Archive for the ‘ Divorce ’ Category

Taxes And Divorce – What You Need To Know

Posted on: February 8, 2016 by in Divorce
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With April 15 rapidly approaching, our Cerritos spousal support lawyers know that if you are anticipating or considering a divorce this winter or spring, you are probably wondering whether you should file your taxes first or file for divorce first. You may not have considered that in a divorce, your ex-spouse may not be the only party trying to take a big bite out of your assets. Ex-spouses can sometimes be intimidating, but the Internal Revenue Service can be an even bigger threat to your assets and resources. Whenever there’s a transfer of even a modest amount of money, investments, or property, your taxes will be affected, and the IRS will be interested. That’s why it’s imperative to seek the legal advice and services of an experienced divorce attorney who fully understands the financial issues that can emerge in a divorce. Depending on your personal circumstances, divorce can have a moderate-to-huge impact on your federal tax burden, and knowing precisely what’s at stake can help you avoid big tax troubles. An experienced divorce lawyer can give you the advice that’s applicable to your own tax situation. In southern California, speak with an experienced Long Beach divorce attorney.

If you are filing your taxes on or before April 15, the first thing that’s important to know is that the IRS only cares about your marital status as of the end of 2015. Thus, the question of whether to file for divorce first or file your taxes first is really up to you – the IRS only cares about last year’s marital status. If your divorce was final on or before December 31, 2015, the IRS “considers” that you were divorced for the entire year. One exception, however, allows some separated parents to claim a “favorable head of household” status, which can facilitate additional deductions. To qualify, you must have paid more than half of your housing costs for 2015 and you must have lived separately from your spouse through the final six months of 2015. Additionally, your dependent child must have lived in your home for more than half of the year.

FILING AND EXEMPTIONS

After a divorce, your ability to claim exemptions for your children can mean a substantial tax federal tax difference. If you and your ex-spouse can agree, you can sign a document specifying which one of you gets the exemption for the children. That decision can determine who will get more than $1,000 in tax savings. Child support is not deductible for the parent who pays, and it is not counted as income for the parent who receives it.

If you are already involved in a pending divorce proceeding, you may file a joint return only if you were still legally married at the end of the tax year (December 31, 2015), and if both of you agree to the joint filing. The box that you check on your return form in this situation is the “married filing jointly” box. Even if you are informally or legally separated, you are considered married by the IRS so long as there was no final court judgment ending your marriage in the year 2015. A temporary order relating to child support, alimony, or child custody does not affect your marital status. However, if the divorce was finalized on or before December 31, you cannot file jointly. Your filing status will either be “single” or “head of household.”

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TALK IT OVER

Discuss with both your tax advisor and your divorce attorney the advantages and disadvantages of filing a joint tax return. Typically, although not in every case, your tax burden will be reduced if you file a joint tax return, contingent of course upon on your respective incomes, credits, and deductions. The primary downside to filing your tax return jointly is that both spouses are jointly liable for the taxes on the return as well as any tax deficiencies, interest, and penalties. You can protect yourself from this to some extent with a tax indemnification agreement. If you are choosing to file taxes jointly, and one spouse will be responsible for preparing the tax returns, you should consider entering into an indemnification agreement. A tax indemnification agreement stipulates that one spouse will be liable for any amounts due on previously filed joint returns, and it protects the spouse who didn’t prepare the return.

You should make certain that your divorce agreement, settlement, or judgment, or another document addresses how you and your ex will handle any federal tax liability or refunds. If you are expecting the IRS to send a refund check, be certain sure that the check will be paid to both of you jointly or that you obtain an agreement in writing that the recipient will pay the other spouse whatever share that spouse is entitled to. If the refund is a direct deposit, make certain that it sent to a joint account – or again, have an agreement in writing.

