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Posts Tagged divorce and taxes

Financial Planning For and During a Divorce

What are the legal fees of divorce?A divorce brings about many changes in a person’s life. One of the most significant changes is the financial impact of a divorce. Spouses go from having a combined household with (usually) two separate incomes, to living apart, and supporting themselves on their own. If you are contemplating a divorce, or have already filed for divorce, there are different actions you can take to plan for your own financial future after a divorce.

 

Create a Budget:

Review your household expenses to see what your weekly/monthly expenses come out to. In addition to including the usual expenses (i.e. mortgage/rent, utilities, heat, cable TV, telephone, groceries, clothing, etc.), don’t forget to include other typical expenses, such as uninsured medical expenses, motor vehicle expenses, child care, vacation and entertainment, education costs for yourself and your children.

Once you have your budget, look at what your income is, and what it is likely to be at the end of the divorce. Don’t forget to factor in any alimony and/or child support that you may be paying or … Read More »



Financial Planning For and During a Divorce

financial planning divorce

A divorce brings about many changes in a person’s life. One of the most significant changes is the financial impact of a divorce. Spouses go from having a combined household with (usually) two separate incomes, to living apart, and supporting themselves on their own. If you are contemplating a divorce, or have already filed for divorce, there are different actions you can take to plan for your own financial future after a divorce.

 

Create a Budget:

Review your household expenses to see what your weekly/monthly expenses come out to. In addition to including the usual expenses (i.e. mortgage/rent, utilities, heat, cable TV, telephone, groceries, clothing, etc.), don’t forget to include other typical expenses, such as uninsured medical expenses, motor vehicle expenses, child care, vacation and entertainment, education costs for yourself and your children.

Once you have your budget, look at what your income is, and what it is likely to be at the end of the divorce. Don’t forget to factor in any alimony and/or child support that you may be paying or receiving.

Based upon … Read More »



Rehabilitative, Transitional, and Reimbursement  Alimony in Massachusetts

Q: What are Reimbursement Alimony, Rehabilitative Alimony, and Transitional Alimony?

A: There are 4 types of alimony under Massachusetts law. The four types are:

General Term Alimony Rehabilitative Alimony Reimbursement Alimony Transitional Alimony Rehabilitative Alimony Q: What is Rehabilitative Alimony?

A: By the statute’s definition, Rehabilitative Alimony for a recipient spouse who is expected to become economically self-sufficient by a predicted time, such as, without limitation, reemployment; completion of job training; or receipt of a sum due from the payor spouse under a judgment.

Q: When is a spouse eligible to receive Rehabilitative Alimony?

A: Rehabilitative Alimony is available to all spouses, regardless of how long they have been married.

Q: When Does Rehabilitative Alimony End?

A: Rehabilitative Alimony ends upon the first of the following to occur:

upon the remarriage of the recipient spouse, the occurrence of a specific event in the future that is outlined in the court order the death of either spouse; After 5 years. Q: Can Rehabilitative Alimony last longer than 5 years?

A: Yes, a spouse can file a complaint for modification upon a showing of compelling circumstances in the event that:

unforeseen events prevent the recipient spouse from being self-supporting at the end … Read More »



Child Support, Alimony & Taxes

Child Support, Alimony & TaxesWhen going through a divorce, there are many financial issues that spouses must address. Some of these financial issues have tax consequences, and other financial issues do not. One area where taxes come into play is support. Under Massachusetts Law, there are two categories of support.

The first category is alimony, which is the periodic payment of support by one spouse to another spouse for that other spouse’s support. Under the federal tax code, and Massachusetts tax law, the alimony paid by the payor spouse is tax deductible for the payor spouse, but taxable to the recipient spouse. That means that the alimony received by the recipient spouse is considered income, and it must be reported on that spouse’s tax returns.

The other category of support is child support, which is support paid by one spouse to another spouse for the support of the child(ren) of the marriage. Unlike alimony, child support is not tax deductible for the payor spouse, or taxable to the recipient spouse. Child support is considered a tax neutral payment.

Read More »



How Much Will My Divorce Cost?

What are the legal fees of divorce?Many times one of the first questions a potential client will ask our firm is “How much will my divorce cost?” Unfortunately, there is no straight answer for this question. There are many variable factors that can affect how much a divorce will cost, and there is no “standard” legal fees for a divorce.

