De Facto Parentage Overview and Case Law Update

The De Facto Parentage area of law is a hotly contested issue currently.  The De Facto petition allows a party to bring an action for residential time with a non-biological child if they meet four (4) factors as stated in the case of In Re Parentage of LB, 89 P.3d 271 (2004); which are (1) the natural or legal parent consented to and fostered the parent-like relationship, (2) the petitioner and the child lived together in the same household, (3) the petitioner assumed obligations of parenthood without expectation of financial compensation, and (4) the petitioner has been in a parental role for a length of time sufficient to have established with the child a bonded, dependent relationship, parental in nature.

Further, LB defines a de facto parent as an adult who has fully and completely undertaken a permanent, unequivocal, committed, and responsible parental role in the child’s life, with the consent of the legal parent in the same household, without expectation of financial compensation, and for a length of time sufficient to have established with the child a bonded, dependent relationship, parental in nature

In LB, a same sex couple parented the child together during the time that they were romantically involved.  Upon separation, the non-biological parent filed a Petition for residential time and the Court ruled that she was the De Facto parent.

It has been argued that the De Facto standards set out in LB apply only to same sex couples only; however, in the case of In re the parentage of J.A.B.,191 P.3d 71 (WA 2008), the Court ruled otherwise.

JAB is a case litigated in the Court of Appeals by Tsai Law Company’s own Emily Tsai. In that case, a non-biological party, a man, filed a De Facto petition and a Non Parental Custody Petition.  His former partner, the child’s biological mother, had a four month old child from a former relationship with another man.  The biological father of that child was not involved in the child’s life and was aware that the Petitioning party helped raise the child along with the biological mother.  The Court ruled that the Petitioning party was the De Facto parent.

Further, the Court in JAB, differentiated between De Facto and Non Parental Custody actions stating that, “a party who meets the test in LB stands in legal parity to an otherwise legal parent and is vested with the same rights and responsibilities limited only by the best interests of the child.”  That Court further went on to state that the “Non Parental Custody status cannot provide an adequate remedy for one who meets the de facto criteria as the Non Parental Custody statute is temporary in nature until the an unfit parent becomes fit to care for the child.”

In other words, if you meet the De Facto factors, you have the same rights to parent a child as any biological parent does even though you do not have the same blood running through your veins.  Whereas, a Non Parental Custody action is an action to be filed when you have not necessarily been a parental figure in the child’s life, but, the biological parents are unfit or are providing a detrimental environment for the children and custody is expected to be temporary only.

Since JAB came out, there have been at least two (2) more significant cases that have recently been litigated. In addition, In Re Custody of BMH, 2013 Wash. LEXIS 944, states that a step parent is not barred from obtaining De Facto relief.  In that case, a stepfather filed a Petition for Non Parental Custody and De Facto claiming that he parented the child as his own since the biological father of the child passed away.  The Court ruled that he met the burden under the De Facto action.

Further In re Custody of AFJ, 2013 Wash. LEXIS 942 states that foster parent status does not bar consideration of De Facto status.  In that case, a foster parent filed  a De Facto petition because that foster parent and the mother agreed to raise the child together, to give the child their names, and held each other out as co-parents, did not expect compensation financially, and they lived together for 3 ½ years.  The court concluded that the foster parent was the De Facto parent.

You can see that the Courts are expanding the De Facto parental status. Step parents and even foster parents are now able to file Petitions as a De Facto parent and have the same rights as biological parents do.  This area of law is fairly new and is continuing to evolve.  If you believe you may have a claim as a De Facto parent, please feel free to call Tsai Law Company and speak to an experienced attorney about your claim.

A. Scott Marlow, Esquire



How a Bankruptcy Filing Affects your Dissolution of Marriage Action

Many people have gotten themselves into a very bad situation financially in today’s economy and find that their only way out is by filing for Bankruptcy.  Filing for Bankruptcy today is no longer “taboo” as it was in the past.  But what happens to your Dissolution of Marriage action if you or your spouse decides to file for Bankruptcy while in the midst of the proceedings?

11 U.S.C. § 362 states that the filing of protection in Bankruptcy operates as a “stay of proceedings” in the Dissolution action.  A “stay of proceedings” is simply a “delay.”  In other words, the Court cannot make any rulings or findings in your case until the Bankruptcy is lifted or finalized.  Actions taken in violation of the stay are void as in the case of In re Schwartz, 954 F.2d 569.

A Common misconception is that a Bankruptcy filing will simply put a hold on everything.  This is not necessarily true.  This “delay” does not mean that the Court cannot rule or make any findings regarding support of the child(ren) or your spouse.  It also does not apply as to claims of domestic violence, establishment of paternity (if you have a child out of wedlock), and parenting of the child(ren) (residential schedule or parenting plan).

In addition, filing for Bankruptcy may protect you from having the creditors come after you for payment, but that does not mean that upon finalizing the Dissolution, your spouse can not later come after you, asking for reimbursement for payments that he/she had to make on your behalf under the “Hold Harmless” provision.  That is why it may be desirable that both you and your spouse (soon to be ex-spouse) file Bankruptcy jointly.

