business is that those payments are not deductible and it doesn’t give them a basis in the business. Most small businesses have very little equity or basis in the business, so the person retaining the business may have a zero base when they want to sell it. If they sell it for $100, they’re going to pay taxes on $100. Meanwhile, they’ve already paid $50 to their spouse for their one half of the interest.
The person who receives the business is not going to receive 50% of it, but they’re going to take all of the tax consequences. They have to weigh whether the future income they can earn is sufficient to overcome the tax disadvantage of owning the business and having all the gain taxed to them alone instead of to their spouse. One of the biggest problems when the court divides the businesses is how to fund the buyout. The business owner has to pay the spouse and pay taxes on that amount. There’s a disadvantage because they take too much money out of the business and literally kill the golden goose.
The court could also order the business sold. The problem is that when you sell a business, it’s unlikely to bring in its fair market value.
How can someone be sure their spouse isn’t trying to hide assets during the divorce process?
When there’s a suspicion of hidden assets, we recommend that our client hire a forensic accountant to start reviewing tax returns and other information to see if there are discoverable hidden assets. If somebody has $50,000 in a Swiss bank account, it’s almost impossible to find that information because it’s not going to be reported on a tax return. They’re going to hide it from the government as well as from their spouse.
The 1040 tax form is designed to tell the federal government what you own. If you have property taxes of $6,000 and the home property tax is only $3,000, a forensic accountant will ask the logical question: what else are you paying property tax on? Forensic accountants are good at finding hard assets, but it’s very hard to find hidden cash unless it’s in an American bank and the interest is being reported.
You run into a different problem if one spouse says, “I know my ex has a Swiss bank account.” The person will testify there is money hiding and they want their half of it. Certain judges will say, “Fine, but I’m taking this transcript and sending it to the IRS. You knew you were hiding money; you weren’t paying your taxes.” Sometimes when a party has a suspicion about hidden assets, they get into problems for admitting under oath that they knew there were assets and they weren’t reporting the income. It’s a catch-22.
What is the difference between marital and separate property?
In New Mexico, community property is defined as property that is not separate property. Separate property is relatively easy to identify: it’s property owned by either spouse before marriage or received after entering a divorce decree. It’s property that the parties designate between themselves in writing to be separate or it’s property they receive by gift, inheritance, devise, or descent during the marriage.
The confusing part is that New Mexico separate property also includes rent, issues, and profits from separate property – rent dealing with real estate investments, issues dealing with cattle and agriculture, and the profits dealing with stock investments. Property acquired during marriage is presumed to be community property unless you can show it’s separate property.
The other difficult area between community and separate property is looking at how the parties handled the property during the marriage. If the husband had $10,000 in his checking account where he puts his wages, and five years later the parties are getting divorced, he might say, “I had $10,000 in separate property in that account that before we got married and I want it back.” It’s the duty of the person who is claiming separate property to trace the separate property. The party would have to show that the account never went below $10,000 and they never intended to make a gift. Parties may complete prenuptial agreements outlining separate property, but unless they keep it segregated, it may lose its separate property character to a process called transmutation.
If one spouse receives annual bonuses that he puts into a savings account in his name only, are those funds considered community or separate property?
Those funds are community property, because they are bonuses earned from his labours. Title in and of itself is only partial evidence of ownership in New Mexico. Based on the source of the funds, it belongs to the community. Once he puts his bonus into a separate fund, the funds that were originally there are transmuted into community property. He may think he is preserving the funds as his own, but all the funds he had that were in that account end up becoming marital or community property.
How can someone protect their credit rating as they go through a divorce?
If you’re a higher income person and credit is important, ensure the bills are paid throughout the divorce process. We have interim division of income in New Mexico, during which the community income is used to pay off fixed bills, including minimum credit card payments, car payments, utility payments, life insurance, and car insurance. What’s left of the community income is then split equally.
