Modifying Your Oregon Divorce Judgment

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A divorce (or custody case) is a major life event which is based on the circumstances that exist at the time your judgment is finalized. What happens if things change several months or even several years after your judgment has been signed? Here is a basic guide to modifying your divorce or custody judgment in Oregon. This is only an overview and is not intended to be legal advice – you should discuss the specifics of your situation with your mediator or attorney.

Overview. Generally speaking, child related issues and spousal support are subject to modification. Property division, on the other hand, is final. A property division can only be reopened if you discover that an asset or liability was omitted (either accidentally or intentionally) from your original judgment. ORS 107.452 is the statute that applies if an asset was overlooked in the original divorce.

Child Support. Child support can be modified when 1) there has been a substantial change of financial circumstances; 2) every three years even if there is no change of circumstances; or 3) if both parents agree to the change. It is important to note that a change to child support must be put into a new judgment which gets signed by a judge. It is not sufficient to have a “handshake” deal regarding child support.

In Oregon child support can be paid up until age 21 if the child qualifies as a “child attending school” under ORS 107.108. What this means (oddly enough) is that your child is a party to your divorce between the ages of 18 and 21 and that he or she can file a motion to modify your divorce judgment to seek child support from either or both parents.
Parenting Plan. The legal standard for modifying a parenting plan is simply a “best interest of the child” standard. In other words, if someone thinks it is in the child’s best interest to change the plan, they can make a formal request to change it either by filing a motion with the court or proposing to go through the mediation process.

Like child support, a parenting plan can be modified anytime both parents agree. One-time change do not need to be put into a new parenting plan. However, if you are going to make a permanent change to the parenting plan then you should submit a new parenting plan to the court (using a Stipulated Supplemental Judgment) and get it signed by a judge. You should be aware that a new parenting plan is not enforceable unless it is in a new judgment that is signed by a judge.

There is a common misconception in Oregon that there is a certain age at which children are allowed to pick where they live. That is not true. However, based on the circumstances of your situation (e.g., child’s age, maturity level, etc.), a child’s preference may be taken into account in developing the parenting plan. In certain situations parents will sometimes include their teenage children in the mediation process when developing a parenting plan so that the children’s preference can be considered.

Decision Making (Custody). The decision-making provision of your judgment (i.e., legal custody) is subject to modification as long as your children are under 18. Joint custody can essentially be modified whenever one parent decides that joint custody is no longer working well and files a motion to sever joint custody. At that point the court has to award sole custody to one parent or the other since there can be no joint custody in Oregon unless both parents agree. Sole custody can only be modified when there has been a substantial and unanticipated change of circumstances that goes to the ability of one parent or the other to care for the children.

Spousal Support. Spousal support (alimony) can be modified any time that both parties agree to it. If there is no agreement, then applicable legal standard is that there must be an “unanticipated and substantial change of circumstances” to change support, i.e., a major life event. Just because there has been a major life change does not necessarily mean that support will be modified; it only means that someone can request a modification. Whether or not there is a modification will depend on the facts and circumstances at the time that the request is made.

Common reasons for modifying spousal support include retirement of the payor, the payor losing his or her job, the recipient getting remarried or the recipient changing careers and significant increasing his or her own earnings. Again, just because one of these things happens does not automatically mean that a spousal support modification will be granted.

As with child support, a new spousal support agreement must be put into a new judgment which gets signed by a judge. Failure to put the modified support arrangement into new judgment will make the agreement ineffective and can lead to some very serious negative consequences for one or both parties.

Spousal support can only be modified as long as there is a spousal support order in place. Additionally, spousal support cannot be ordered later on if there was never a spousal support order in the first place. Lastly, if your spousal support order has ended it cannot be reinstated. There is an exception to this rule which is that if spousal support had been terminated early and the reason for termination has ended the spousal support can be reinstated if you are still within the timeframe of the original support award.

Misc. Issues. There are a number of other smaller issues that are subject to modification, although they are typically only addressed if one of the major issues above is also being modified.

Some of those smaller issues include:
• Who will provide health insurance for the children;
• How the children’s unreimbursed medical expenses will be paid;
• How non-medical expenses for the children will be paid;
• The amount of life insurance that needs to be maintained; and
• Who will claim the children on their taxes.