FILING AS “HEAD OF HOUSEHOLD”

If you have concerns about allowing your spouse to prepare accurate tax returns, you’re better off having the tax returns prepared professionally or just filing separately. Courts will not order a spouse to file a joint tax return against his or her will. If your divorce was not final on or before December 31, 2015, you should file as either “married filing separately” or as “head of household” depending on your situation. When you file as “head of household,” it lets you claim the standard deduction and credits such as the earned income credit and the dependent care credit. “Head of household” may also allow you to be taxed at a lower rate. To file as head of household, these are the criteria:

  • Your spouse did not reside with you during the final six months of 2015.
  • You paid more than fifty percent of your household’s costs in 2015, including rent or mortgage payments, homeowners’ insurance, utilities, and groceries.
  • Your home was the primary residence of your child, stepchild, or eligible foster child for more than half of 2015, and you could claim a dependent exemption.

If you file as “head of household” and your divorce was not final on or before December 31, 2015, your spouse then must file as “married filing separately.” After you are divorced you may continue to file as “head of household” if you pay more than fifty percent of your home’s expenses for the tax year and if your child or children reside with you for more than half of the year.

TAXES AND SUPPORT PAYMENTS

When you’re negotiating or fighting in court about spousal support, you cannot afford to overlook tax issues. Spousal support payments are deductible for the party who pays and counted as income for the party who receives the support payments. If you are the spousal support recipient, you’ll want to plan for that income’s federal tax impact. Your ex is not an employer, so nothing is withheld when you receive a spousal support payment. Paying an estimated tax to the IRS each quarter helps many people avoid taking a tough tax hit all at once at the year’s end. If you are employed, you might consider increasing the amount withheld from your paycheck to help you offset the tax impact of receiving spousal support.

Child support payments and property distributions are not deductible, but if you are an ex-spouse making spousal support payments, those payments are deductible on your federal tax return. The IRS looks closely at spousal support paid in the first three years after a divorce. to make sure that you didn’t shift nondeductible payments – property distribution or other responsibilities such as attorneys’ fees – into spousal support to make them appear as deductible support.

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THE LEGAL HELP YOU NEED IS HERE

If your spousal support agreement or settlement involves paying higher amounts in the first years after a divorce and lower payments subsequently, the IRS will also look closely to see if the first payments are “disguised” property division payments or other nonsupport payments. In your spousal support agreement, it’s imperative that you do not link the cessation of support payments to your children – for example, when they leave for college or move out and get a job. The IRS might suspect that the payments are child support, which is not deductible, disguised as spousal support, which is. Frankly, anyone paying spousal support should not be surprised if the IRS wants to ask you some questions. If you make payments to a third party – such as the state – rather than paying your ex directly, the IRS treats those payments the same way as payments made directly. A good divorce attorney can make certain that your divorce-related finances are in order and can help you deal with the IRS if they question you regarding spousal support.

Divorce is never fun. Even when there is really nothing to dispute, divorce can be painful and difficult. Don’t let the tax issues associated with a divorce make it worse for you. Contact an experienced divorce lawyer who understands and who is willing and able to discuss the impact of your divorce on your taxes. In southern California, put your divorce in the hands of an experienced Long Beach divorce attorney, and if you are considering or anticipating a divorce, make the call promptly.

The Divorce Rate Is Plunging

Posted on: January 19, 2016 by in Divorce
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When the popular actress Gwyneth Paltrow divorced in 2015, ABC News said it was the latest example of an out-of-control divorce rate that is “fifty percent and climbing.” A Fox News anchor recently blamed poverty in the United States on the divorce rate “going up.” And when Bravo introduced its divorce reality show Untying the Knot in 2015, the network called divorce “a situation that fifty percent of married couples unfortunately end up in.” More than half of all marriages end in divorce, and the divorce rate is on the rise. That’s the conventional wisdom and the general consensus, but is it the truth?

Not at all, according to recent statistics including a survey sent out by the Census Bureau to 3.5 million addresses in the U.S. every year. Divorce has declined about three percent since 2008, and the long-term trend is downward. The divorce rate for first-time marriages is currently 41 percent and dropping. Still, if you are considering or anticipating a divorce, you need to seek out a good divorce lawyer at the very beginning of the process, and in southern California, you should speak with an experienced Los Angeles divorce attorney.

