Another Thing to Fight Over in Your Divorce- Coronavirus Stimulus Checks

Americans are waiting to see when they will get their checks from the coronavirus stimulus package, which was signed by President Donald Trump last week.

The law will give Americans one-time checks to help them get through financial challenges brought on by the spread of coronavirus. The stimulus checks will be based on your tax returns. But for those who recently divorced or who are in the process of a divorce, what happens to the benefits? Imagine a couple who filed taxes jointly in 2018, and their refund was direct deposited into their joint bank account. But they divorced in 2019, and they no longer share the bank account. So what happens to that money? Will an ex-spouse lose out on benefits because of the divorce?

Unfortunately there are no rules or precedents to cover this, so here’s what divorced and divorcing couples should know.

Generally, as part of divorce litigation, tax refunds are recognized as an asset that is subject to equitable distribution. Refunds are most often equally shared between the parties. It’s common for divorcing couples, as part of their settlement, to agree to file a joint tax return for all years they were actually married. They would usually agree to share any refund received or taxes owed.

If you filed jointly in 2018 and divorced in 2019 but have not yet filed your 2019 taxes, the IRS does not know that you are divorced and will send the payment to you and your spouse as a married couple. Working from that premise, it would be fair to anticipate that each party would be entitled to receive 50% of any joint stimulus check received regardless of whose bank account it is deposited in — if the total stimulus check was based on the family status pre-divorce. Therefore, the party receiving the stimulus check should voluntarily forward 50% to the ex-spouse.  Of course, that doesn’t always happen, and if the spouse refuses to share the check, the other spouse has the right to be made whole.

But you’ll have to decide whether it’s financially worth the fight, as the $1,200.00 (or less) that you may be entitled to may be less than what you would spend on an attorney.

If your divorce is still going on, you should make sure the stimulus payments are addressed as part of your agreement, or you may want to have your attorney address it with your spouse’s attorney prior to the payments being received as the payment may go into a bank account you no longer have access to.

The stimulus package also provides an additional $500 payment per child under age 17. Marital settlement agreements will allocate the tax exemption for children, so whichever parent claimed the child that year would likely get that check. If you are not yet divorced but in the process, these are also payments that should be divided between you and your spouse.

This is all uncharted territory for you and for your divorce attorney, however, if you are in the process of your divorce these payments are all marital assets that must be divided. If you have questions contact our office today.