When you first start contemplating a divorce in Texas, you will have the ability to do things with financial accounts that you might not be able to do once the divorce begins. Once the divorce has been filed, you are not allowed to divert money, change designations, or the like. You should also be aware that your spouse will have access to the joint bank (checking, savings, or mutual fund) accounts just like you and when discussions about attorneys come up, it is not uncommon for one spouse to empty all of the money out of the joint bank account for these types of needs. Is there anything that you can do about this? Probably not. During a divorce, the spouses are generally permitted to make expenditures for: (1) reasonable living expenses (such as food, shelter, etc), and (2) attorney's fees. However, you should at least have your own contingency plan.
The only way to ensure that you will have access to funds is to open up your own bank account and start having your paycheck deposited to this account. It is not a bad idea to attempt to get both you and your spouse (by agreement) to open up separate checking / savings account and a separate credit card account. You can even agree (in writing or otherwise) that these accounts are the separate responsibility of the respective spouse. Close the joint account (or keep a nominal amount of money in it) so that there are less assets to ultimately divide by the Court.
If this can be done by agreement, then there will be less of an opportunity for a misunderstanding. If you change where your paycheck gets deposited without informing your spouse, understand that you might be starting a "war." You should be very careful about any actions like this that can backfire. However, if you can do this without inciting additional problems, then this is not a bad idea. In any event, you should at least open up a separate account and ensure that you have enough funds in that account to get by for a couple of months and to obtain an attorney if this becomes necessary. Otherwise, you may not be able to survive without help from family or friends, and you might end up having to sacrifice assets in order to make it for a couple of months. Another alternative is to have your attorney seek the disbursement of funds for living expenses and attorney's fees from other community assets. These types of motions, however, can end up being expensive.
If you expect your spouse to remain civil during the divorce, then this might not be a big deal, but understand that your spouse will have access to each of the joint accounts and during a highly contested divorce, it is not uncommon for one spouse to withdraw money from accounts (for legitimate attorney's fees or for other things) and they can then start hiding the cash. If you have questions about the preparation of specific agreements and other questions about how to deal with joint accounts, you should seek the advice of an experienced divorce attorney.
Saturday, January 31, 2009
Austin Divorce Lawyer Tip: What should we do about the Safe Deposit Box during a Divorce?
First of all, safe-deposit boxes are not themselves assets -- it is the items inside the box that are assets. If the safe-deposit box has joint access by both spouses, then you should at least inventory the contents at the time of (or immediately prior to) the initiation of a divorce. It is not a bad idea to take photographs and to take notes on what is in the box so that you have proof. You should date the notes and make them as detailed as possible. It is not a bad idea to get a copy of the log sheet from the bank showing the date when you did the inventory. It is also very important to have a neutral third party go with you and act as a witness. The third party neutral can then initial the inventory and verify the contents. If you cannot find such a person (preferably not a relative or friend who could be accused of being "biased"), someone like a bank employee might even be a good person to use for this. By doing this, you will be able to prove the existence of items in the event of a dispute. If the items are very valuable, it might not be a bad idea to take an independent, third party appraiser with you so that you will have someone who can testify as to value in case the items "disappear." You can usually find someone like a local auctioneer who can perform these types of services.
As long as there is no temporary restraining order or temporary injunction in place, you could potentially take the items and put them into your own safe-deposit box or other safe location so as to limit access by your spouse. If the items are your separate property, (i.e. - the items were purchased prior to marriage, or obtained by gift or inheritance), these actions might not be view by the Judge to be unreasonable. However, if there is a temporary restraining order or a temporary injunction in place (or as we have in Austin / Travis County, Texas a Standing Temporary Order) then you should not and cannot take the items (hide or secrete them) without Court approval. You should keep in mind; however, that if you start taking and hiding assets of the marriage, your spouse might start doing the same and this would not be a good thing.
As long as there is no temporary restraining order or temporary injunction in place, you could potentially take the items and put them into your own safe-deposit box or other safe location so as to limit access by your spouse. If the items are your separate property, (i.e. - the items were purchased prior to marriage, or obtained by gift or inheritance), these actions might not be view by the Judge to be unreasonable. However, if there is a temporary restraining order or a temporary injunction in place (or as we have in Austin / Travis County, Texas a Standing Temporary Order) then you should not and cannot take the items (hide or secrete them) without Court approval. You should keep in mind; however, that if you start taking and hiding assets of the marriage, your spouse might start doing the same and this would not be a good thing.
Austin Divorce Lawyer Tip: Post-Divorce Planning with Insurance and Retirement Benefits.
Oftentimes divorce attorneys are focused on getting all of the divorce issues handled and do not discuss estate planning issues with you. At the inception of any Divorce, it is recommended that you seek the advice of an experienced Estate Planning Attorney to update your will, living will, medical powers of attorney, and durable powers of attorney. Although Texas law provides that after a Divorce, beneficiary designations as to insurance proceeds and retirement benefits are treated as having been automatically revoked under Texas Family Code sections 9.301 and 9.302, you should not depend upon this. The insurance company or Plan Administrator will not be liable for paying in accordance with your instructions, unless they get prior notice of the claim of another before distributing the funds and then fail to interplead the funds into the registry of the court. Also, you may not have considered some of these issues:
What if a spouse should die during the pendency of the Divorce, will my spouse get all of my life insurance and retirement benefits?
