Coronavirus Issues: Stimulus Funds for Separated Spouses

As Coronavirus (COVID-19) continues to spread, the largest stimulus package in our nation’s history is aimed at minimizing the inevitable economic crisis.

As you have heard and read, a significant slice of CARES carves out billions in direct-pay stimulus funds (“recovery rebates”) for Americans who meet certain income qualifications.  While this is certainly welcome news for many, we have encountered a number of concerns about how the funds will be distributed and divided between persons who are married, but living separate and apart. Again, we are in uncharted territory.

Please note that this post is not intended to offer specific legal or tax advice and we recommend that you speak with the appropriate professional to determine your rights and options incident to CARES.

• Separated Spouses (not yet divorced):
  • Who will receive the stimulus funds?
    • According to the text of CARES, funds will be disbursed “electronically to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of taxes…” 
    • That being said, if spouses filed jointly in 2018 (or 2019) and received a refund via direct deposit, it appears that their stimulus check may in fact go directly into the same account, if it exists.  
    • This may present problems—i.e. only one spouse remains on the account and is unwilling to equitably divide the funds; both spouses are on the account, but one spouse removes all funds as soon as they are deposited.
  • How should funds be divided?
    • CARES does not appear to specifically address how to divide the funds between separated spouses.
    • That being said, this question prompts many other questions:
      • Are the funds marital property?
      • Should they be divided in accordance with income percentages?  Or should they be divided in accordance with general equitable distribution principles?
      • Should division of the funds depend on the relative financial impact of each spouse (i.e. if one spouse was laid off, while the other spouse remained fully employed)?
    • Time will tell how Courts will answer these questions, and the many others that are sure to arise. 
  • Note: the same questions / concerns set forth above may also apply to separated parents who don’t have an established custody order, or who have joint physical custody (50-50).

• Suggestions?
  • It would be wise to speak with an experienced divorce and family law attorney, as well as an experienced tax professional to discuss your options and determine the best course of action.
  • We also recommend attempting to communicate with the other party (or through your attorney if you have one) in an effort to resolve the issue.  If you are able to reach an agreement, that may be the quickest practical solution.
  • If the IRS does not already have account information on file to deposit the stimulus funds, it may be wise to reach out to them to relay your status and to provide them with contact/account information.

If you would like to speak with an attorney today, please contact BoykoNapier by phone at (804) 658-3418, or via email.