Alabama Opens Door for More Retirement Distributions in Divorces

Until recently, Alabama courts were unable to force parties to divide retirement benefits in a divorce unless the parties had been married for at least 10 years. However, under a new Alabama law, courts will now be allowed to use discretion in awarding the division of retirement accounts in all divorces.

Why Limit to 10-Year Marriages?

There is good reason for the old restriction. Under the old theory, a person who is working to earn retirement benefits, such as pensions and 401(k) plans, is doing all the work to earn the money. Since forcing a withdrawal can trigger steep penalties and unintended taxes that could eliminate much of the benefit and value of such plans, the old law allowed the parties to postpone actual payment until the person began receiving the retirement checks. So, if a husband had a 401(k), the court can award up to 50% of that retirement account to his ex-spouse. But he would not be required to start distributing his ex’s share until he actually retired and began drawing on the account.

The problem, of course, is that this manner of property division keeps a divorced couple potentially connected for decades, even until death. This does not favor finality or swift resolution and separation of marital bonds. Although the old law did allow the parties to agree upon a lump sum, this essentially forced the difficult compromise of losing money to penalties and taxes in exchange for finality. By limiting these types of divisions to longer marriages, courts generally would offset the difference by requiring larger awards from other sources, thereby protecting the benefits of retirement accounts.

How Does the New Law Change Things?

Under HB 208, Alabama lawmakers decided it made more sense to allow judges the discretion to award retirement divisions in all marriages. This does not mean judges will be required to divide retirement accounts in short marriages. It simply means that it is open to debate in divorce cases. This is long overdue, because income has changed significantly since the original law was enacted decades ago.

Intuit suggests that about 34% of Americans currently are employed by the ‘gig economy,’ meaning they are freelancing or working at jobs that are temporary and usually carry no retirement or benefits, according to CNN Money. Furthermore, with income equality steadily rising, and women making more than at any time in the past, it makes sense to start looking at retirement distributions differently and with a more modern view that allows for a case-by-case analysis. Divorce lawyers have been negotiating retirement distributions for years, as part of settlements; this law just gives judges the ability to do the same.

Hiring a Birmingham Divorce Lawyer

Family courts are among those with the greatest number of pro se (self-represented) individuals. Unfortunately, this often results in a lot of long-term problems, such as endless disputes, unresolved tax and financial complications, and repeated, unnecessary court appearances. The Birmingham family law attorneys of 5 Points Law Group can help you efficiently resolve your divorce without as many surprises. Laws change frequently, so what works today may not work tomorrow. Call (205) 263-0743 or visit us online today to get timely advice to your divorce questions.

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Divorce Courts Now Deal With Disputes Over High School Athletics

There are plenty of things to disagree about in a divorce case. Who gets the kids on major holidays? Where are we meeting to make the swap this weekend? In recent years, courts have been mediating a new type of dispute between divorcing spouses – should the children play high school sports?  Just as is the case with determining the custody of a minor child, Alabama courts will generally look to what they deem is in the best interests of the child. Of course, this is often subject to much debate.

Birmingham divorce attorneys often advise clients on Alabama law, but it is a moving target when it comes to certain high school athletic programs. In particular, recent studies on head injuries associated with high school and college football have led some to rethink the wisdom of letting children play.

Recent Disputes Over High School Football in Family Courts

One father in Pittsburgh is fighting to keep his son from being able to continue playing high school football. That father, according to the New York Times, believes that the risks are simply too great and therefore the teen should not be allowed to continue. On the other hand, the man’s ex-wife strongly supports their son continuing to play, despite the fact that the young man has had multiple concussions. It is a power struggle, in which both parents definitely have valid and understandable arguments.

As The Times explains, the mother feels like her son has a lot to gain from athletics. Meanwhile, the father feels that his son is jeopardizing long-term potential and well-being by continuing to risk his health. So, how can a court resolve this dispute?

Family Court Involvement in High School Sports

It is important for anyone going through this type of dispute to understand that no matter how much a teenager may express his or her wishes, ultimately the courts will presume that both parents are legally permitted to make these decisions on behalf of their minor children. So long as both parents can come to an agreement on these matters, a court is probably not going to be involved. Courts generally get involved when the parents cannot agree.

Risks Associated With High School Football

The links between high school football and head injuries have only begun to be explored through research, but one study suggests that high school football players are nearly twice as likely to suffer a concussion as their college counterparts. The study, according to Frontline, also suggests a potential link between repeated head injuries and a number of conditions. For instance, retired NFL players tend to have a far higher average rate of conditions, such as clinical depression, suicidal ideation, Alzheimer’s disease, and traumatic encephalopathy. Frontline is careful to point out that there has been no clear or definitive link proven to date, but the research certainly does reveal a burgeoning crisis, especially among younger athletes – namely high school football players.