If you want to protect your client’s credit rating, then include all of the minimum payments for the credit card debts and the house payment on his or her side of the ledger, and hopefully your client will pay them in a timely manner. Have your client make payments that need to be made during the interim between the filing of the divorce and the final decree to protect their credit rating.
How does a person begin the divorce process?
In New Mexico what is commonly called a divorce is actually a suit to dissolve the marriage contract. If there are attorneys involved, they’ll prepare the forms and go help the parties through the procedures. If the parties do not hire attorneys there are pro se forms available to litigants.
What is a Pro se form?
Pro se means not represented by an attorney and they can find those forms at the website nmcourts.gov. Those forms are very generic and although they include everything you need, a petition, response, settlement agreement, parenting plan and the final document, they do not assist the parties in really determining what are the assets, what are the debts and what are the children issues. But they’re there for filling in the blanks.
What is the procedure for divorce in New Mexico?
The dissolution proceeding or divorce proceeding is similar to any other lawsuit. In a lawsuit there must be what’s called subject matter jurisdiction and personal jurisdiction over the defendant who in a divorce situation is called the respondent. There are no jury trials in a divorce action in New Mexico. To commence the action the petitioner or the person who wants to bring the suit files for the dissolution of marriage in the district court where either of the two parties reside.
In the petition, the relief being sought is set out so the court can determine what’s before them. To start a divorce proceeding or a dissolution at least one of the parties has to be a resident in New Mexico for at least six months prior to the filing. If you’ve lived here only three months you can’t get a divorce, but you still may be able to file what’s called a legal separation, which will resolve other issues than the status of the marriage.
How do the courts determine jurisdiction over child support?
In the proceedings the court has to be told whether or not they have jurisdiction toward custody and visitation over the children. For that to happen, the children have to be generally residents of New Mexico for six months. Welfare’s an emergency situation; the New Mexico courts can’t award custody or visitation unless the children reside here. If there are no minor children involved and the respondent or defendant lives in New Mexico then New Mexico can look into the financial issues. The financial issues will include spousal support if it’s appropriate and dividing what we call community assets and placing the responsibility on the parties to pay debts.
What happens once a petition for divorce has been filed?
Once a petition is filed the defendant respondent has to be served with the petition by someone who’s over the age of 18 and is not a party to the action. The respondent then has 30 days to respond to the petition. And during that time period things may begin.
They will divide the income between the parties and place responsibility to pay the debts between the parties. Then what’s called the discovery process begins. The discovery process is asking the other side what are the assets and liabilities. There could be a request for production and a request for admissions.
What other steps occur before settling or going to trial?
Once the discovery is done most of the courts in New Mexico will require the parties to attend the facilitation, where a neutral third party attorney is brought in to meet with the parties and see if they can help them reach an agreement. The courts here have found that, more often than not, it’s bad communications that cause people to go to trial versus they really do disagree as to what should happen. And then ultimately if there is no settlement, then the court will set a trial and the parties will proceed to a trial to determine the division of the property, division of the debts, awarding custody and awarding support between the parties.
What happens in a divorce case where one spouse had an affair?
New Mexico is a true no-fault state. In other words, fault is not considered in determining any of the major factors in the case. Fault’s not considered in determining custody of the children; it is awarded based upon the best interests of the children. The court’s jurisdiction is awarding community property, which are assets minus the debts, equally between the parties. Child support is based upon guidelines. Spousal support, also known as alimony, is based primarily on factors that by statute are set for it.
So the affair will have little or no legal ramifications. The problems with affairs are the emotional ramifications to the spouse who considers himself or herself injured. But it’s a practical matter; the courts will really not consider that in any award of property.
Would any money spent on an affair be taken into consideration when dividing the assets?
Only in a minor effect. If there’s a huge expenditure, the court could find that it did not contribute to the community debt. But in general, we are not a reimbursement state. We don’t go back and look who spent what because it is almost an impossible task for the court to unwind and determine if each item was appropriate debt or not. The court is not going to award reimbursement except in very extreme circumstances.
