Seperation Agreement-Binding Contract?


#1

$46,000 AND $24,000 in back taxes??? From one year’s filing? That is a lot of money! Either they both made a LOT of money or they didn’t have any taxes withheld from their checks. Were they self-employed?

I would think if the judge made a decision, it’s binding unless you re-file and challenge it. BUT I’m not a lawyer, so hopefully one will advise you.


#2

Thanks for the comment needinganswers. The taxes were due from my husband’s retirement fund. Per the seperation agreement his ex was entitled to a little over $89,000. He quit his job for about 3 months so that he could collect his money for two reasons 1- to pay her off and 2- to have money so he could live. After child support and the bills he was left with to pay, he had no money left to live on so I am told and was living with his mom. We had not met at that time. Anyway, supposedly she was going to put $50,000 into an educational IRA for their kids. Come tax time, they met with a CPA and she found out how much taxes would be due. She then decided to file on her own without claiming any of the monies. Our point to the judge was if she wanted that money free of tax then she should have put it into an IRA fund or something like that, but she used it as income. She admitted to the judge that she didnt have any of that money left. Sad to say, we are now paying taxes that are more than my husbands share of his retirement, beacause everyday we are incurring late fees and interest. His ex wife had the seperation papers drawn up and then they were incorporated into the divorce. We are still amazed how this is not a contempt of court order, but supposedly since she filed her taxes before the divorce was final, she was not in contempt. Now, we are looking at the angle of breach of contract for the seperation which was active at that time. any words of wisdom would be greatly appreciated. thanks.


#3

I would think she breached the separation agreement, but now that he’s divorced, I don’t think you can go BACK and issue a show cause for breach of a separation agreement. That would be a lawyer question.

As far as the taxes. I know splitting 401k/IRAs are done all the time for E.D. I do NOT know if any special conditions are in place tax-wise though. My first reaction is that if someone takes/cashes in their accounts early for whatever reason, they ARE liable for taxes for early cash-out. He didn’t take a ‘loan’ against the account (which would be different-you pay yourself back), it sounds like he cashed it out when he quit and YES he owes taxes on it and I believe it’s taxable to the person it belongs to-namely him.

It sounds like she lied on her return about the ‘unearned income’. Once again-I’m not an accountant- but I know you don’t have to claim child support as income, but you do alimony payments. I would assume her cut was unearned income unless stated in the ED that the payout was to be nontaxed for her. That is legal stuff that I don’t know about. Sorry! Maybe someone else can advise.


#4

Yeah needinganswers, I am hoping for a response from the online attorney here. It all seems a bit confusing to me. In the seperation agreement, it did not state that she would receive the money taxfree. It only stated the amount she was due, which was about 50% less her retirement fund amount that would have gone to my husband. Unfortunately, at the time of seperation, my husband could not even afford to live on his own much less anything else, so he really had no options at that time. Imagine being married 17 years and your spouse telling you they simply didnt love you anymore and now you are starting completely over because you didnt want to take anything away from your kids so you left with only the clothes you owned. He paid large penatly fees and taxes when he opted to cash out his retirement. It also happened to be right after 9/11, so the stock market had dropped. He ended up with about $43,000 and she got about $89,500- he asked if she would be willing to take less because the amount had dropped. Her answer was a very firm NO, she wanted all of her money now! That she would be putting $50,000 into an educational IRA for the kids. She had every opportunity to roll some or all of her money over into an IRA account, but she never did. And as my husband and I came to find out, when it came time for the oldest to go to college, he had to go on a full student loan. The youngest now will be starting college this year and the same thing will apply to her. We now believe that is why she decided to file taxes on her own, because she had every intention of using that money as income and not invest it at all. We are only asking that she pay the taxes due on the portion of the retirement that she received, not the portion my husband received. But imagine if you will, busting your butt for over 20+ years and not only having to split that earned retirement with someone who says they dont love you anymore but then have to pay taxes on it because she didnt invest it or roll it over. The government keeps every refund he is due and now they keep a portion of mine because we are married. I have to file an injured spouse form each year and the gov’t decides which portion I should get back. Now, you want to talk about unfair. Here is someone who is paying taxes for money she never, ever saw. Agh!