What happens after we have settled our case (by mediation, negotiation, in a Rule 11 Agreement, or otherwise), but before the divorce is actually finalized?
Do you want your spouse making medical decisions if you should get seriously injured?
Do you want your spouse to have access to all of your assets, bank accounts, safe deposit box, and mutual funds in the event of your incapacity?
You should also be aware that once the Divorce case has been filed, you may not be permitted to change these designations due to a Temporary Restraining Order, Temporary Injunction, Local Rule, or as we have in Austin, Texas, the TRAVIS COUNTY STANDING ORDER REGARDING CHILDREN, PROPERTY AND CONDUCT OF THE PARTIES. As a result, you need to make these considerations prior to the time the Divorce is filed.
This is where divorce law intersects with estate planning and probate law. Anyone who may be planning on a divorce should think about these issues and consult their Divorce Attorney to come up with a plan to ensure that these matters are addressed.
What if a spouse should die during the pendency of the Divorce, will my spouse get all of my life insurance and retirement benefits?
What happens after we have settled our case (by mediation, negotiation, in a Rule 11 Agreement, or otherwise), but before the divorce is actually finalized?
Do you want your spouse making medical decisions if you should get seriously injured?
Do you want your spouse to have access to all of your assets, bank accounts, safe deposit box, and mutual funds in the event of your incapacity?
You should also be aware that once the Divorce case has been filed, you may not be permitted to change these designations due to a Temporary Restraining Order, Temporary Injunction, Local Rule, or as we have in Austin, Texas, the TRAVIS COUNTY STANDING ORDER REGARDING CHILDREN, PROPERTY AND CONDUCT OF THE PARTIES. As a result, you need to make these considerations prior to the time the Divorce is filed.
This is where divorce law intersects with estate planning and probate law. Anyone who may be planning on a divorce should think about these issues and consult their Divorce Attorney to come up with a plan to ensure that these matters are addressed.
Thursday, January 29, 2009
Insurance Coverage under COBRA after a Texas Divorce.
Pursuant to Federal statute (specifically, the Consolidated Omnibus Budget Reconciliation Act of 1985 or "COBRA"), you should keep in mind that a spouse (and dependent child) who is covered under the insurance policy of an employee may have the right to so-called COBRA "continuation coverage" after a Divorce is finalized. In order to qualify, the employee must: (1) work for an employer who has 20 or more employees, (2) file an application with the employer no later than sixty (60) days after the divorce is finalized, and (3) keep up the premium payments, which cannot be two percent (2%) more than the original premium payments.
COBRA coverage can become especially important for spouses with significant pre-existing conditions that might not be covered with a new insurance carrier. As a result, as long as the coverage elections are timely made, the former spouse cannot be required to take a physical exam or otherwise qualify for the continued coverage. The continuation coverage has the potential to last for three (3) years after the Divorce is finalized. After that, the former spouse still may be able to purchase "conversion coverage" under COBRA; however, with the conversion policy, the employer or insurance carrier can charge significantly higher rates.
These rights only apply in situations of qualifying employees (those policies purchased through work or an association) and not with an individual plan, or those that you purchase on your own. Individual plans are generally not subject to the COBRA provisions. As a result, once you lose that coverage, you won't be able to get an extension.
COBRA Insurance coverage generally ends when: (1) the last date of maximum coverage endes; (2) premiums are not paid on a timely basis; (3) the employer ceases to maintain any group health plan, (4) you obtain coverage through another employer group health plan that does not have any exclusions or limitations with respect to a pre-existing condition of a beneficiary; (5) you move outside the health plan coverage area; and, (5) a beneficiary is entitled to Medicare benefits.
COBRA coverage can become especially important for spouses with significant pre-existing conditions that might not be covered with a new insurance carrier. As a result, as long as the coverage elections are timely made, the former spouse cannot be required to take a physical exam or otherwise qualify for the continued coverage. The continuation coverage has the potential to last for three (3) years after the Divorce is finalized. After that, the former spouse still may be able to purchase "conversion coverage" under COBRA; however, with the conversion policy, the employer or insurance carrier can charge significantly higher rates.
These rights only apply in situations of qualifying employees (those policies purchased through work or an association) and not with an individual plan, or those that you purchase on your own. Individual plans are generally not subject to the COBRA provisions. As a result, once you lose that coverage, you won't be able to get an extension.
COBRA Insurance coverage generally ends when: (1) the last date of maximum coverage endes; (2) premiums are not paid on a timely basis; (3) the employer ceases to maintain any group health plan, (4) you obtain coverage through another employer group health plan that does not have any exclusions or limitations with respect to a pre-existing condition of a beneficiary; (5) you move outside the health plan coverage area; and, (5) a beneficiary is entitled to Medicare benefits.
