Even More Things You Probably Didn’t Want to Consider About the Stimulus Packages

Marital Settlement Agreements (MSAs) or Property Settlement Agreements (PSAs) are lengthy documents. If there are multiple real properties or a child with special needs, they can be even lengthier.  We would like to think that we thought of everything when drafting them, but lo and behold COVID-19 comes along and with it a shortage of toilet paper, mask wearing mandates, the CARES Act and follow up stimulus payments.

 For those of you who do not know, CARES stands for Coronavirus Aid, Relief, and Economic Security Act.  It was signed into law by President Donald Trump on March 27, 2020 and is a $2.2 trillion economic stimulus bill enacted in response to the economic fallout of the COVID-19 pandemic in the United States.  Under the Act, most individuals earning less than $75,000 received a one-time cash payment of $1,200. Married couples making less than $150,000 received a check and families received $500 per child. The incomes were derived from either the 2019 tax returns or if none was filed, then from the 2018 return, and the payment was deposited into the same account that the taxpayer used when filing their taxes.

 On December 29, 2020, a second stimulus payment was authorized and signed into law.  This one was not as clear in how much each person would receive, but generally the amount was $600 for singles and $1,200 for married couples filing a joint return. In addition, those with qualifying children also received $600 for each child. IRS News Release IR-2020-280, December 29, 2020. As of the date of this blog post, President Biden had committed to a third stimulus payment in the amount of $1,400, however, the details are still being worked out.

 Besides being interesting to a handful of you (maybe), why is any of this relevant to family law? The stimulus payments were automatically deposited into the account used on a party’s 2019 or 2018 tax return.  So, if the parties were married in 2019 and had a joint account and divorced in 2020 and Husband kept that account, then the money went into his account. That is a logistical problem.  The legal question is: if the parties filed for divorce in February of 2019, but filed taxes jointly for 2019, then is the stimulus payment marital property and/or how should it be divided?

 The CARES Act and subsequent stimulus payment provided a payment for a “qualifying child.”  But what if 2019 was the year that non-custodial mom claimed the child on her tax return? Then she received $1100 in payments and may receive a third payment, while custodial dad receives none.  In a perfect world, mom would share the payment with dad either on a pro rata income or time-sharing basis or simply fifty/fifty; however, the chances of that happening are about as great as my Cowboys winning the Super Bowl next year.

 So, what do you do? Is there some thought to including a provision in agreements to account for refunds, rebates, reimbursements, government or private reparations or subsidies, etc? Or is it impossible to account for every circumstance in life—especially a pandemic? Hopefully you’ve been stimulated to at least give it some thought ;)