Does having one stay-at-home partner in the marriage have any significant bearing on dividing the assets?
It has very little to no bearing on dividing the assets because it’s community property, which is property acquired during marriage through the parties labors and efforts. The court’s jurisdiction is limited solely to dividing it equally between the parties.
What if somebody is not certain that their lawyer has a good handle on the financial aspects of their divorce? Is there something that they can or should do about that?
Yes. From the very beginning there needs to be a divorce plan. When consulting a lawyer, the lawyer needs to get a handle on the issues right away. This can be done in the initial consultation or shortly thereafter. The lawyer should know the procedural steps and to posture the case right away. That’s the procedural aspect.
There’s the substantive aspect: that is, what are the issues and how is the court likely to divide them? There is the discovery process where financial information is either obtained from the client or from the other side, and once that is done then there needs to be a chart or divorce plan.
So, in our cases we have a community property balance sheet and a separate property balance sheet, that families and businesses should have. The balance sheet will pinpoint where the holes are, where the issues are, what needs to be understood, and what is needed in order to present a case for a settlement or trial.
Once you proceed to a settlement or trial, the client should have as much information both procedurally and substantively as the lawyer, because if there is a trial the client is going to be testifying. The client will know the case just as well as the lawyer does if there is a good preparation.
What if somebody feels they are not as up to date or as knowledgeable on their case as they should be? Could that person seek guidance from another lawyer?
It’s common to have second or third opinions. The earlier the issues are laid out the better, because then everyone on our side, including the client, the attorney and anyone helping, possibly experts, has a sense of direction. If the lawyer is giving blank answers, there should be a second or third opinion.
What factors do New Mexico courts consider when determining alimony?
New Mexico looks at ten different factors in setting spousal support. The main things the court looks at are the age and health of the parties, and the ability of each person to support themselves. They look at the current and future earnings of the parties. If you have somebody making a million dollars and somebody who can make minimum wage, then there’s quite a possibility there will be spousal support. They’re also going to look at what assets each party is going to receive. If it’s what you may consider a small case with nominal assets but there are big incomes, then there’s likelihood there’s going to be alimony.
The courts look at the duration of the marriage. We have alimony guidelines in New Mexico that were outlined by a committee that was formed by the New Mexico Supreme Court. They issued recommendations to the courts on what should be considered and how spousal support should be handled. With short-term marriages, those under 5 years, generally there will not be any alimony claim.
For marriages between 5 and 20 years, they look at it whether it needs to be a rehabilitative support situation. For example, a person who needs to go back to school to upgrade their degrees to become self-supporting can receive transitional support. If the parties are 60 years old after a 15-year marriage, they may award support for 5 years or 6 years until the parties reach full social security age or when they may be eligible to start receiving retirements.
They also look at the ability of the other spouse to pay alimony. Under the guidelines is a rule that if one party’s income is under $25,000 a year, that person will not generally be ordered to pay spousal support. Because one thing the court wants to ensure is that support is paid. So the court will consider the ten factors set out in the statute, and they are all weighed equally.
How do you fairly assess the economic value and impact of divorce on things like employee benefits and stock options, pension plans and retirement accounts? Is there a procedure or process to assess the value?
Yes, there is. Oftentimes these employment benefits are some of the largest assets involved in the case. Therefore, it can be the largest issue. There is a whole range of employment benefits that can be valued and divided. It can be done by the hourly rate. There are generally two types of pension plans: one is a defined contribution plan and another is a defined benefit plan.
How is a defined contribution plan divided in a divorce case?
The defined contribution plan is, in most cases, simply an account and it could be a 401K profit-sharing type of account. The account that has been created during marriage is divided equally. If a portion is acquired before marriage, then the account is apportioned between a separate and not divided portion and a community or joint divided portion. It’s important to understand that this is a pre-tax account. You don’t want to offset a $50,000 dollar defined contribution plan 401K against a $50,000 account or stock that is in after tax dollars. That’s not an equal division. You want to consider tax effects when dividing pension plans.
