Tax Issues for Couples in Civil Unions

As tax season is now behind us, many same-sex couples may have discovered that same-sex couples often pay higher taxes because they are not entitled to federal tax benefits for a marriage. Additionally, same-sex couples must file separate federal returns and in most states, separate state returns. States that recognize civil unions or marriage for same-sex couples, such as Massachusetts, may file joint state returns. Here in the Live Free or Die state where we do not have an income tax, couples do not file state tax returns. 

Kevin R. McMurdy's recent post on Tax Implications and Civil Unions on the Employee Benefits Law Blog reviews various tax implications and employee benefits for same-sex couples.

Short Sale: Selling Your Home for Less than the Costs and Mortgage Balance

As foreclosures are on the rise, many homeowners are seeking alternatives to protect their credit and move on. One such alternative is a "short sale." A short sale is when the costs of selling the home (i.e. realtor's commission, transfer taxes) and the mortgage payoffs are greater than the proceeds received from the sale. The seller must then either bring funds to the closing to complete the transaction, or work out a deal with their lender to accept less than the amount due on the mortgage.

A recent posting from Barbara Strapp Nielsen on the New Jersey Law Blog titled Short Sales When Loans Exceed the Value of a Home provides insight and analysis on this topic. Attorney Nielsen writes:

Unless a homeowner is able to pay off all of the mortgages which are secured by his property, the homeowner will not be able to convey good title to a buyer.  If the homeowner is unable to obtain a sales price which enables him to pay off all loans and closing costs, and he does not have the funds to make up the difference, then he may want to try to obtain approval from his current lender(s) to accept an amount less than the full amount due on its mortgage.  For a lender, this may be acceptable to obtain repayment of a substantial amount of its loan and to avoid the costs and delay of foreclosing on the loan.  This will generally mean that the Seller will not receive any funds from the sale of his home.

In order to obtain such approval from a lender - which may or may not be granted - the homeowner needs to contact his lender(s) to determine what information they will need to make their decision.  This usually includes a financial statement of the homeowner, copy of a contract of sale, appraisal, and other pertinent documents.  Generally, a lender will not consider approving a short sale without a clear economic hardship on the part of the homeowner and an existing default or pending foreclosure.

Until recently, forgiveness of a debt under these circumstances, could trigger a taxable event according to the IRS.  This means that if a lender forgave a part of the mortgage debt by accepting a reduced amount in full satisfaction of the loan, then the amount forgiven could be deemed taxable income to the homeowner.  This was so even though the homeowner received nothing from the sale.  However, in December 2007 Congress passed the Mortgage Forgiveness Debt Relief Act of 2007.  This Act amends the Internal Revenue Code to exclude from gross income amounts attributed to a discharge of indebtedness incurred to acquire a homeowner’s principle residence.  The amount of the debt forgiveness can be up to $2.0 million.  Thus, a homeowner is now able to sell his home for less than what is owed on it without incurring an additional tax liability.   This exemption for forgiven debt, however, is only temporary and expires within three years.

Divorce and the Housing Market in New Hampshire

Reports of the housing crunch are all over the Internet, the newspapers and the television. Here in New Hampshire, foreclosures are on the rise. In 2007, banks foreclosed upon 2,000 New Hampshire property owners, and foreclosures are expected to reach 3,000 for 2008. As of the 2007 fourth quarter, 18,000 New Hampshire loans had past due payments.

What can you expect if you are in the process of divorce and one of the thousands of New Hampshire property owners experiencing trouble making your mortgage payments? The court has jurisdiction under NH RSA 458:16,I (h) to order the sale of the home only if the party residing in home does not have sufficient financial resources to pay the debts and obligations of the property in a timely manner. These debts and obligations include the mortgage payments, taxes, insurance and ordinary maintenance of the home. However, the continuing decline in the housing market can spell trouble for divorcing couples who are trying to stay afloat even when the parties agree to list the home for sale or the court orders the home to be placed on the market. According to the New Hampshire Association of Realtors, home sales in Hillsborough County New Hampshire have dropped 26.8% and the median home price has dropped 7.8%. Although these numbers have not seen as drastic a drop as the national numbers, divorcing couples in New Hampshire need to be prepared to sell at lower prices after a longer stay on the market.

For more information about the current New Hampshire housing market, Laura Knoy recently hosted a program on NH Public Radio that can be found here.

New legislation re: payday loans

Today the New Hampshire house passed HB 267, legislation that puts a cap on the interest rate for small loans given out by payday and title lenders. As on January 1, 2009, the date that the bill becomes effective, lenders may not charge more than 36% annualized. The bill also limits the eligibility of borrowers by restricting the number of times that a borrower can utlize a payday loan.

Although these types of loans can be a valuable way to manage an emergency, the loans can create a cycle of debt that the borrower can not break free from. Especially during a divorce, as pressure mounts to make ends meet, it is important to make good choices in the type of debt that you incur. Whether you are using a credit card, a payday loan, or a loan from your 401(k), read the fine print and make sure you understand the ramifications of the debt that you are taking on and the fees and costs that are associated with the debt.

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What is a Guardian ad Litem?

