We've already talked about spousal support and dependency exemptions. Here we'll continue with other divorce-related tax issues.
]]> Division of property is another area that can cause couples confusion. Generally speaking, property acquired in a divorce is considered to be a gift for tax purposes, and so does not incur income tax. The value of such property will be the same as it is for one's ex-spouse, and this will determine the value of the assets for determining taxable gains when the items are sold. Assets that are income-producing will have their taxable gains or losses divided at the date of transfer. It is good to have an accountant to work with on these issues.As far as filing status, couples going through divorce will be considered married for tax purposes if they haven't legally divorced by the end of the year. One positive aspect of this is that financial benefits may be available to those who file jointly one last time.
Attorneys fees involve more tax considerations. Specifically, are they deductible and if so, who can deduct them? Divorce attorneys fees generally cannot be written off, but the portion of the fees that went for tax advice or help in obtaining alimony can. This includes payments to attorneys, appraisers, actuaries and accountants.
Taxes, like divorce, can be a frustrating thing to deal with, but obtaining the help of qualified professionals certainly helps make the process easier.
Source: Reuters, "Tax Planning for the divorcing and newly divorced," Amy Feldman, May 4, 2012.
]]>Two major tax considerations that should come up in a divorce are writing the divorce agreement so that alimony is tax deductible, and how to navigate the tax issues connected to the sale of assets during divorce. Here we'll take a look at these and several other divorce-related tax issues.
]]> In general, the party who receives alimony or spousal support is taxed and person who pays it can deduct it on their tax return. The one paying does not need to itemize to claim the deduction but can just take it on form 1040, and the one receiving it can report it on Form 1040, and may also be liable for estimated taxes.A divorce agreement can specify, however, that payments given to a spouse are not alimony, in which case the receiving party avoids tax liability.
Another consideration is the dependency exemption. This is a deduction permitted in the calculation of taxable income or a person qualifying as the taxpayer's dependent. In general, the parent that has the most custodial time with the children will take the exemption, though the agreement can specify otherwise. The important thing to remember is that the noncustodial parent will need to file Form 8332, which is an exemption release signed by the custodial parent. This will permit the noncustodial parent, from the IRS's perspective, to take the dependency exemption.
In our next post, we'll continue with this topic.
Source: Reuters, "Tax Planning for the divorcing and newly divorced," Amy Feldman, May 4, 2012.
]]>As it turns out, the answer largely rides on how the card is held. If the question is coming up for married couples, it will be the difference between holding the card jointly or having one spouse as an authorized user.
]]> Most often, an authorized user is not liable for the debt on a credit card, and only individual and joint account holders are responsible for the charges on the cards. While a spouse who is an authorized user may wish to assist their ex in paying credit card debts off, the card issuer will most often only seek payment from the primary cardholder.Where things can get a bit stickier is in community property states, where debts incurred during marriage are considered joint debts. In such states, a spouse could be held responsible for credit card charges even if they never signed onto the credit card. The same goes for loans.
During divorce, it is wise for couples to separate credit card accounts. For authorized users, it is a fairly simple matter of calling the issuer and asking to be removed. For joint account holders, it is often best for the couple to pay off the debt together prior to the divorce is through. Alternatively, the debt could be transferred to another card in one spouse's name.
It is important for those going through divorce to realize that a credit card arrangement does not take precedence over a divorce settlement. So, divorcing couples should take precautions so that their credit isn't harmed if one party is responsible and fails to pay.
Source: Fox News, "Does Wife Owe Ex-Hubby's Credit Card Debt?," Janna Herron, May 2012
]]>A recent Forbes article written by Jeff Landers points out that women going through divorce often feel overwhelmed by the requirement that they sort through their finances, particularly if they haven't had a lot of involvement in financial decision-making during the marriage.