How is a defined benefit plan divided in a divorce case?
A defined benefit plan is commonly understood as a benefit payment for the life of the participant, and these are valued in understood ways. A personal value could be obtained for a defined benefit plan and given to the employee, and then the non-employee receives compensating offsetting value in the same amount. Or in the defined benefit plan the monthly pension benefit can be split or divided when the retirement occurs or is eligible to occur.
How is a benefit stream divided in a divorce case?
There are rules for dividing a benefit stream as well, and essentially what has been acquired during marriage is divided equally. Stock options were also mentioned and stock options are employment benefits, they can be very valuable. They are apportioned between what type of effort is needed to have them mature. And the effort or work that was done during marriage is divided equally. If there is still additional work or effort after divorce then that is apportioned separately. There are also tax effects to consider and the whole range of the employment benefits are at issue.
What is a QDRO and how is it divided in a divorce case?
A QDRO stands for Qualified Domestic Relations Order. Back in the late 70’s, the federal government passed some significant legislation that affected pension plans and retirements, which were previously exempt from anybody’s claims. Here in the divorce circumstance, one spouse may now receive a pension earned in the name of the other spouse.
A QDRO relates to a private plan. There are different plan names. For the federal government, you may have their common retirement plans. In that area, the federal government says you can divide what’s called Tier 2 benefits but not Tier 1 benefits. If you were a federal employee before 1985, it’s called a civil service order.
What does a QDRO do in a divorce case?
Each state has their own pension plans and their own rules on how to divide them, because technically the federal government can’t affect those pensions. A QDRO allows the spouse to receive one half of a retirement fund, which can be a defined contribution plan, without there being any tax effect. Then the person takes a carryover basis on the retirement—basically they receive a retirement—it’s not taxable to the employee or former employee. It will be taxable by the recipient only when they take the money and start spending it because they have a right to rollover their share of the retirement to an individual retirement account or other appropriate retirement mechanism.
Is it difficult to file a QDRO?
The Domestic Relations Order is probably one of the most complicated areas of all, because every employer has a different plan and they have different terms in it. You have to be able to understand the terms of what they are trying to divide and how you’re allowed to divide it.
What happens if a QDRO is not entered?
Just because this QDRO is not entered, doesn’t mean the non-employed spouse doesn’t have a retirement. What it means is they have another lawsuit that’s pending. So the QDRO is very important because it secures the non-employed spouse their right to the property rights in that retirement system.
How significant are retirements in relation to other assets in New Mexico divorce?
The retirements are, especially in New Mexico, clearly the most valuable asset in almost every case. For a state employee who’s worked 25 years, that retirement may be worth $400,000 or $500,000 even though that employee was only making $30,000 or $40,000 a year. It is usually the most significant asset in a case where there is a retirement plan that covers an employee.
What happens if there is a substantial investment account in the divorce case? Will that account be split in two and would there be any tax consequence to splitting it?
Generally, there is no tax consequence because of provision 1041 of the internal revenue code, which states that transfers between husbands and wives incident to a divorce are not taxable events. So if they divide those stocks equally and are not selling them and receiving money, each party gets what’s called carryover basis. Now, if they sell the stocks in the future they will pay capital gains tax on the sale—the difference between what they bought it for and what they sold it for. But the mere division of the stocks between the parties will not be a taxable event.
If the couple owns a business, what is the distinction between a business valuation for divorce purposes and a business valuation for a third party if you were selling the business? Is there a different kind of business valuation done in the case of divorce?
Yes, there may be. In New Mexico, the case law says that the value of all property in a divorce case is market value. Now, there are different ideas and different interpretations as to what that means. Market value is a willing buyer and a willing seller. So, if there is a business involved and it is going to be sold in a divorce context, then the market will determine what the value is, and the extent to which the business is formed during the marriage will be divided equally. In most cases, neither spouse wants the business sold because it generates the income that may need to be divided after the divorce.