Mediation tends to be a very efficient process for dealing with modifications. Usually a modification can be mediated in just one or two mediation appointments. Once an agreement is reached, Forrest can prepare all of the necessary documents and file them on your behalf. There is a $150 filing fee that gets paid directly to the court each time you file a modification.

What Does Custody Really Mean?

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If you had to define “custody” how would you define it? Interestingly, Oregon statutes do not actually define sole custody but they do define joint custody.  ORS 107.169 defines joint custody as “an arrangement by which parents share rights and responsibilities for major decisions concerning the child, including, but not limited to, the child’s residence, education, health care and religious training.”

There are a number of common misunderstandings about legal custody:

Custody doesn’t impact child support. People sometimes think that legal custody impacts child support. It doesn’t. The parenting plan impacts child support but legal custody doesn’t.

Custody is not parenting time. People often confuse custody with parenting time. Custody literally only refers to decision making while parenting time refers to the actual parenting schedule. To illustrate this point, you can have: Sole custody with a 50/50 parenting plan; Sole custody with an every-other-weekend parenting plan; Joint custody with a 50/50 parenting plan; or Joint custody with an every-other-weekend parenting plan.  When we discuss these two concepts in mediation or Collaborative Law we usually talk in terms of “decision making” and the “parenting plan” or “parenting schedule.”

Custody doesn’t automatically allow someone to move out of state. People often think that sole custody automatically allows a parent to move far away with the children. That’s not the case. In Oregon, if there is a contested move-away situation the court looks at what is best for the child. The assumption used to be that if a parent was moving away to get a better job or to get more family support, that would be good for the parent which would then be good for the child. That assumption is no longer made. Now the assumption is that if a child has a regular relationship with both parents, it is best to ensure that those relationships continue.  Mediation is a great option for addressing move-away cases because it allows parents to focus on creating a workable arrangement for both of them  rather than taking a “win-lose” approach to the situation.

So what is custody?

In the mediation or Collaborative process we don’t usually use the word custody. Instead, we refer to it as “decision making.” The phrase “decision making” is more accurate and less inflammatory than the word custody. When we talk about decision making we typically are talking about religious upbringing, school decisions and elective medical decisions. As we see in ORS 107.169, the major decisions “include but are not limited to” these three types of decisions. Realistically, major decisions include any decisions that are coming up where you end a lot of time thinking about the decision, research different possible options, etc.

How is decision-making addressed in mediation and Collaborative Law?

In mediation we begin by asking the question, “How have you made decisions in the past?” We then ask, “How do you envision making decisions in the future?” Often times whatever people have done in the past they will continue to do in the future, although that doesn’t always have to be the case. For example, it may the case that a stay-at-home parent historically made most of the decisions but now that there will be separate households the wage-earning parent begins to take a more active role.

Regardless of the approach to decision-making, mediation and Collaborative Law provide a process for identifying and discussing interests. When we are discussing something as important as making major decisions for your children, it is important that each parent have a chance to discuss the issue from their perspective and feel heard.

Divorce and Taxes – Ten Things To Know

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This article has been updated to reflect the Tax Cut and Jobs Act of 2017. 

Divorce frequently has tax consequences.  Here are ten important things to know when going through the divorce process.  Depending on your situation, you may be able to implement strategies during the divorce to reduce taxes for one or both of you for years to come.

