Question: After my wife and I separated, we went to court and I was ordered to pay $325 per month in child support for our son. Six weeks later, I was injured in an automobile accident (my fault) and am now totally and permanently disabled. It took me nearly two years to get my Social Security disability payments approved, and my wife told me not to worry about the arrears. I didn’t get this in writing, and never went back to court to change the order because I couldn’t afford a lawyer.

I now receive not only Social Security disability, but also a small monthly income from short-term disability. Together, these payments aren’t enough to allow me to take care of myself, so my parents are helping me and have set up a trust. My now ex-wife gets more each month from Social Security for our nine-year old son than I used to pay in child support.

But she is now saying that I have to pay the arrears totaling more than $7,000, which I don’t have – even though the Social Security for my son was paid retroactively. Am I entitled to have the money that my son received applied to my arrears, or will I have to pay money I can’t afford?

Answer: Generally, when a parent becomes disabled and receives Social Security disability, most state courts have reduced child support payments that accrued after the injury by the sum the child receives from Social Security. Since there is generally a delay between applying for Social Security disability and the date on which it is granted, the Social Security Administration makes the award retroactive to the date of application.

Depending on the law of your state, which a lawyer in your area can tell you about, it appears to us that most (if not all) of your arrears, and also your on-going support obligations, should be ended. Otherwise, your ex-wife would be receiving a windfall to which she is not entitled.

Question: When I divorced three years ago, I was awarded a piece of land with timber on it from my ex-husband. I am now trying to sell it because I need the money. I have been told that I will have to pay capital gains taxes on the difference between the cost of the land and the sales price. I have no idea how much these properties cost, and my former husband is now deceased. How can I find out?

Answer: At the time of divorce, it is important that the spouse who transfers assets provide sufficient records to allow the recipient to determine not only the “basis” but also the holding period for the assets you received. Since this was not handled at the time of divorce, you will have to reconstruct the basis by reviewing your records, court house records, your joint income tax returns, and records from the year the properties were acquired through the year of sale. In general, lifetime, non-taxable, divorce-driven property transfers between spouses result in the recipient spouse receiving the basis of the transferor (the person who is transferring the property).

Because recipient spouses take the same “cost basis” as the transferring spouse, many recipients are shocked when they are required to pay capital gains on assets they sell.
That’s why divorce agreements and decrees should require transferring spouses to provide basis and holding period information at the time of transfer.

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