Remember as well that there are different types of Bankruptcy filings and the protection may extend to other areas that may be relevant in your family law matter.  Make sure you talk to one of our experienced attorneys here at Tsai Law Company about whether fling for Bankruptcy is in your best interests.

A. Scott Marlow, Esquire


Divorce Lawyer Philip Tsai Presents at NBI Conference in April

In April, 2013 Philip C. Tsai, co-founder of Tsai Law Company, PLLC will present “Dirty Litigation Tactics Rambo Lawyers Love.”  This seminar will describe some of the tactics that opposing counsel may employ that is characterized as “Rambo” lawyering along with how to handle those tactics within the bounds of ethics and professionalism.  To sign up for this seminar, go to the National Business Institute website for continuing legal education for Professionals here:



Gabrielle Clemens: 3 Life Insurance Mistakes To Avoid In A Divorce Settlement

Gabrielle Clemens writes about life insurance mistakes you should avoid in your divorce settlement.  It’s often not practical to renegotiate the property settlement so consider these items in advance.

Gabrielle recommends you consider the following before you sign the agreement:

Mistake #1: Your ex is underinsured.  You want the death benefit to pay off your current mortgage and credit card debt. Some may want to have this benefit pay for college costs as well.

Mistake #2: Your ex didn’t pay the premiums and the policy lapsed.  You can request that your ex put your name on the policy as a person to be notified if the premiums are not paid.

Mistake #3: Your ex changed the beneficiary to the new spouse.  Remember that the person who owns the policy controls the beneficiary designations and can change them at any time.  Speak to your attorney about your ability to sue your ex’s estate for the amount of the death benefit you were supposed to receive.


Robert Hughes, Jr.: What The Latest Scientific Findings About Kids Of Divorce Reveal

Professor Robert Hughes, Jr. wrote an article in the Huffington Post a while back about the research findings that explore the effects of divorce on children.  The summary is that the results are inconsistent. According to Robert, “thirty years of scientific study have concluded that there are no simple answers to the question about how children will be affected by divorce.”  An article by Paul Amato summarized current research and concluded, “A reasonable assumption is that divorce can have varied consequences, with some children showing improvements in well-being, other children showing little or no change, some children showing decrements that gradually improve and yet other children developing problems that persist into adulthood.”


Deductible Costs of Divorce, Gift Tax, and Student Loans


Exceptions to Gift Tax and Property Settlements: Generally, there is no federal gift tax on transfers of property between spouses.  (See IRC Section 1041).  However, the transfer of property between spouses must qualify under one of the following exceptions: (1) it is made in settlement of marital support rights[1]; (2) it qualifies for the marital deduction; (3) it is made under a divorce decree; (4) it is made pursuant to a written agreement, and the divorce occurs within a specified period; and (5) it qualifies for the annual exclusion.[2]

Student Loan Interest Deduction: Many times, a spouse has student loans that they will be paying during and after the divorce is finalized.  The family law practitioner should be aware of the benefits of student loan interest that may be deducted by the spouse for tax purposes.  A spouse can claim the deduction in student loan interest if: (1) interest was paid on a qualified student loan in the given tax year; (2)  a spouse is legally obligated to pay interest on a qualified student loan; (3) the spouse’s filing status is not married filing separately; (4)  the spouse’s modified adjusted gross income is less than a specified amount which is set annually, and; (5)  both spouses, if filing jointly, cannot be claimed as dependents on someone else’s return.  (See IRS Topic 456, Student Loan Interest Deduction).


Tax Advice and Alimony: While a spouse cannot deduct the court costs and legal fees for getting a divorce, there are two possible deductions your client may be entitled to receive in connection with a divorce: (1) fees for tax advice; and (2) fees to obtain or collect alimony.  A spouse must itemize their deductions to obtain these deductions and both are subject to the 2% limit.

  1. Tax Advice: Pursuant to Publication 504, you can deduct fees for advice on federal, state, and local taxes of all types, including income, estate, gift, inheritance, and property taxes provided that the time spent for the tax advice related to the divorce is itemized on the attorney billing statements.
  2. Establishing or collecting Alimony: A spouse receiving alimony must include the funds in the spouse’s gross income for tax purposes.  Therefore, you can deduct the fees paid to establish or collect an alimony award, provided the time spent on obtaining or collecting alimony is itemized on the attorney billing statements.

[1] The value of the property transferred cannot be more than the value of the marital support rights.

[2] The annual exclusion for 2011 was $13,000.  However, the annual exclusion is $136,000 for transfers to a spouse who is not a US citizen provided the gift would otherwise qualify for the gift tax if the spouse were a US citizen.