  1. Property Division Not Taxable.  A property transfer related to divorce is not a taxable event pursuant to Internal Revenue Code Section 1041.  This means that you do not have to pay taxes on assets that you receive in the divorce.  This also means that you do not get to deduct the transfer of assets on your taxes.
  1. Spousal support. Beginning January 1, 2019 spousal support was/is no longer tax-deductible to the person paying it (the payor) or taxable to the recipient.  However, divorces which were finalized prior to this date are ‘grandfathered in’ so that spousal support continues to be tax-deductible to the payor and taxable to the recipient.  It’s important to address the issue correctly in any supplemental (modification) judgment so that the deductibility is preserved.
  1. Child Support.  Child support is not a taxable event. The payor pays child support with after-tax dollars and the recipient does not have to pay taxes on the money received.
  1. Dependency Exemption/Child Tax Credit.  The dependency exemption used to be a deduction from your taxable income associated with caring for a child.  The dependency exemption no longer has any value in and of itself.  However, it the person who claims the dependency exemption for a child also gets to claim the $2,000 child tax credit.  A ‘tax credit’ is a dollar-for-dollar reduction off of your taxes, where as a tax-deduction just reduces the amount of income you pay taxes on.  If you do not specify who gets to claim the child, then the IRS rules say that whoever spends more than half of overnights with the child gets to claim that child.  If you have a 50/50 parenting plan, the IRS says that whoever has the higher income gets to claim the child.  These are just the default rules – you are allowed to “trade” the dependency exemption and child tax credit.  For example, if you have one child, it is possible to agree that you will each claim the child every other year.  If you have two children, it is possible to agree that you will each claim one of them.  It is important to note that the tax benefit associated with claiming the dependency exemption and child tax credit is phased out at very high income levels.
  1. Capital Gains.  When you are dividing stocks or mutual funds that are NOT held in retirement accounts, you need to be aware that you may have to pay taxes on those stocks when you sell them.  For example, let’s say you have ten shares of Google stock that are worth $500 and you paid $100 for five of them and $450 for five of them.  If you sold the shares tomorrow you will pay capital gains on $400 of gain for the shares that were purchased for $100 but only pay capital gains on $50 of gain for the shares that were purchased for $450.  This is true even though all of the shares are worth $500!  Therefore it is very important to know what the “basis” (purchase price) is when you are dividing assets to which capital gains may apply.  Capital gains can also apply to other assets, not just stocks.  It is important to know that assets that are held for less than one year are taxed at normal income tax rates, while assets that are held for more than year are taxed at a more favorable long term capital gains rate (0% or 15% for most people).  Depending on how you structure a settlement, you may be able to save on taxes thanks to the capital gains rules.
  1. Retirement Transfers.  You can divide a 401(k) and certain other types of retirement accounts without incurring penalty or paying income taxes using a Qualified Domestic Relations Order (QDRO).  If you did not use a QDRO and just cashed in a portion of the retirement to give to your ex, you would incur a 10% penalty (if you are under 59.5) and pay income taxes based on the account owner’s tax bracket.  A QDRO allows you to make the transfer without tax or penalty; the amount awarded to your ex will be transferred into a retirement account in his or her own name (usually a rollover IRA).  Your divorce judgment will specify how much will be transferred.  The QDRO is a supplemental legal process that happens after the judgment is signed by the judge (or at the same time).  QDROs are a specialized area of the law and most divorce attorneys do not draft them.  However, your divorce attorney or mediator should be able to provide you referrals to one or more QDRO attorneys.
  1. IRA Transfer.  IRAs can be transferred without a QDRO when done pursuant to a divorce judgment.  The company that holds the IRA will have a form that you need to fill out and you will likely have to provide a copy of the judgment when you initiate the transfer.  IRA transfers are free and relatively quick; QDROs usually cost $500 or more and can take up to several months to complete.  If you have both IRAs and 401(k)s, one strategy is to do the entire transfer from the IRA so you can avoid having to do a QDRO.
  1. Head of Household.  If you have more than 50% of overnights with a child then you can file your taxes “head of household”.  Head of household is a more favorable tax filing status and results in having to pay less tax.  Unlike the dependency exemption, you cannot “trade” head of household tax filing status.  In other words, you can only file head of household if your child actually spends more than half of the year at your house.  If you have a 50/50 parenting plan and two kids, one strategy is for each parent to get an extra weekend with one of the children so that both parents can file head of household.
  1. No Partial Year Filing.  If you are married as of December 31st you can file taxes as “married filing jointly” or “married filing separately”.  If you are divorced on or before December 31st you have to file “single” or “head of household” (if applicable).  It is not possible to file part of the year as a married couple and part of the year as single.  One common strategy toward the end of the year is to wait to finalize your divorce until January so that you can file jointly for the prior year.
  1. Capital Losses.  Don’t forget to address carry-forward capital losses in your divorce judgment.  If you have previously filed jointly, look at your most recent tax return to see if you have capital losses that you can carry forward to the following year.  If you do, these can be divided between the two of you.  Depending on your situation, it may make sense to award the losses to someone who is also receiving an asset that has capital gains associated with it.  A different strategy would be to award the losses to a person in the higher tax bracket.

Lastly, lawyers not CPAs!  You should not rely on your lawyer for tax advice unless they happen to be a tax lawyer or also happen to be a CPA.  Lastly, this article is provided for general information only and should not be construed as tax advice.  If you need tax advice you should consult with a licensed tax professional.