What to do if You And Your Ex can Not Agree About High School Sports for Your Child?

In almost all cases, you are better off if you can reach an agreement about what is best for your children. The last thing you want to do is give teenagers a reason to drive an emotional wedge between you and your ex. Instead, you should work closely with your attorney to reach an agreement. Ultimately, you should discuss your concerns with an experienced Birmingham family law attorney. Five Points Law Group can help with even the most difficult family law disputes. Call (205) 263-0743 to speak with an attorney about your case today.

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Trusts for People with Disabilities

One of the primary concerns people have as they age is protecting their children, grandchildren, and other people they love. This can be complicated when an adult child is living with a disability.

Current estimates suggest that as many as 48.9 million Americans living outside of institutions are living with disabilities. As many as 24.1 million have severe disabilities, according to the National Service Inclusion Project (NSIP). This means that a lot of Americans may die each year, leaving a surviving disabled adult child or other close relative. When planning, here are a few questions people might want to ask:

• Who will take care of this person when I am gone?
• How will this person obtain medical care without my help?
• If I leave this person all my money, who will manage the funds?
• If I leave this person money, will he or she lose Medicaid and Medicare eligibility?

These are just a few of the big questions families must ask when they are providing for a disabled adult child or other close relative. Fortunately, there are things people can do right now to protect their loved ones for years to come.

Types of Trusts

A trust is just a document that establishes a set of rules and procedures for managing and distributing assets that are owned and controlled by that document. There are many kinds of trusts. For instance, most trusts are established as revocable, meaning they can be revoked or changed during a person’s life. There are also irrevocable trusts. One people put assets into that type of trust, they cannot change their mind and take things back out of the trust. There are also special needs trusts, which are set up to protect people with disabilities.

Funding a Trust

There are two basic ways to fund a trust – self-settled and third-party settled. A self-settled trust is one that is funded by the person who is intended to receive its benefits. In other words, you put money in a trust that is set up to provide for your own care and upkeep. On the other hand, a third-party settled trust is one that is funded by someone other than the individual who will receive its benefit.

Special Needs Trusts (SNT)

A special needs trust is often set up to maintain eligibility for public aid and other needs-based benefits, like Medicaid, Medicare, Social Security, and so forth. These trusts are often quite complicated and require the careful review and assistance of an experienced attorney.

Rules for SNTs

In August of 2017, the Centers for Medicare and Medicaid Services (CMS) released guidelines entitled, “Implications of the Cures Act for Special Needs Trusts. In this release, CMS provided clarification on the requirements for establishing a workable SNT.

A properly drafted SNT must meet the following:

• Disabled adult is under 65
• Person must have a qualifying disability
• Trust must be set up solely for that person’s benefit
• Trust reimburses the state for all money left over after death (up to the amount of free care paid by the state while alive)
• Can be established using the money of a loved one or the disabled person created on or after December 13, 2016)

Estate Planning for Disabilities

If you have loved ones with disabilities, there can be a lot of public benefits to preserve, as well as potential tax consequences. In Birmingham, the experienced estate planning lawyers of Five Points Law Group can carefully review the facts of your unique situation and look for the best option to protect those you love. No single solution is good for everyone. Get caring and knowledgeable advice. Call (205) 352-4455 to schedule an appointment today.

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Preparing for the High Cost of a Nursing Home Stay

Not all estate planning is about wealth building. In fact, these days most Americans are less concerned about what happens if they die, but rather, they are more worried about what will happen if they live too long. According to the Social Security Administration’s (SSA) life expectancy tables, the average American male who is currently 65 can expect to live 84.3 years of age. A woman aged 65 can expect to live to 86.6.

The SSA reports that 25% of those living past 65 will also live to be over 90, and about 10% of them will live past 95. With longer life and better medical care, people may be living longer, but longer life also means higher medical costs.

Think Your Savings are Safe?

A married couple that has saved $1 million for retirement has done pretty well. By all measures of success, such a couple should feel reasonably proud of their savings and confident that it will last through 20 years of retirement (65 to 85), assuming they have a modest annual budget, they own their home, and healthcare costs can be handled through Medicare.

Average Cost of American Nursing Home Care

A 2015 Cost of Care Survey by Genworth suggests that the national U.S. average cost of long-term skilled nursing home care is about $80,000 per year.  For Alabama, it is around $69,000, and for the Birmingham area, it runs $73,825. According to Lifehappens.org, studies show that the average length of a nursing home stay is about 835 days, costing a total of $200,000. Of course, some people with chronic or severe conditions may require lifelong nursing home care at the end of life. Imagine a five-year nursing home stay: It could easily cost $400,000.