Dependency Exemption and Credits in Divorce

Who Can Claim a Child as a Dependency Exemption: The dependency exemption for a child will be awarded to the parent who has physical custody of the child for the greater number of overnights during the calendar year. If the child spends an equal amount of time with both parents, the parent with the higher adjusted gross income will be allowed to claim the dependency exemption provided the child is otherwise eligible to be claimed as a dependent. In order to satisfy the Internal Revenue Service’s requirements for a qualifying dependent child, the child must meet four requirements: (1) the child must be designated as a child of the taxpayer; (2) the child must not have reached the age of 19 during the calendar year or must be enrolled as a full-time student and not reached the age of 24 during the calendar year; (3) the child must have the same principle place of abode as the taxpayer for more than one half of the year; and (4) the child must not have provided more than one half of his or her own support for the year.

Noncustodial Parent May Claim the Dependency Exemption: For tax years starting after 2008, the noncustodial parent can claim the exemption for a child if the custodial parent formally releases the exemption via IRS Form 8332. The child still must meet the IRS qualifications of a dependent. Since the waiver does not have to be permanent and can be revoked at a later date by the custodial parent, it is important to ensure the final order of child support requires the custodial parent to sign the dependency exemption waiver for the years that the exemption is awarded to the noncustodial parent. A copy of the waiver must be attached to the noncustodial parent’s annual tax return. For court orders entered prior to 2009, the noncustodial parent may claim the dependency exemption only if the order states all of the following: (1) the noncustodial parent can claim the child as a dependent without regard to any condition (e.g. payment of support); (2) the other parent will not claim the child; and (3) the years for which the claim is released.



Mortgage Interest and Allocation of Itemized Deductions

Itemized Deductions: Another common tax question in divorce is which spouse is able to claim the itemized deductions when the divorce is complete.  It is always a good idea to address these issues in the settlement agreement and divorce decree so everyone is clear who will be claiming which deductions.  Also, depending on whether you live in a community property state, the below rules may differ or not apply at all regarding who can claim the particular itemized deduction.

Overall, it is usually safe to claim the deductions that the spouse paid.  If the parties paid the itemized deductions from a joint account, each spouse can claim one half of the deduction.

Property Tax and Mortgage Interest: Real estate taxes and mortgage interest are usually the largest deductions that the family law practitioner should be aware.  Whose name the house is in can sometimes be determinative regarding whether a spouse can take the deduction.  For example, if the house is in the husband’s name only, then only the husband can claim the mortgage interest and property taxes as itemized deductions on the home.  If the home is in the name of both the husband and the wife, then both parties are able to share those itemized deductions.

Further, if a divorce or separation agreement requires one spouse to pay the mortgage interest on a home that is jointly owned, part of the payment of the interest may be considered spousal maintenance.  The divorced spouse who pays the mortgage interest could deduct half the amount as spousal maintenance and the other half as an itemized deduction for home mortgage interest. The other former spouse would have to include half the amount as income from spousal maintenance but may also be able to claim an itemized deduction for half the mortgage interest and real estate taxes.



Mortgage Debt Relief Act of 2007 in Divorce

The Mortgage Debt Relief Act of 2007 (Act) generally works to allow tax payers to exclude cancelled debt from income owed on their principal residence.  Qualified principal residence indebtedness is any mortgage a person took out to buy, build or substantially improve the person’s main home.  After the real estate bubble burst, many homeowners found themselves in a position which tax law prior to the enactment of the Act would have required them to include as income the forgiveness of this debt.  For example, assume John purchased a residence for $400,000 of which $350,000 was borrowed and $50,000 was used as a down payment.  John lost his job and could no longer afford the payments on the residence, which declined in value to $300,000.  He was able to sell the residence for $290,000 on a short sale and the bank forgave the remaining $60,000. But for the Act, John would have to pay tax on the $60,000 the bank forgave.  However, the Act only works to relieve John from having to pay tax on this forgiveness of debt if it is for the purpose of buying, building or substantially improving the main home.  In the above example, if John would have refinanced the residence for $400,000 and took $50,000 to pay off credit card debt, only $10,000 of the $60,000 would be excluded from income pursuant to the Act assuming no other exclusion applies.



Innocent Spouse Relief in Divorce

Innocent Spouse Relief, Form 8857. There may be circumstances that your client can seek relief from the payment of income tax, interest and penalties by claiming “Innocent Spouse”.  To file this claim, your client needs to fill out IRS Form 8857.  Your client is not responsible to calculate the amount of tax that may be relieved as the IRS will perform this calculation.

To qualify for Innocent Spouse, the IRS provides the spouse must prove the following factors:

  1. The taxpayer filed a joint return which has an understatement of tax due to erroneous items of your spouse (or former spouse).
  • The taxpayer establishes that at the time he or she signed the joint return they did not know, and had no reason to know, that there was an understatement of tax.
  • Taking into account all the facts and circumstances, it would be unfair to hold the taxpayer liable for the understatement of tax.
  • A request for innocent spouse relief will not be granted if the IRS proves that the taxpayer and their spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.

If granted, the IRS can only collect the tax, interest and penalties from the other spouse or former spouse.  However, one significant factor regarding whether a spouse will qualify for Innocent Spouse relief is whether a significant benefit was bestowed on that spouse. The IRS defines a significant benefit is any benefit in excess of normal support.  Normal support depends on the spouse’s particular circumstances.  Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understatement.


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