]]> Landers proposes a handful of tips for women who find themselves in this situation:A particularly important point to make is that asset hiding occurs more often than most people might realize. Because of this, many divorcing women-and men-are advised to do pre-divorce planning by thoroughly investigating one's marital assets. One divorce is papers are filed, assets begin to move, so having a financial portrait beforehand allows for a more accurate picture.
Source: Forbes, "The Five Key Points Divorcing Women Need to Know About Financial Affidavits," Jeff Landers, May 9, 2012
]]>The ex-couple apparently had a 2008 divorce decree which ordered the children to live with their father and granted the mother visitation rights. The decree allowed the father to move the children overseas with the permission of his ex-wife. According to the father, he obtained her permission prior to taking them. She, however, has protested the truth of that contention.
]]> Authorities have charged the father with three felony counts of aggravated interference with parental custody, and just last week he was charged in federal court with fleeing to avoid prosecution.In the federal filing, the father is accused of using his sister's wedding as a pretense to convince his ex-wife to sign passport applications for the children. Following the wedding, however, he kept the children in Gaza.
Under international law, countries must cooperate with one another in the return of wrongfully removed or retained children, but Gaza is not a party to the treaty, and is unlikely to honor it.
Unfortunately, the best the mother can do in this case is have U.S. authorities register an arrest warrant with the International Criminal Police Organization and appeal diplomatically to leaders in that nation. They would not be required to cooperate, though.
This situation is obviously tragic, and must be very difficult for the mother. In any case where child abduction takes place, it can be scary for the victim parent. Federal law, however, provides protections for parents affected by child abduction, and those facing such a situation should consult an attorney for help.
Source: Washington Post, "US authorities claim divorced father illegally moved 3 children from Kansas to his native Gaza," May 2, 2012
]]>The question can be answered in a general way, but to have a specific answer one really needs to look at the specific laws of each state. In some states, courts consider "fault" as a factor in making certain determinations, while courts in many states will not.
]]> Generally speaking, adultery mostly does not impact property division, except in cases where one spouse used marital assets in the context of an affair. Adultery will not usually affect custody determinations either, except in cases where the children were exposed to the affair or other inappropriate persons or behaviors connected to the affair. In states that permit fault-based considerations, adultery can significantly affect spousal support determinations.Missouri is considered a modified or limited no-fault divorce state, and dissolution can be granted if one party testifies that the marriage is irretrievably broken and that there is no likelihood it can be preserved. It is unnecessary for a party to actually prove cruelty, adultery or other fault-based grounds to obtain the dissolution. As far as making determinations related to property division, spousal support, attorney's fees, and custody, courts in Missouri are given specific factors to consider.
One definite way adultery will impact divorce proceedings is by making one's partner less likely to cooperate in a settlement. That in itself can be a great challenge, drawing the process out and incurring extra costs.
Source: Huffington Post, "Divorce Questions: How Does Adultery Affect A Divorce Case?," May 3, 2012
]]>Prenuptial agreements, again, can deal with a number of very important matters, but they do have some limitations. They cannot restrict child support, custody or visitation rights. In many states they cannot, for instance, waive the right to spousal support, though some states do allow this. Neither may they encourage divorce in any fashion.
]]> Beyond the general advice of looking into a prenuptial agreement, it is also important for older couples planning a marriage to discuss their outstanding debt and decide how it will handled both within the marriage and in the event of divorce. Any agreement can be worked into a prenuptial agreement. Couples may want to review one another's credit reports as part of this process.Several other areas to be sure to discuss are benefits, taxes and retirement. In terms of benefits, couples should determine which plan setup is the best for their particular needs. They should also think about the possibility of long-term care insurance. As far as taxes, couples may wish to consult an accountant to go over the tax consequences of marriage and how they will navigate that. Retirement will be a more pressing issue for older couples to consider. In particular, older couples planning marriage should determine whether their ideas of retirement are compatible, and how retirement will be funded.
While these are only some of the issues older couples will want to address prior to marriage, working through the issues presented here will bring couples a lot closer to ensuring a successful financial future together.