WHY THE DECLINE?

Why is the divorce rate plunging now in the United States? Observers and pundits have offered a number of reasons, and probably all of those reasons play some part in the ongoing reduction of the U.S. divorce rate. Certainly one reason the official divorce rate is declining is because more couples are choosing to live in cohabitation arrangements, and when those arrangements dissolve, the breakups don’t count as divorces. In other words, fewer marriages mean fewer divorces overall and a declining divorce rate. “It’s becoming more acceptable to be in a long-term, committed relationship without a legal document,” says Pamela J. Smock, director and research professor at the Population Studies Center at the University of Michigan-Ann Arbor.

According to the Population Studies Center’s research, between 1995 and 2010, first-time cohabitation jumped by 43 percent for white women, 57 percent for Hispanic women, and 39 percent for African-American women. Marriage is seen as more “optional” for young adults in the 21st century, whereas in the 1960’s, almost ninety percent of the U.S, population married in their twenties. It was virtually universal marriage, and about half of those couples eventually divorced in the divorce “boom” of the 1970s and 1980s. Today, fewer people are marrying, they’re marrying later, and they seem to be taking their marriage commitments more seriously. With more women empowered, earning, and independent, the choice to marry is more and more becoming a truly free and fully voluntary choice. Despite some loudly-articulated fears about the decline of the traditional institution of marriage, marriages in the United States are in fact stronger today than they have been in a number of decades. The divorce rate peaked in the 1970s and early 1980s, and it’s been declining since that time.

About 70 percent of the marriages that began in the 1990s reached their fifteenth anniversary (excluding those in which a spouse passed away), up from about 65 percent of those that began in the 1970s and 1980s. Those who have married in the 2000s are so far divorcing at even lower rates. If current divorce rate trends continue, nearly two-thirds of today’s marriages will not end in divorce, according to data from University of Michigan economist Justin Wolfers.

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A NUMBER OF FACTORS

Birth control, which first became widely available in the 1960s, and abortion, which became legal in every state in the nation in 1973, are also among the reasons why divorce is declining. Birth control and legal abortion have virtually eliminated the coerced or “shotgun” marriages that were actually rather frequent prior to the 1960s. Cohabitation, birth control, abortion, and the rising age of those entering first marriages are all functioning to reduce the divorce rate in the United States. These same forces are helping to reduce the divorce rate in parts of Europe, too.

Education also seems to be playing a role in lower divorce rates. According to Justin Wolfers at the University of Michigan, the ongoing decline in divorce is most pronounced among couples with college educations. Of the college graduates who married in the early 2000s, only about eleven percent divorced before their seventh anniversary, but for people without college degrees, seventeen percent were divorced before the seventh anniversary, according to Mr. Wolfers’ research.

THE NEW MARRIAGE MODEL

Andrew Cherlin, a sociologist and the author of Labor’s Love Lost: The Rise and Fall of the Working-Class Family in America, takes another approach. He believes that a new “model” of marriage is being developed by college graduates in Europe and the United States, and that working-class couples without college degrees may be lagging behind. “Better-educated Americans have found a new marriage model in which both spouses work and they build a strong economic foundation for their marriage,” says Cherlin. Working-class families, on the other hand, may hold more traditional notions about male breadwinners, yet economic changes – such as outsourcing and the transformation from an “industrial” economy to an “information and service” economy – have left many of the men in these working-class families struggling to find sufficient, stable, long-term employment. As a result, working-class couples are now divorcing at higher rates than college-educated couples, and that’s a situation that may not change until the newer “model” of marriage is more widely accepted.

