Tag: divorce strategy

Strategy if Your Spouse Files for Divorce

Posted by Ron Kauffman on

There is some strategy for you to consider if your spouse asks you for a divorce. MSN discusses some things you could do immediately to protect your personal and financial interests. Obviously, it is difficult to focus on money when your marriage is ending, but you need to make sure that you reach a fair and equitable divorce settlement too.

divorce strategy

A Few Good Moves

You wouldn’t end a business partnership without first determining that all assets were divided fairly. The same holds true for dissolving a marriage. Focus on the following things immediately if you learn that your spouse is planning to end your union.

Hire a good attorney

According to MSN, hiring a lawyer is crucial. Your goal: Find an experienced advocate who will put your personal and financial interests first. Never share the lawyer with your spouse. Make sure you feel comfortable with the attorney.

Get referrals for attorneys from your trusted friends, family members and business associates, but keep in mind you want a lawyer who specializes in family law and divorce, preferably someone board certified as a specialist by your state’s Bar Association, and who is very involved in the legal community.

Monitor your credit reports

Protect yourself by preventing your spouse from running up large or unnecessary bills at this time. For now, at least, you may be responsible for half of any joint expenses.

“You know your spouse better than anyone else. If you know they’re not trustworthy, or they have a gambling problem, or you both are in a lot of debt, that tells you there are financial warning signs.”

Monitoring your credit score and credit reports before, during and after a divorce will ensure that your credit is safe and that no one else is using your name to borrow.

Florida Divorce

The official term for divorce in Florida is “dissolution of marriage”, and you don’t need fault as a ground for divorce. Florida abolished fault as a ground for divorce.  I’ve written about divorce before. In order to divorce in Florida, you need to file a petition for dissolution of marriage in the family court.

The no-fault concept in Florida means you no longer have to prove a reason for the divorce. Instead, you just need to state under oath that your marriage is “irretrievably broken.”

Before the no-fault divorce era, people who wanted to get divorce either had to reach agreement in advance with the other spouse that the marriage was over or throw mud at each other and prove wrongdoing like adultery or abuse.

No-fault laws were the result of trying to change the way divorces played out in court. No fault laws have reduced the number of feuding couples who felt the need to resort to distorted facts, lies, and the need to focus the trial on who did what to whom.

But there is some additional strategy to protect yourself.

Consider Closing joint accounts

To protect your credit rating, you may want to consider closing credit accounts that your spouse has access to. The idea is to prevent your spouse from incurring large debts before the divorce is final.

With joint credit cards, you are liable for any debts taken on by your spouse, says Sarah Carlson, a certified financial planner in Spokane, Washington.

If your spouse can’t pay the debts he or she runs up on your joint accounts, you may be held responsible.

Determine how much money you’re entitled to

When people divorce, many financial issues are tied to the size of the marital estate. To help you determine which assets you’ll be entitled to in a divorce, you’ll need to understand how much you and your spouse are worth, separately.

“For example, identification of an income-producing asset may be helpful for determination of child support and maintenance issues, while also affecting the division of the marital estate”.

Your job: Find out which assets are in your name and which belong to your spouse.

Protect your savings

It is easy to use up your cash quickly in a divorce. Safeguard your joint assets by asking your financial institutions to require two signatures for withdrawals.

“We generally don’t advise doing this with a regular joint checking account that is continuing to be used for household expenses, because that can become cumbersome. But we do advise dual signatures for any savings or investment accounts.”

Keep things as friendly as possible

Starting your divorce on an amicable note will make the proceedings easier and less time-consuming. From the beginning, work to keep things civil.

When you spend time bickering over minor issues, the only people who benefit are attorneys billing you by the hour.

“If ever there was a time to pick your battles, this is it. If you fight over every detail of your divorce, the fights will be never-ending, and that will impact your emotional state and your wallet.”

Talk with your children

The needs of children sometimes can be overlooked when parents divorce.

The best way to break the news of a divorce to children is for both parents to explain that their relationship is changing, making it clear that both parents love the children and the parents respect each other, says David T. Pisarra, a family law attorney in Santa Monica, California.

The Mayo Clinic advises parents to spend time explaining to children what is happening. Let them know that the separation isn’t their fault and that you will continue to care for them.

The MSN article is here.

 

Divorce Tax Strategies

Posted by Ron Kauffman on

As the New York Times reports, divorce can be a business negotiation. Harsh as that may sound — especially if there are children being fought over — when a couple gets to a final hearing or mediation, numbers matter. There are some divorce tax strategies you should know about involving the home, alimony, and even the time allotted with children.

divorce tax strategies

New Tax Code

Divorce negotiations are never easy, but they became even more complicated this year after the sweeping overhaul of our tax code changed many of the calculations that factor into the logistics of divorce.

The most sweeping tax legislation since 1986 was signed into law in 2017 and are only now taking effect. The Tax Cuts and Jobs Act makes reductions to income tax rates, reduces the income tax rate for corporations and pass-through entities like Sub-S corps and LLCs.

The revised tax code has brought some surprises to couples going through a divorce too, and many lawyers are suggesting that clients bring accountants into the divorce team to lay out the tax implications of age-old strategies.

Nothing is Certain: Divorce and Taxes

I’ve written about divorce and taxes before. The new tax code changes will impact your divorce, but the alimony deduction change may not be the only tax change which you should take into consideration in your divorce.

Many people are criticizing the new tax law in general. For example the decision to end the alimony deduction receives a lot of criticism. Many are saying it made divorce worse.

People won’t be willing to pay as much in alimony, which will disproportionately hurt women who tend to earn less and are more likely to be on the receiving end of alimony payments.

On the other hand, the alimony deduction itself has also been criticized. For example, the government argues the deduction is a burden on the IRS because, if the alimony amounts ex-spouses report paying and receiving don’t match, it can force the agency to audit two people who may already be feuding.

So, what are some of the new divorce ax strategies to consider with the changes to the tax code?

Alimony

Everyone involved in divorce has been talking about what happened to alimony and taxes. Last year I was warning clients in the midst of their divorces to hurry things up because of the new tax law changes which made alimony not deductible anymore. But like love, divorce cannot be rushed.

For divorces completed this year, and in the future, the spouse paying alimony can no longer deduct the alimony from taxes while the spouse receiving the money no longer has to claim it as income.

The loss has made alimony payments more costly to the paying spouse because it eliminated a tax break that often served as a reason to bring about an agreement by taking off the sting of alimony payments.

Family Home

The new tax law’s restrictions on deducting state and local taxes (the so-called “SALT” deductions) surprised many who saw their tax bill go up. When it comes to divorce, that limitation on deducting your real estate taxes can turn your home into a hot potato.

Usually, the spouse with less money would often want to keep the marital home for the children, but doing so now has become more costly.

In high-property-tax states, some divorcing couples are looking to get rid of second homes as well. Some states further complicate the process by having a set of standards that were created when alimony and state and local taxes were deductible on federal tax returns. While the SALT deductions have changed, the standards have not.

Dependents

The tax value of children in a divorce was also changed in the tax overhaul. In financial terms, children have become a smaller deduction.

The exemption for each dependent — $4,050 per person — was eliminated, but the child tax credit was increased to $2,000.

That credit starts to phase out at $200,000 of income for an individual and disappears at $240,000. This can impact you because the credit can be given to the spouse with lower income in exchange for a break elsewhere in the negotiations.

The New York Times article is here.