A guardian ad litem, often referred to as a "GAL," is a person appointed by the court to represent the best interests of an individual. Unlike a guardian, a GAL does not manage the affairs of of persons, nor do they act as their attorney.  

In a divorce or parenting petition proceedings, the GAL is usually appointed to represent the best interests of the children. The court charges the GAL with the responisbility of investigating designated issues and making recommendations to the court. Issues can include parenting responsibility, parenting schedules, ability of either parent, influence of signifcant others, and special needs of the children. The GAL is a valuable tool for the court since the GAL can gather a lot of information to provide to the court and aid in making a decision regarding parenting rights and responsibilities.

For more information on Guardian ad Litems, the New Hampshire guardian ad litem board has a useful webpage found here.

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College expenses

Besides baseball and daffodils, spring is also the time for college financial aid applications. A recent post from Jennifer Weisberg Millner on the NJ Family Legal Blog regarding the responsibility of parents for their children's college expenses highlighted how different laws are from state to state. Although parents in New Jersey may be ordered to pay for their children's college tuition and expenses, in New Hampshire, no court order shall require a parent to pay for educational expenses beyond high school. However, under the NH Supreme Court's decision in Donovan, a court may enforce orders made prior to February 2, 2004 (the date that the law went into effect) that required a parent to to pay for college.

Attorney's fees in family law

Divorce is a time of great financial stress on a family. Throughout the process, the family often maintains separate households, has debts that need to be paid, and then also need to pay an attorney. Before you hire an attorney, you should have a clear understanding of the fees that you will be charged, as well as what expenses you will be responsible for. It is always best to sign a fee agreement, which will outline the fees, expenses and retainers.

Family law attorneys and their staff generally charge by the hour in increments such as every six minutes. You will be billed for any time spent on your case, including meetings, emails, drafting pleadings and correspondence, telephone calls, hearing preparation, travel and waiting time at court. Hourly rates vary widely, depending mostly on experience. Family law attorneys cannot charge contingent fees where they are paid by a percentage of an amount recovered (for example a portion of a child support arrearage).

A client will often be asked to provide a retainer, which is a sum of money paid up front to secure payment of any fees that are incurred. A retainer will range from very small ($500) to very large ($10,000) depending on the attorney that you hire and the level of complexity of your case. Although most retainers or the unused portion of the retainer are refundable, sometimes the retainer is not refundable.

Finally, attorneys will charge for a variety of expenses, including filing fees, sheriff fees, long distance phone calls, fax fees, copies, postage and mileage. Generally, if the fee relates to your case, whether it be a $21.00 fee from the sheriff for serving papers or a $500.00 fee from a stenographer for a deposition, you will be charged for the expense.

 

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Pets and Divorce

A very concerning issue for many people facing divorce is what will happen to the family pet. Currently, the law recognizes pets as property which will be divided in a final divorce decree pursuant to RSA 458:16-a. Property distribution factors were recently discussed here. A court is more likely to permanently award a pet to one of the parties rather than ordering a "shared parenting" arrangement. On the one hand, the law is not able to recognize that pets have strong emotional ties and separation from that pet will be much more detrimental to a family member than the loss of a kitchen table or a television. On the other hand, enforcing a court order with a "shared parenting" schedule and calls for division of vet and doggie daycare expenses could place an additional burden on the all ready over-worked courts.

Attorney Danny Meeks, who publishes the Pet Trust Law Blog, recently wrote about these issues in a posting called  "Is your pet a family member subject to 'shared parenting.'" Attorney Meeks sited interesting pending legislation in Massachusetts that would grant court's the authority to restrain a party from a pet in a temporary domestic violence restraining order.

New Hampshire civil union

A civil union is a domestic relationship that provides state-based legal rights, responsibilities and benefits to couples of the same sex. On January 1, 2008, New Hampshire became the fourth state enact laws that recognize civil unions. A civil union entitles the parties to “all the rights and subject to all the obligations and responsibilities provided for in state law that apply to parties who are joined together [in a marriage] pursuant to RSA 457." Some of these rights and obligations include:
· inheritance rights and intestate succession;
· wills, survivorships, or other incidents of the acquisition;
· access to courts under family and divorce law;
· health and auto insurance benefits;
· state family medical and bereavement leave benefits;
· protection against discrimination based on marital status;
· medical decision making powers and hospital visitation rights;
· workers’ compensation dependency benefits;
· standing for wrongful death and loss of consortium claims
· crime victims’ rights;
· marital privileges in court proceedings; and
· vital records


Property distribution: Equittable is not always equal

New Hampshire law grants courts the authority to order an equitable distribution of property between parties. Although the law presumes that an equal distribution is also an equitable distribution, the court may decide that equitable is not equal when one or more of several factors are present. Some of the factors include the 1) the duration of the marriage, 2) the opportunity of each party for future acquisition of capital assets and income, 3) the need of the custodial parent to occupy or own the marital residence for the benefit of the children, 4) tax consequences of the property settlement, 5) expectations of retirement assets and 6) the fault of either party. The law includes fifteen different factors, including the broad final factor of “any other factor that the court deems relevant.” Click here to read all of the factors listed in the property settlement law.