My Ex-Wife wants to modify our separation agreement. Instead of saying “$2000/month child support & $600/month spousal support”, she wants it to say that I’ll pay $2000 toward the mortgage, $300 spousal, and $300 child support. She claims that by wording it this way her income goes down and that she will qualify for reduced lunches and the kids will be able to apply for Pell grants (evidently they count both spousal and child support for these things). It seems to me that a $2000 mortgage payment for a home I don’t live in must be considered some sort of support, and I don’t want to have some sort of tax problem or lie on the applications. Am I right to worry, or does this wording about the mortgage payment not count as support?
$2000 seems like an outrageous amount to be paying but you may be making lots of money to do such. Alimony is tax deductible to you but she has to pay taxes on it. I can only assume maybe she wants to pay less taxes. I don’t think you should do it, but I also don’t know the whole situation either!
I’m not terribly familiar with all the ways such things can be structured (the Rosen lawyers might be able to tell us, or else contact your own lawyer and/or accountant). As for the mortgage, according to IRS publication 504 it seems to depend on whose name is the house (not the mortgage) is in: if it’s in your name it doesn’t count, if it’s in hers it counts as alimony, and if it’s jointly owned then half of it is alimony. But you shouldn’t take my advice, ask a tax professional.
Note that if she takes advantage of various welfare programs for the kids (I’m not sure if reduced lunches is included in that), that opens the door for the state to get themselves involved (they want their money back for the welfare programs) which might result in that $300 child support obligation being raised up to the amount specified by the NC guidelines while you’d still be on the hook for the $2000 mortgage and $300 alimony under the agreement. Of course, she could try that on her own anyway, either directly or by inviting the state to involve themselves.
Yes, paying the mortgage would be support in that you would be supporting her and the children, but if I were you, I would be hesitant to change the wording for a number of reasons. First, one of the reasons for the change would be to change the spousal support from being defined as alimony and being taxable. This will impact your taxes negatively. Also, if you change the support provisions to only paying $300 a month in child support, she may be able to go after you in child support court and get you ordered to pay support pursuant to the child support guidelines. Then you would still be contractually obligated to pay the mortgage under the agreement. Lastly, while I’m not well-versed in information about Pell Grants, it would seem that she is trying to be fraudulent. If you are inclined to make any changes, I would do so with caution and make sure you have an attorney draft or review the paperwork so that all your other interests are protected.