After Hurricane Ida cut a path of destruction through Louisiana, family law attorneys had to answer special financial questions when preparing community property partitions and support agreements while their clients clean up and suffer with liquidity concerns. We have worked with family law attorneys and their clients since 1999, through several hurricanes, and are experienced in the questions that need to be answered and the options available to help you and your clients reach settlement.
Understanding insurance coverage is critical to settling community property. It is important to distinguish the kind of insurance payments being made so that insurance reimbursements for property repairs, loss of use, and loss of income are properly treated as property or income in the divorce process.
During a divorce one spouse may control the bank account into which insurance reimbursement checks are deposited. It is important to properly report the deposit of the funds and their use to repair property so that any reimbursements for unused insurance proceeds can be correctly calculated. If the property is not to be repaired but sold “as is”; and the insurance proceeds used to pay off mortgages, a clear and defensible financial report will facilitate settlement of sale and insurance proceeds to be correctly calculated in the Property Partition.
No Insurance Coverage
Louisiana homeowners who do not have insurance coverage and live in Parishes designated for Survivor Assistance may be eligible for help from FEMA. US Small Business Administration Loans are available up to $200,000 for homeowners to replace or repair their primary residences and $40,000 to replace personal property, including vehicles.
Tax Deadlines Extended
On August 31, 2021, the IRS announced tax relief for victims of Hurricane Ida in Louisiana extending the due date of properly extended business and personal returns to January 3, 2022. As a result of this extension, it is more likely that couples will not file their 2020 tax returns until 2022 and it will be important to obtain 2020 tax documents (1099, W-2, Schedule K-1) to calculate income for support purposes.
As the Federal Government declared Louisiana a Disaster Area, taxpayers can elect to deduct any casualty loss in the current or proceeding years tax return. This can be a source of liquidity for individuals in the midst of a divorce. The election to deduct the loss in the preceding year must be made within six months after the regular due date of the return for the year in which the disaster occurred. As the year of loss for Hurricane Ida is 2021, the election must be made by October 15, 2022.
Hurricane Ida Major Disaster Declaration is 4611-DR-LA. Form 4684 is used to claim the casualty loss.
Waiver of Tax Return Copy Fees
The IRS is waving their fees for copies of tax returns or tax transcripts, provided that Louisiana-Hurricane Ida is put in bold letters at the top of Form 4506 or Form 4506-T.
Past-due Support Payments
Individuals who participate in Employee Savings Plans and 401(k) accounts with the ability to borrow from the Plan may want to considering making a loan to cover this obligation. Alternatively, a Qualified Domestic Relations Order (QDRO) can be prepared to make support payments. Payments under a QDRO are exempt from the ten percent (10%) early withdrawal penalty, but as spousal support is no longer taxable, and all payments to a former spouse by QDRO are taxable, the award will need to be grossed up if the recipient spouse is to receive the correct payment of spousal support.
Hoffman Divorce Strategies brings their experience of handling divorce cases since 1999 to prepare defensible financial reports for negotiation or litigation and can assist you and your clients in understanding the quality and long-term impacts of financial settlement proposals.