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Divorced? Here’s what you need to know about your stimulus check.

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Like most people, you probably heaved a huge sigh of relief when the government announced the first coronavirus stimulus package back in March. And with another stimulus package likely, you can breath out a little again. After all, there are very few of us who've made it through these last few months of the pandemic financially unscathed; for many, that check will be an absolute lifeline.

However, those of you who are divorced — or those who were in the middle of the divorce process when the crisis first hit — may have run into complications with the allocation of your stimulus check.

Quick fact check: here's what you should receive.

The terms of the first stimulus package state that, for the most part, couples with less than $150,000 in joint income should have received $2,400, individuals with less than $75,000 are entitled to $1,200, and parents should be given $500 for each child under the age of 17.

Haven't received your check? This might be why:

That all sounds straightforward enough — at least until you throw a divorce or separation into the mix.

For example, if your divorce is fairly recent and you filed your last tax return jointly as a couple, your stimulus check has gone straight into whichever bank account you gave the IRS on that return, which is fine if you used your own account, but potentially problematic if your check has been sent to your ex instead.

And it's not only the recently divorced that are facing issues. If you've been divorced for a while and share custody of your children, you may take turns each year to claim your children as dependents when filing your taxes. In this case, whoever made the most recent claim will receive the $500 check for each child.

Worried about your check? Here are your options.

If you've had an amicable split.

I'll start with the easiest scenario to work through: an amicable split. This one's a no-brainer really — you and your ex should work together to ensure a fair division of the checks. This, of course, will look different for every family.

For example, if one parent pays for the bulk of the childcare-related expenses, including food, clothing, extra-curricular activities, and so forth, then it makes sense that they be given the bulk of the $500. If you co-parent, with your child spending equal amounts of time with each parent, it might make more sense to split the payment right down the middle. Take the time to talk it over and decide on a solution that works well for the whole family.

If you're recently divorced.

Again, if your divorce is amicable, go with the advice above: working together to find a way of sharing the payment that ensures everyone gets what they need.

However, what if you and your ex find communication difficult? Or unresolved resentments have led one party to withhold their ex's share of the stimulus payment?

This is a tricky scenario, primarily because there's no precedent: we're all in unchartered territory here. That said, your tax refund might be subject to equitable division as part of your divorce. So it's worth going back over your settlement to double check the terms you agreed.

It's highly likely that whoever is in receipt of the check is legally (and certainly morally) obliged to hand over their ex's share of the stimulus payment and a gentle reminder of that fact will hopefully be enough to solve the issue.

Of course, it might not be that simple — you might just have a fight on your hands.

In this case, litigation may seem like the only solution but with courts facing a huge backlog of cases, and litigation being notoriously expensive, taking your spouse to court over a withheld stimulus check would likely cost more than the check is worth, and be resolved far too late to be of any practical benefit anyway.

If you find yourself in this situation, it's worth looking into mediation, which can lead to a quicker and far cheaper resolution.

If you're separated but not yet divorced.

If you're currently trying to navigate your divorce, it's worth talking to your financial advisor about whether you'd be better to file your taxes early, or hold off for a little while, as there are limits to the stimulus payments, depending on your claimed earnings.

Equally, when dealing with your divorce attorney or mediator, make sure that stimulus checks are taken into consideration when negotiating the terms of your split.

Ultimately, this has been a tough time for everyone: we've all just about reached the upper limits of our stress thresholds. It's easy to see why these stimulus checks have become a bone of contention for many. However, the last few months have been particularly scary for our kids; working together to find ways to minimize their worries — whether financial or emotional — is arguably one of the best things we can all do for them right now. And that involves finding a peaceful way to co-parent through the pandemic.

If you need help finding a peaceful way through the divorce process during this stressful time, I'd be happy to help. Get in touch to find out if mediation is right for you.

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Sunday, 09 August 2020

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