In the 1960s and earlier, the marriage “model” was a breadwinning male and a homemaking female who both needed the other’s contribution to the household. That changed in the 1970s. For the first time, women entered the work force by the millions, and they simultaneously gained reproductive rights. The long historical perspective may eventually show us that the skyrocketing divorce rates of the 1970s and 1980s represented an irregularity. The divorce spike occurred at the same time as a new feminist movement and the emergence of reproductive freedom. Today, society has generally adapted to those changes, and the divorce rate is once again where it should be – on the decline. Marriage has now evolved into a new, 21st-century model based on love, two incomes, and shared interests as well as shared household duties.

Those who are waiting longer to get married are a big part of the picture. Prior to marriage, people are taking more time to mature, to build financial stability, to understand what they want in a partner, and to find one. The median age for marriage in 1890 was 26 for men and 22 for women. By the 1950s, that age had plummeted to 23 for men and 20 for women. In 2004, the average marriage age had climbed back to 27 for men and 26 for women.

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GROWING CONCERNS

While no one disputes that a lower divorce rate is good news, there are a number of growing legal concerns regarding the millions of couples who now live in cohabitation arrangements. In fact, one group of family law attorneys in the United Kingdom is advocating formal, legal safeguards for cohabiting partners in that nation. To receive legal protection when a cohabitation relationship ends in the United States, you need to have some kind of a contract – written, oral, explicit, or implicit – that you can offer to a court if you need to receive “palimony” when your cohabitation arrangement ends. “Palimony” is not a legal term, but the concept is comparable to alimony in California and a number of other states. Palimony is the division and distribution of financial assets and real property upon the dissolution of a cohabitation relationship between parties who are not legally married. In some cases and in some states, it may not be possible to win a palimony settlement or payments, but many have succeeded with the help of an experienced divorce lawyer.

The first step toward winning palimony is usually mediation. If the ex-partners in a cohabitation arrangement can resolve their dispute with the help of a mediator – and avoid lawsuits and courtrooms – they can save time, resources, and probably a great deal of aggravation and grief. If mediation fails to resolve the dispute, depending on the state you reside in and the specifics of the case, an experienced divorce lawyer may be able to take a palimony claim to trial. In the 1976 Marvin v. Marvin case, the California Supreme Court ruled that non-marital relationship contracts may be legally enforced. Such contracts may be expressed, implied, oral, or written, but they must be provable in court. If you need palimony – or if you expect to be part of a palimony dispute – you must retain an attorney who routinely handles palimony and divorce cases.

To protect themselves, cohabiting partners should consider drawing up a contract similar to a prenuptial or postnuptial agreement. You can draft an agreement that spells out each partner’s protections, rights, and obligations in the event of a breakup. An experienced divorce lawyer can help most couples in most states create the agreement that’s right for their particular circumstances. If you have questions or concerns regarding divorce, cohabitation, or any matter of family law, or if you need legal representation in a divorce or a post-cohabitation dispute, speak at once with a good divorce lawyer, and in southern California, with an experienced Los Angeles divorce attorney.

Trial Separation: What you need to Know

Posted on: July 24, 2015 by in Divorce
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When a couple is having problems in the marriage, the spouses may decide on a trial separation. The trial separation is an informal agreement under which the couple will decide to live separately from each other for a while. They may decide on the duration of the trial separation in advance.

Basically, the trial separation affords a couple time and breathing space to think things over. When you aren’t living with the same person 24/7, it can give you a new perspective on your relationship that you may not have had before.

A trial separation is an informal agreement, and nothing is down in writing. This is not a legal contract. You are still officially married to each other. That means that you are not free to marry other people.

In many cases, trial separation will ultimately lead to divorce. However, in some cases, the spouses may find that divorce is not a solution to their problems, and that they would like to give their marriage another chance.

Speak To A Los Angeles Family Lawyer

If you are considering divorce, and want to know what effect the divorce will have on your finances, your family life and other aspects of your life, speak to a Los Angeles family lawyer. It’s important to make the right decisions during this critical stage in your life. Schedule a consultation with a Los Angeles family lawyer today.