Paying for Care

Fortunately, there is Medicare, right?  Well, not exactly. Medicare only pays for up to the first 100 days of long-term care. Technically, Medicare is only designed to pay for short-term rehabilitation. So, if you need rehab after an injury, Medicare will pay for it, so long as you are making progress and your physicians believe you will recover and be able to return home. If, however, you require long-term care, Medicare will stop, and you will have to pay out of pocket for the care. That is unless you have planned ahead.

Long-Term Care Insurance

Many seniors over the age of 60 are smart to invest in a long-term care insurance policy, but these policies are not cheap. If you have saved a million dollars, you should have to start putting your budget toward high premiums, not to mention the fact that these policies are often quite limited and only cover a year or two of care.

Medicaid as the Primary Payer of Nursing Home Care

For the majority of Americans in nursing homes, Medicaid will pay the bill. For those with a lot of assets, it can be a challenge to understand that there are options for becoming eligible for Medicaid in order to preserve hard-earned wealth. There are often creative estate planning solutions that can shift assets to a spouse living outside of the nursing home in order to avoid having to use your entire retirement income on the nursing home bill. By setting up a qualifying trust or simply changing the ownership of certain assets, many seniors are able to preserve their savings, while ensuring that they are well-positioned to use Medicaid if they ever require nursing home care.

Birmingham Estate Planning Attorneys

If you are approaching retirement or are already in retirement, you should consider the likelihood that you may need to stretch your retirement savings for 30 or more years. Will your savings last that long if you or your spouse require nursing home care? The attorneys of 5 Points Law Group are dedicated to helping you preserve wealth and protect your savings. Call (205) 352-4455 to schedule a private consultation to review your unique retirement and estate plans today.

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Understanding How the New GOP Tax Law Affects Alimony

If you have been paying attention, you already know the new sweeping changes made by the GOP’s tax law will have long-range effects throughout the economy for decades. One big change has divorce lawyers across the country on edge – the elimination of the alimony deduction. For over 75 years, the alimony deduction has been a strategic aspect of negotiations between divorcing couples. Going forward, however, this is now off the table.

What was the Alimony Deduction?

Under existing IRS rules (See Publication 504), alimony was generally treated as a deduction for the paying spouse. The recipient then paid tax on the money, just like all other income. This somewhat softened the impact of being forced to continue paying money to an ex-spouse.

Theories Behind an Alimony Deduction

The logic is pretty clear. A person is ordered to pay an ex-spouse a portion of his or her money, most often because the ex-spouse earns less money. The paying spouse is usually the one who makes more (aka “the breadwinner”). It can be a hard thing to accept that you have to continue paying an ex, long after you are divorced. The paying spouse is getting nothing out of the continued relationship, while the recipient is getting income. The tax deduction acknowledged the fact that the alimony payments are a total loss for the payer, as he or she is not receiving goods or services for the money paid. Here is what the new law means for married couples looking to get divorced after 2018.

Changes Took Effect on January 1, 2019

The new law does not take effect immediately. Instead, it will only apply to those who get divorced after December 31, 2018. So, those who are considering divorce in 2018 may want to consider doing so quickly, as the law will not apply to those already paying alimony.

Settlement Negotiations Will Change

Previously, tax benefits of alimony were a strong consideration for higher income spouses. Now, without the benefit of any deduction, other items may be used to offset the implications of this law. In other words, we will likely see higher property distributions, lump sum payments, retirement divisions, and so forth being offered in lieu of alimony payments.

Consider a Prenuptial Rewrite

For those who have signed prenuptial agreements in the past, it may be wise to see an attorney to do a quick rewrite before 2019. After all, one common provision in many prenup agreements is a higher alimony payment (which includes tax benefits for the paying spouse) in exchange for less property distribution and less division of other assets, like retirement accounts, pensions, annuities, investments, and business interests. Given the lack of a tax benefit for alimony payments, those with prenups may want to strongly consider paying a little money to have an experienced divorce lawyer go through the old prenup to make sure it remains a viable and beneficial agreement going forward.

Getting Advice from an Alabama Divorce Lawyer

Whether you are considering a divorce, facing one right now, or just looking to take proactive steps to update your prenuptial agreement, the attorneys of 5 Points law Group are available to answer your questions and help you stay up-to-date with the most recent changes in the law. Call (205) 352-4455 or visit online to speak with an attorney today.

 

 

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