Source: Fox Business, "Putting the 'Aged' in Engaged: Financial Tips for Late Marriages," Julie Bawden-Davis, April 19, 2012
]]>While many younger couples, in fact, could benefit from a bit of financial and legal planning prior to marriage, older couples should especially consider it. Because older couples often bring more assets and previous relationships to a marriage, there are additional risks involved in divorce.
]]> Among the things older couples should look into prior to marriage is asset protection. This entails thinking through property division issues.Property division is governed by laws which vary from state to state. Missouri law follows the principle of equitable distribution in dividing assets between divorcing spouses. With this approach, all martial property and debt will be distributed based on a number of factors coalescing into the consideration of what is ultimately fair.
Marital property is defined as all property acquired by either spouse after their marriage, though there are a handful of exceptions to this rule. One significant exception is property excluded by a valid written agreement of the parties. This is where prenuptial agreements have their place.
With a prenuptial agreement, one can effectively trump the default laws governing marital property. Prenuptial agreements can address a number of issues, including commingling of finances, shielding spouses from each other's debt, providing for children from prior marriages, and setting limits on property distribution in the event of divorce.
There are a number of limitations to prenuptial disagreements to be aware of, though, and we'll pick up with that in our next post.
Source: Fox Business, "Putting the 'Aged' in Engaged: Financial Tips for Late Marriages," Julie Bawden-Davis, April 19, 2012
]]>According to the University of Missouri School of Law professor who authored the bill, one of the major goals was to clarify who could intervene in an adoption case. The bill provides very specific requirements fathers must comply with in order to intervene. It is also an attempt to clarify how judges should handle an issue which has split lower courts throughout the state.
]]> Some have voiced opposition to the bill, though, arguing it is biased against fathers and could be used to deprive them of their parental rights and responsibilities unfairly.Some say the bill should permit fathers to intervene in adoption proceedings when they haven't met the stated requirements not only when the mother has prevented them from doing so, but also when the court and the prospective adoptive parents have done so.
Other criticisms against the bill are that it doesn't take into account social factors of the mother and father or their particular relationship, and that it is based on legislative class bias favoring the middle and upper class.
If passed, the bill will make it easier for mothers to place their children up for adoption in cases where the father refuses to cooperate, but it will also make it more difficult, or nearly impossible, for a certain section of fathers to exercise their parental rights.
Source : CBS St. Louis, "Fathers of Illegitimate Children Would Lose Rights to Adoption ," Josie Butler, April 10, 2012.
Tags: adoption, custody
4/19/12
Custody battle prompts MO lawmakers to consider adoption measure, P.1
A six-year-long child custody battle in the Missouri Supreme Court is prompting lawmakers to consider a bill which would permit mothers to allow adoption of their children without the father's consent.
The case before the state's high court involves a man and woman who had a child together in 2004. At the child's birth, the man apparently did not put his name on the birth certificate since he was waiting for the results of a DNA test to prove paternity. Under current Missouri law, a father must declare paternity within 15 days of the birth of a child.
In this case, 15 days lapsed before the results were received, and the child was temporarily placed in the home of a Texas couple, who later petitioned for adoption with the mother's consent.
The father in the case reportedly filed with the putative father registry and had the child's birth certificate amended after learning of the adoption proceedings. Last summer, he obtained custody of the child.
Current Missouri law requires the consent of both parents before a child can be put up for adoption, but the bill currently being considered in the General Assembly would permit mothers put their child up to adoption without the consent of the father, if the latter previously failed to develop a consistent and substantial relationship with the child.
In order to counter a mother's adoption attempt, a father would have to show that they provided: consistent prenatal financial support, payment of prenatal and natal medical care for both the mother and child; child support payments proportional to his ability to pay; consistent contact and visitation with the child; and education and medical care assistance for the child.
In our next post, we'll continue looking at this story, and the potential impact of the bill.
Source : CBS St. Louis, "Fathers of Illegitimate Children Would Lose Rights to Adoption ," Josie Butler, April 10, 2012.
