There are many issues to sort out in a divorce. When spouses disagree it is usually over children, support and money. In the process, spouses may overlook the importance of addressing common tax issues.
The tax dependency exemption for qualified children is worthy of a separate blog.
Here are the other top four:
1. Filing status. Your tax filing status is your marital status on December 31. If you got “hitched” on New Years Eve 2011 you are considered married for 2011. Got divorced as a Christmas present to yourself? You cannot file married for any portion of that year. Ordinarily, the most advantageous filing status is “married jointly.” However, if you are going through a divorce and have questions about the legitimacy of the information provided by your soon to be “ex” you may wish to insulate yourself and file “married separately.”
What if you are legally separated? You are treated as single for tax purposes.
2. Tax refund/tax liability. Spouses should endeavor to agree on a fair division of the refund. If there is no agreement, treat the refund as a marital asset subject to distribution at trial. Same advice to tax liability.
3. Support. Alimony is taxable to recipient and deductible by the payor. Child support is tax neutral – there are no tax implications. “Unallocated support” (child support and alimony rolled into one amount) is treated like alimony for tax purposes. Therefore, in an effort to maximize financial resources (and give Uncle Sam less) it may be beneficial to eliminate the labels of “alimony” and “child support” and explore the concept of “unallocated support.” Sometimes it does “pay” to get creative.
4. Asset division. If done properly, dividing assets should have no tax consequences. For example, most retirement plans can be distributed pursuant to a Qualified Domestic Relations Order (QDRO). But a word of caution. While the transfer (division) of assets pursuant to a divorce has no immediate tax impact there are potential tax implications when those assets are eventually liquidated.
A recent wrongful death lawsuit filed in Bridgeport Superior Court alleges that the founder of Stew Leonard’s grocery caused the death of a man when he operated his powerboat recklessly.
According to news reports, the man was thrown around the boat and suffered both head injuries and spinal cord injuries before falling overboard. His wife is seeking millions of dollars for wrongful death, medical expenses, pain and suffering, loss of income, loss of consortium and other damages she and her husband suffered after the boating accident.
It is unknown who was driving the boat at the time of the accident, but it appears the boat was travelling very quickly in treacherous conditions. The lawsuit alleges that Mr. Leonard made a reckless decision to take the trip and that the boat was going up to 90 miles per hour in an area where warnings had been issued. According to Mr. Leonard, a 12-15 foot high wave appeared “out of nowhere,” causing the boat accident.
The plaintiff filed the boat accident lawsuit against Stewart Leonard Sr., his son and the boat company. The facts of the case will determine who is responsible for what portions of the plaintiff’s injuries.
This lawsuit is a good example of personal injury cases that involve multiple at-fault parties and ambiguous facts. These cases often require extensive research (called the “evidence” phase of a lawsuit), witness and expert testimony, and talented advocacy from an experienced accident lawyer.
Wrongful death cases are also different from other personal injury lawsuits because they involve additional damages, such as “loss of consortium” (in other words, the loss of the love that a husband gave his wife). All of the potential damages in wrongful death cases should come into play in this Connecticut boat accident case.
Source: CBS New York, “Stew Leonard, Son Sued in Deadly Boating Accident,” Mar. 8, 2012.
Florida is the latest state to consider alimony reform. The reform would limit the ability of judges to order lifetime alimony and adjust the way alimony is calculated.
Connecticut lawmakers are drafting an alimony reform bill. Other states including Arkansas, North and South Carolina, Oregon and West Virginia have set up “Alimony Reform” groups to research the issue.
The movement is well under way.
Stay tuned.
Alimony Payers Prod States to Update Divorce Laws – NYTimes.com
In many divorce cases, the most valuable asset is the house. Therefore, it is no surprise that how to handle the house is also one the most important decisions a divorcing couple faces.
There are many possibilities when it comes to property division. But whatever the decision is, this is an area of the Separation Agreement that requires careful consideration. Agreements that plan for as many contingencies as possible reduce post divorce conflict.
The article below hits the major issues. I offer a few thoughts on each.
Proceeds. A division of the equity does not always involve a sale of the property. There may be enough financial resources where one spouse retains future ownership and “buys out” the other spouse.
Timing. The more time the children have lived in the home the stronger the argument is to defer the sale of the home – usually until the oldest child graduates high school.
Occupancy and decision-making. It is crucial to set forth who is responsible for paying the mortgage (its not always the “occupant”) and how carrying expenses such as taxes and homeowners insurance will be paid if these amounts are not escrowed by the bank. In addition, I think it is best to “cap” improvements at a fixed amount. This amount can be exceeded only if both parties agree. For example, a common scenario invloves the real estate agent advising the parties that improvements are necessary to effectivey market and ultimately sell the property.
Maintenance and repairs. The cost of repairs and maintenance should be consistent with the division of equity (i.e. split equity – split repairs). However, this may not be the case if one spouse is solely responsible for the mortgage.
Trouble selling. I believe the list price should be re-evaluated periodically. Where the parties have difficulty agreeing, consider allowing the real estate agent to unilaterally adjust the list price. Alternatively, the Separation Agreement can provide that the list price must be reduced by a certain percentage at certain intervals. I like 3% every 45 days.
Divorce Your House When You Divorce Your Spouse | Fox Business
A 9-year old boy who took a gun to school and accidentally shot a female classmate is likely to receive probation and mental health treatment.
The girl remains in critical condition in a Seattle hospital.The Prosecutor’s decision is undoubtedly a challenging one. The goal of the juvenile justice system in Connecticut (as it should be all states) is the rehabilitation of the youth when at all possible. It requires balancing the notion of holding juveniles accountable for their unlawful behavior while offering them rehabilitative services to prevent future illegal behavior. Of course, the community at large must also be protected.
Did the Prosecutor get it right?
Should the adults who owned the gun or were negligent in allowing access to the gun be charged?
Washington School Shooting: Prosecutor Seeks Probation For 9-Year-Old Boy
A group called Action on Smoking and Health apparently performed a survey on the relationship between custody issues and smoking.
The group claims that the issue of smoking is an effective threat for a nonsmoking parent to use in court to gain an advantage in a custody or visitation battle.
That’s extreme – but consider the source. After all, an anti-tobacco group with an agenda to promote conducted the survey.
In my opinion, a court will not cite cigarette smoking as a determinative factor in deciding a parenting plan. Imagine an otherwise fit custodial parent who loses custody simply because he or she smoked? Not happening. A parent will not be deemed “unfit” merely because they are a smoker.
And if smoking should be the sole cause of a parent losing custody, why wait until a divorce or custody case was initiated? DCF should be pulling children from homes all across the state. C’mon.
This is not to say that smoking is never relevant. It may be a factor if a child is asthmatic or has certain allergies and is exposed to smoking. In that example, the offending (smoking) parent lacks the capacity to understand and meet the needs of the child. That type of parent would not be considered “fit”. In an extreme case, one could argue that exposing a child to smoking amounts to medical neglect.
See – it turns on parental fitness – not smoking itself.
Therefore, I say, if you got ’em go ahead and smoke ’em. (Of course, this says nothing about the health risks associated with smoking). It’s really a matter of common sense. If you have children smoke outside. And don’t smoke in the car.
Smokers losing child custody cases a growing trend | Washington Times Communities