#5

Gosh…I’m sorry! Did SHE work at all? From what I understand, if she did, and had any retirement, then your husband was just as entitled to 50% of hers as she was of his. Retirement/401K is a part of marital asset and subject to Equitable Distribution. Many times, couples will forgo this in an “I-won’t-touch-yours-if-you-don’t-touch-mine” and I fully agree with that when both parties worked. However, it is also used as a negotiating tool too.

Also, unless it is specifically stated in an agreement, she (nor he) can’t be made to do anything as far as college goes. The state sees a child as an adult at 18, and under no financial obligation from either parent. College education is a ‘gift’ from the parents. And even if she SAID she would put the money in a college fund, there is nothing (but her word) to make her do that unless it was written into an agreement. Unfortunately, your husband couldn’t afford an attorney, but now it seems he really couldn’t afford NOT to have one.


#6

Yeah, its a terrible mess. Hopefully we can get some direction on the next steps to take. There may be nothing else we can do and believe me my husband has learned a very important lesson in all of this. Too had we are hvaing to pay for it now. ha. thanks for the response needinganswers. I am still holding out for a response here from the online attorney.


#7

Unfortunately, this is not a question that can be answered without reviewing your specific documents. Any response I gave you would simply be guessing and might result in confusing you more.

Helena M. Nevicosi
Attorney with Rosen Law Firm

4101 Lake Boone Trail, Suite 500
Raleigh, North Carolina 27607
919.787.6668 main phone
919.256.1665 direct fax

10925 David Taylor Drive, Suite 100
Charlotte, North Carolina 28262
704.644.2831 main voice
704.307.4595 main fax

1829 East Franklin Street, Bldg 600
Chapel Hill, NC 27514
919.321.0780 main phone
919.787.6668 main fax

ROSEN.COM

The response posted above is based upon the limited factual information made available and is not intended as a full and complete response to the question. The only reliable manner to obtain complete and adequate legal advice is to consult with an attorney, fully explain your situation, and allow the attorney sufficient opportunity to research the applicable law and facts required to render an accurate opinion. The basic information provided above is intended as a public service but a full discussion with an attorney should be undertaken before taking any action.


#8

Is a seperation agreement a binidng contract between the two parties in that if one does not comply then you can take legal action for a breach of contract? Let me explain why I ask. My husbands exwife filed contempt of court papers roughly 1 1/2 years ago against him. In return, my husband filed contempt of court papers back on her for her refusal to file taxes jointly in 2002 which was stated in the seperation agreement that her attorney filed and then was incorporated into the divorce agreement. She dropped her charges against my husband because they were unfounded, but we continued with our case due to the large tax liability that my husband incurred for money he gave her out of his retirement fund. Hindsight is 20/20 and he knows that now but at the time he did not have the money for an attorney so he didnt know how to fight it. anyway, my husbands exwife’s attorney moved to have the case dismissed because at the time she filed taxes it was during the seperation agreement.the judge denied her request and then twice during the hearing it was requested again and the judge says no i have alreayd denied that request.Well, at the end the judge said she needed more time to go over the facts and would make a decision later. 2 1/2 months later, there was still no word from the judge. Our attorney approached her last week and asked her about the case. she says oh yeah i rememeber that one, i will have a decision by the end of the week. this was on a thursday, on monday morning this week, the judge faxes her decision to our attorney and uses the exact reason that the other attorney wanted to have the case dismmissed for. Talk about confusing. So, now we dont understand. Since the seperation agreement was incorporated into the divorce agreement, why is she not in contempt? And if she isnt in contempt of court because it was during the seperation agreement, can we file an appeal for breach of contract for the seperation agreement. My husband and I have already paid off the state taxes in excess of $24,000 and now we are looking at the federal of $46,000 which increases everyday for interest and late penalty fees. At this rate it will never be paid off and i also wonder that if (God forbid) my husband passes away before the debt is paid, does it then become my debt? please help. where do we go from here. And is an appeal worth it, I am told it can be very costly.