]]>The case before the state's high court involves a man and woman who had a child together in 2004. At the child's birth, the man apparently did not put his name on the birth certificate since he was waiting for the results of a DNA test to prove paternity. Under current Missouri law, a father must declare paternity within 15 days of the birth of a child.
]]> In this case, 15 days lapsed before the results were received, and the child was temporarily placed in the home of a Texas couple, who later petitioned for adoption with the mother's consent.The father in the case reportedly filed with the putative father registry and had the child's birth certificate amended after learning of the adoption proceedings. Last summer, he obtained custody of the child.
Current Missouri law requires the consent of both parents before a child can be put up for adoption, but the bill currently being considered in the General Assembly would permit mothers put their child up to adoption without the consent of the father, if the latter previously failed to develop a consistent and substantial relationship with the child.
In order to counter a mother's adoption attempt, a father would have to show that they provided: consistent prenatal financial support, payment of prenatal and natal medical care for both the mother and child; child support payments proportional to his ability to pay; consistent contact and visitation with the child; and education and medical care assistance for the child.
In our next post, we'll continue looking at this story, and the potential impact of the bill.
Source : CBS St. Louis, "Fathers of Illegitimate Children Would Lose Rights to Adoption ," Josie Butler, April 10, 2012
]]>A bill currently being pushed by the House Armed Services Committee would strengthen the rights of service members in child custody disputes. The bill, called the Family Protection Act, would prevent judges in family courts from issuing rulings against armed service members in child custody disputes based solely on past or future deployments.
]]> In custody disputes, family court judges have the best interests of the child as their primary consideration, but the bill would modify how judges approach the issue of the military parent's extended absences.The bill was sponsored by Rep. Mike Turner of Ohio, who believes that service members are often unavoidably subject to extended absences, and that this alone should not prevent them from being awarded primary custody.
The bill seeks to combat the typical scenario, where a nonmilitary parent uses the military parent's absence as a means to persuade the judge to win permanent full-time custody of children.
Sources said the bill was first introduced back in 2008. It has reportedly passed the House of Representatives multiple times with bipartisan support, but consistently fails in the Senate, largely due to opposition from the Defense Department, which believes the measure should passed through state courts.
Robert Gates, the current Secretary of Defense, has voiced support for the bill, though, and has promised to fight for its passage.
Source: military.com, "Law Would Strengthen Troops' Child Custody Rights," Charlie Reed, April 10, 2012.
]]>According to the Los Angeles Times, Rodman may have to spend 20 days in jail for contempt of court because of failure to pay $860,376 in child support and spousal support owed to his wife, Michelle Rodman. The money is reportedly due y May 29. According to his attorney, he may be able to do community service time instead, but he faces severe financial challenges.
]]> Michelle Rodman, Rodman's third wife, filed for divorce in 2004. At that time, Rodman listed his previous year's income as $570,000, reported $3.4 million in property and $1.45 in stocks and bonds. Monthly expenses were listed as $31,000.Rodman's financial advisor has said that his struggles with alcoholism play a large part in his financial difficulties, and that his divorce from his third wife has made matters worse. At present, Rodman also has tax issues and owes $350,000 in back taxes, though his lawyers say he owes significantly less.
No matter how you slice it, Dennis Rodman is undergoing serious financial difficulties. While most folks with child and spousal support duties don't have the high charged lifestyle of Rodman, they do have their own expenses to deal with. Sometimes keeping up with child and spousal support payments becomes difficult or impossible because of changed circumstances. In such cases, modifications can be sought which allow for more reasonable payments.
Source: Los Angeles Times, "Dennis Rodman could face jail over child support," Lauren Williams and Mike Anton, March 28, 2012.
]]>According to the 2009 census, around 1.1 million children-around 1.5 percent-lived in the home of a parent who divorced in 2008. States in the South and West ranked highest for wedding rates, though they generally have higher divorce rates than other regions.