One of the biggest factors to determine how much a divorce will cost is whether the divorce is contested or uncontested. With uncontested divorces in Massachusetts (also known as IA divorces), spouses not only agree to get divorce, but agree to the terms of settlement of the divorce. They then jointly file with the court a Joint Petition for Divorce along with a Separation Agreement that outlines the terms of settlement. There is then only one court hearing to approve the documents that have been jointly filed by both spouses. Whereas, in a contested divorce, either one spouse opposes the divorce altogether, or the spouses cannot agree on some of the terms … Read More »



Handling Your Divorce Like an Air-Traffic Controller

compromiseThe stresses placed on divorcing couples, who are making decisions about custody, spousal support, equitable distribution and parenting plans are not unlike those of air-traffic controllers, who are trying to safely land multiple jumbo jets coming in on multiple runways. Perhaps these aren’t life or death decisions, but that depends entirely on your perspective!

I can’t take credit for this brilliant and so-directly-on-point analogy, but am borrowing it for the sake of this conversation. I hope it’s useful to anyone going through the divorce process today, or for those stuck in the seemingly never-ending post-divorce arguments that annoy, irritate and frustrate us.

We embark on the divorce journey for many reasons. For some, it’s a joint decision made, when it’s clear that the marriage isn’t working. For others, it was one spouse taking the initiative to raise the flag and take those first steps. Some go voluntarily into the process, and some go kicking and screaming, maintaining their status as “victim” in their broken fairytale. Regardless of how the travel plans were made, you are nevertheless taking this trip, and are forced to make many inter-related decisions that will ultimately affect your … Read More »



Divorce Can Mean a Trip Down the Economic Ladder for Women

crying womanDivorce can be a one-way ticket down the road to financial instability for many women, especially for those who are middle class or low-income.

It can mean a loss of work hours, more time (and expense) devoted to childcare and a cold slap in the face when it comes to finding a job or finishing an education.

While working-class women tend to be hit harder, not having a job, money or credit of their own is a challenge that can affect women of all socioeconomic brackets, said Bruce McClary, spokesman at the National Foundation for Credit Counseling. “In a lot of situations you have that career interrupted… It can be very messy in that situation because they have to start right from scratch.”

This was the situation Michelle Bornemann found herself in when she and her husband began divorce proceedings more than four years ago. The Long Island, New York resident, who has two children, had worked for a title insurance company before they were born but has been largely out of the work force since.

“I have nothing to show for a … Read More »



Managing High Asset Divorces in Massachusetts

high net worth

All divorces can be stressful and important to spouses facing a divorce. However, handling divorces with a high asset value has some additional inherent complexities that not all spouses, or even all attorneys, are aware of.

When addressing high asset divorces, there are complicated issues that have to be addressed within alimony, property division, taxes, life insurance, and even child support. In handling such divorces, it often requires the attorney to review a large volume of documentation, particularly financial documents. Because these documents can be highly technical, a knowledgeable divorce attorney typically takes a “team” approach to such divorces, and includes financial professionals in the management of such a divorce. These financial professionals can include a business appraiser, tax professional or accountant, financial planner, forensic economist, and/or certified divorce financial analyst (also known as a CDFA). It is important that your attorney already have a team in place that they have been working with for years.

These professionals can help your attorney work through some very complicated financial issues relating to the divorce, and oftentimes these professionals are also knowledgeable of the law associated with the financial aspects of … Read More »



Dependency Tax Exemptions and Divorce

Divorce-and-Taxes

During the course of a divorce, there are many issues that spouses have to resolve: property division, alimony, child custody, child support, medical insurance, and taxes. One after thought of these many issues is the child dependency tax exemption.

In a divorce, spouses can agree how to allocate the dependency tax exemption. For example, if a couple has 3 children, then one parent can claim 2 children in a given year, and the other parent can claim 1 child in a given year, and then the parents can alternate in the following year. Or if parents have an even number of children, then they can each claim an equal amount of children.

However, sometimes it does not make financial sense for one parent to claim any tax dependency exemptions, either because this parent is unemployed or underemployed. In this case, the other parent can claim all the exemptions to as to maximize the tax consequences of the exemptions.

In divorces, the options with respect to dependency tax exemptions are endless. There is no “one size fits all” solution. Each couple should look at their … Read More »



Taxes and Divorce, What You Need to Know

taxes2Finances and taxes are a significant issue during divorce, especially when children are involved. There are also special rules in the tax code that govern divorce and separation. It’s important to be apprised of these rules.

Dependency Exemption. If you are the custodial parent of the children, you can claim a dependent exemption of $3,950 (for 2014) for each child. The noncustodial parent may claim the dependent exemption and the child tax credit for the children with the consent of the custodial parent. For this change to be valid, the custodial parent must sign IRS Form 8332 Release of Claim to Exemption for Child of Divorced or Separated Parents . The noncustodial parent must attach the signed release to his or her income tax return each year for which the dependency exemption is claimed.

Even if the noncustodial parent takes the exemption, the parent who has custody of the child can still claim Head of Household filing status, which results in a lower tax liability. The custodial parent may also qualify for the Child Care Credit, Exclusion for child Care Benefits and the Earned … Read More »



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