In those cases, there needs to be a valuation of the business as a going concern. The complicated issues arise whether that business is controlled by one spouse or the other. You have a majority control of the shares and can determine the direction of the business, can determine the board of directors and are essentially in control. That is one aspect that affects a valuation for divorce purposes if it’s not going to be sold.
Who performs the actual business valuation?
Typically in a divorce case, it’s going to involve outside professionals because the clients usually–even if they know a lot—are not very good at testifying as to the value of the business. In most cases you would need an expert. Not all businesses require experts and with experience you can look at the balance sheet and see whether it justifies an expert valuation. But the more valuable the business is, the more necessary it will be that you have an expert valuator.
The other thing you do want to look at is if there’s a minority shareholder or minority member or partner. The shareholder agreement or partner agreement would have a very large impact on the valuation itself. These are all factors that need to be considered. And in most cases there is a buyout over time with interest and secured by property.
Does working with an experienced family law attorney and the professionals that they would bring in help ensure that the party who hasn’t been involved in the business gets their fair share during the divorce?
Definitely. Regardless of what lawyer is hired, if there is a valuable business then the owner or the spouse is absolutely recommended to hire an experienced family lawyer to address that matter. It’s a virtual necessity.
Is that possible to appeal a divorce case in New Mexico?
What is the process of appealing a divorce in New Mexico?
First of all, you want to try to settle the case, because you control the outcome. And in spite of popular opinion, even trial lawyers very much want to settle a case. The cases that are tried, however, may be going towards an appeal. A trial lawyer needs to actually have a great knowledge of an appeal; and an appellant lawyer has to have a great knowledge of trial procedures as well. It’s best to have access to both because to properly lay a case for appeal it has to be done at the trial court. It may adversely affect an appeal if the case is not laid out properly at the trial court.
An appeal is where you’re dissatisfied with the outcome. There are some post-decree motions that can be filed to ask the court to reconsider or bring some matters to bear that possibly were overlooked. There are procedures for that. After that happens, then there is time for appeal.
Is there a time limit for appeals or post-trial motions?
For any client that is thinking about post-trial motions or an appeal, there are strict timetables on that. Missed timetables would mean that the court order ruling would stand.
What types of appeals are generally successful?
It’s generally only legal issues that are appealed and not discretionary issues that the court makes. The court could go one way or the other on any issue and if there’s evidence to support what the court did, that issue will not be appealable because that’s the court’s discretion. So, usually appeals are where a court went wrong on a legal issue. The appellant process, however, is very lengthy so it has to be worthwhile. We do lots of appeals. Our firm has had the most reported cases in the family law area and in the state.
If circumstances change, can those court rulings be changed after the divorce has been finalized?
In family law cases where there are child support or spousal support, the court keeps jurisdiction of those issues until the children reach the age of majority and in the case of spousal support until it ends. In those cases, changed circumstances can mean that there would be a change in the support payments. There are, in spousal support cases, ways to arrange the award so that it cannot be changed. But child support matters can always be changed.
Also, the court always has jurisdiction to enforce its orders even many years after the divorce, anything that is done on property that is not appealed will not be changed. So, the only things that can be changed typically are support. Under Rule 60, a court can reconsider a decision but those would have to be dealt with within a year of when the court made the decision. Courts can overturn a property judgment or a monetary judgment if there have been certain types of actions like mistake, fraud, things of that nature.
If someone disagrees with the outcome of their divorce case, are there additional options to those already mentioned?
In certain cases a court can set aside the judgment for things like mistake, fraud, inadvertence and excusable neglect within a year after the divorce. And there are other reasons if the court didn’t have jurisdiction; that’s an attack on the judgment itself, those can be successful. For compelling reasons a court can set aside the judgment. Except for that and post-decree motions where you are bringing a matter for reconsideration to the court, once the court has ruled the only other avenue is by way of appeal.