By Elisabeth Edwards, Wanzer Edwards PC
The CARES Act, also known as the Coronavirus Aid, Relief and Economic Security Act, officially became law in the U.S. on March 27, 2020. The average American likely has little knowledge of the full scope of the CARES Act and cares only that stimulus money showed up as a result of the new law. Stimulus checks springing from the CARES Act were based on 2019 federal tax filings and included money for individuals and $500.00 per dependent under age 17. Most families started receiving direct deposits or paper checks in April 2020. his is exactly when the questions started overwhelming attorneys in the family law bar: Should this money be divided between parents? If so, how? My ex claimed the children in 2019 and got all the stimulus money; shouldn’t I get some? As with many family law practitioners, I took the approach that if the stimulus payment was less than the attorney fees which would be incurred to fight over the money, it was not worth fighting over. But, as is usually the case, this did not deter already angry ex-spouses or never-married parents from engaging their counsel to argue about division of funds. Many in the family law bar responded by writing a method of division of possible future payments into our agreements if there would be another one.
A second stimulus payment was approved in December 2020 and paid in January 2021. This payment increased the amount per dependent to $600 but was still based on 2019 federal tax filings. This now seemed incredibly unfair to all the parents who typically alternated claiming the children for tax purposes but had happened to draw the “short straw” of not claiming the kids in 2019.
The American Rescue Plan is scheduled to pay stimulus payments of $1,400 per dependent beginning May 2021. The difference with this third round of payments is that there is no age limit on the dependents, with payments now included for any dependent, such as those 17 years of age and up, including college students, disabled adults and any other adult dependent. Payments may also include “plus-up” payments, if the IRS underestimated previous stimulus payments by using an older tax return when the payment was originally calculated. This increased payment is sure to rekindle arguments between parents as to how it should be divided, especially if previous payments were not shared, or the 2020 tax returns have not yet been filed. What can all of us in the family law bar tell our clients?
For parents whose divorces are not yet finalized, or whose paternity or modification cases remain pending, this issue can be easily added to pending court proceedings. For everyone else the answer as to “What would Judge So-And-So do?” depends on what county is managing the case.
An extremely informal survey of central Indiana judicial officers has revealed as many ways to divide the stimulus check as there are judicial officers. Some counties do not even have consensus among judges who hear family law cases. However, here are some options for attorneys to consider when speaking with their clients and when presenting cases for division of stimulus payments to the court (actual results in court may vary depending on a number of factors):
- Use income percentages. Select judges in Hamilton and Marion Counties suggested to reverse the parties’ income percentages and divide the child-related portion of the stimulus payment accordingly. For example, if Dad earns 80 percent of the income and Mom earns 20 percent of the income on the parties’ child support obligation worksheet, then Dad should receive 20 percent of the stimulus payment and Mom should receive 80 percent. This is a division method that seems to focus on the need of the parties. The obvious downside is that income may have changed since the last order and perhaps because of pandemic job loss.
- Use overnights. Select Hancock County judges indicated their solution was to divide the child portion of the stimulus payments based upon each parent’s percentage of overnights. For example, if Mom has 102 overnights annually, and Dad has 265 overnights annually, Mom would have 28 percent of the overnights, and Dad would have 72 percent. Therefore, Mom should receive 28 percent of the stimulus payment, and Dad should receive 72 percent. This, however, could lead to a battle over whether the overnights listed on a child support worksheet are actually being exercised.
- Give to the custodial parent. One judge I spoke with in Hendricks County suggested to give the child portion to the custodial parent. Others have ordered that the child portion should be held and reserved for final division by the court or agreement of the parties.
- Divide equally or not at all. Conversations with attorneys have suggested that other judicial officers may be taking the “keep it simple, sis” approach, preferring to divide the payments equally between parents, or simply leave the payments alone, as they are based on which parent claimed the children each year and therefore are already divided as the government intended. Many judges have also said they have not had to decide this issue yet, but would be open to dividing the payment between parents, under the right circumstances.
What should family law practitioners do about payments already received or the next round of payments? For starters, parents should consider payments received in 2020 and earlier this year to be gone unless there has been an order directing recipients to hold any amounts received for further division at a final hearing. Especially if there has been nothing pending, that money is likely spent. If there is nothing pending and parents want to try to capture some of this next round of stimulus money and possibly future payments, attorneys should do an honest cost-benefit analysis with clients regarding how much it will cost in attorney fees as well as their own emotional currency and cost to their co-parenting relationship to bring up the issue and ultimately file for a hearing on the issue. Odds are, it may not be worth it to mess up a sometimes precarious relationship with their ex, even if they may come out in the positive monetarily. But, if the case is already open, add division of stimulus payments as an issue to consider at mediation and trial. Plan to include language in all future agreements as to how to divide child-related stimulus payments going forward.
Until this period passes, I offer my solidarity to the rest of the family law bar. I promise, this too shall pass, just like the pandemic.
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