]]> While the rather-anemic state of marriage shows room for improvement, it is certainly the case that some marriages are best put out of their misery. Taking the first steps toward divorce can be overwhelming and scary. Where does one start? What are the issues?The primary matters of concern in divorce relate to children, property, support and other miscellaneous matters. In terms of children, child support, custody and visitation are biggies. Others things to address are health insurance, uninsured health care costs, college education funding, life insurance beneficiary designations, and tax deductions.
In terms of property issues, there is the primary question of how assets will be divided. Who will take on what debt is another big issue, as well as the possibility of hidden assets.
Spousal support is an important matter to address, as well, since parties to marriage make numerous sacrifices in order to make the partnership work. When it falls apart, the disadvantaged party can sometimes find himself or herself destitute.
Other potential issues to address are domestic violence, protections orders, child abuse, parental kidnapping, nonfinancial support, and attorney's fees and expenses. Each marriage will have a unique situation, and the issues each couple needs to address will vary according to the situation.
Those considering divorce should keep these issues in mind when consulting an attorney.
Source: Businessweek, "Divorce expo a counterpoint to wedding industry," Leanne Italie, April 4, 2012.
]]>In a recent article written for Forbes, divorce financial strategist Jeff Landers notes a number of sings that a spouse may be hiding marital assets during divorce. He lists a total of 21 different signs to look for. So, while the list is certainly helpful, it goes to show there is a lot to look out for.
]]> The following are among the signs Landers alerts his readers to be wary of behavior like: secrecy about financial matters; deleting personal financial programs such as Quicken or Quickbooks from computer or removing hard drive and never returning them; insisting on mutual durable powers of attorney; shopping sprees on expensive or luxury items; reports significant decrease in value of marital or business investments; opening multiple business or personal bank accounts without obvious reasons for doing so; and so on.As Landers also points out, there are often specific and predictable objectives to the various tactics involved in hiding assets. He lists four:
1. Hiding, understating or undervaluing particular assets,
2. Overstating debts,
3. Reporting lower than actual revenue, and/or
4. Reporting higher than actual expenses
The key in handling this behavior, according to Landers, is detecting the schemes early on in the process. It also helps for a spouse to consistently participate in financial matters touching on the marriage. Doing so will decrease the possibility of one's spouse hiding asses.
Source: Forbes, "21 Signs That Your Husband May Be Hiding Marital Assets During Your Divorce," Jeff Landers, March 20, 2012.
]]>There are a number of reasons why seeing the divorce process through before getting back into a relationship is the best approach. These include considerations of the psychological, financial, and legal ramifications of divorce, and how the challenges a new relationship will impact one's resources.
]]> From an emotional or psychological perspective, divorce can be very demanding. Couples often relive all their problems as they go through divorce in amplified pitch. If the divorce is contested, a new relationship may add further emotional strain if one's spouse finds out. One also should be certain that any new relationships one takes on start off on the best footing possible. For some, divorce is not a good time to start building foundations for a new relationship.Financially, the decisions being made during divorce deserve the most careful of attention. These decisions involve child custody and visitation, property division, spousal support and other important matters. Having sufficient energy and attention to consider these things is critical for one's future well-being.
Dating during a divorce can have an impact on custody issues. When judges make such determinations, their primary concern is the best interests of the child. Bringing a new adult into children's life during divorce is acknowledged to have a negative impact. If that new person has a shady past, there will be even greater consideration of a potential negative impact. One's spouse may also react negatively to bringing in a new adult to fill their spot, leading to further problems in the divorce.
The bottom line is that, although many people do end up falling back in love and remarrying after divorce, it may be best to wait until the divorce itself is wrapped up to take a new relationship on. Divorce can be demanding, and the more one can focus on seeing it through, the better are the chances a solid foundation will be set for future relationships.
Source: Huffington Post, "Dating during divorce? Not So Fast...," Bari Zell Weinberger, March 16, 2012.
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