Ten Ways to Help Your Children Get Through Your Divorce
1) Do not insult or talk bad about your (soon-to-be-ex) spouse in front of, to, or around your children. This is harmful and detrimental to your children. In extreme cases, it is sometimes referred to as "Parental Alienation Syndrome (PAS)." You should encourage your spouse to be the best parent that he or she can be, even if your spouse was not a particularly good husband or wife. Children need both parents; driving a wedge between your child and the other parent will do grave damage to both or may backfire and cause the child to resent you and defend the other parent. Sometimes the other parent simply withdraws from the relationship altogether; only in the rarest of circumstances is this good for your child. The majority of children charged with crimes in our juvenile justice system do not have the active involvement of both parents.
2) Do not involve your children in legal discussions. The financial and legal details of the divorce will only serve to upset and distress your children. Children should not be permitted to (over) hear your arguments and discussions about legal, financial, or emotional issues relating to the divorce. Children should not be informed about what is going on in court and generally should not be asked to make a decision to choose one parent over the other. Your children should not be encouraged to shuttle messages back and forth between their parents; instead, you should communicate directly, politely, and calmly with the other parent about any parenting issues (even if your spouse is rude or unresponsive with you). Never bring your children to Court without prior Court approval.
3) Do not dump your emotional baggage on your children. If you are angry with your spouse, have resentment toward your spouse, or are saddened by his or her actions, you should not discuss these extreme emotions with your children. Your child is not your friend, buddy, and certainly not your counselor or therapist. You are the parent and your children expect you to be in control at all times. If you are out of control, you cannot parent the way you should. Your children need you to be engaged most of all during this emotionally difficult time. If you need to discuss your feelings, hire a counselor or speak with a close friend or adult relative.
4) Reassure your children that both parents love them; tell them directly that the divorce is not their fault and that everything will be okay. In most cases, you should attempt to come up with a game plan (or "parenting plan") so that both parents can be actively involved in your children’s activities. Also, there are “parenting coordination classes” such as “Putting Kids First,” that can be taken to help you work with the other parent for the betterment of the children. Discuss any potential plans or agreements with your respective attorneys, and seek their input, but do not sign anything without talking to your lawyer first.
5) Try to maintain the status quo during the divorce as much as possible. The children have grown to expect such routines from you, and you will cause unnecessary stress if you decide to change all things that are familiar to them. If the divorce does not require moving them out of their house, changing schools, or moving to another city, it is not a good time to make these or other changes. If your children have friends they like to play with, family members that they want to see, or adults involved in their lives (that you approved of prior to the divorce), do not cut off those relationships simply because they may be "more friendly" with (or related to) your spouse. Your children should be encouraged to contact these people by telephone or email if they cannot visit in person. You must be the bigger person about these matters. Take the high road, rather than the low one that is so often traveled.
6) Never ever, ever introduce a new "significant other" into your children's lives during or even shortly after the divorce. This will confuse them, upset them, and will make them very angry and resentful. Take this time to concentrate on the children and building your relationship with them, rather than a new love interest.
7) Children should not be exposed to secondary smoke from tobacco. Children should not be present during the use or possession of illegal drugs. Parents must ensure that children are not transported in a motor vehicle by any person under the influence of alcohol or drugs. Your children deserve to be safe and secure.
8) Parents should discuss, agree, and then mutually enforce appropriate limitations concerning the use of cell phones, computers, video games, television, and similar electronic devices or modes of communication. You should include what ratings are acceptable for television, movies, and video games, as well as appropriate curfews or bedtimes.
9) Do not criticize the other parent. Do not permit, encourage, or allow your children to criticize the other parent. The other parent's failures in life (financial, psychological, relational, physical, emotional limitations, or legal problems) should not be discussed with the children, unless it is first brought up by the child, and only then after a discussion is had with the other parent about the nature and extent of the disclosures to be made to the children.
10) All children should have a place for their belongings in a room separate from their parents, at each parents' location. The children should be allowed to take a reasonable amount of belongings with them to the other parent’s home and they should always be permitted to return with those items that were originally in his or her possession, unless a prior agreement is made with the other parent in advance. The child must be permitted to have photographs, correspondence, and personal items from both parents in their personal space.
2) Do not involve your children in legal discussions. The financial and legal details of the divorce will only serve to upset and distress your children. Children should not be permitted to (over) hear your arguments and discussions about legal, financial, or emotional issues relating to the divorce. Children should not be informed about what is going on in court and generally should not be asked to make a decision to choose one parent over the other. Your children should not be encouraged to shuttle messages back and forth between their parents; instead, you should communicate directly, politely, and calmly with the other parent about any parenting issues (even if your spouse is rude or unresponsive with you). Never bring your children to Court without prior Court approval.
3) Do not dump your emotional baggage on your children. If you are angry with your spouse, have resentment toward your spouse, or are saddened by his or her actions, you should not discuss these extreme emotions with your children. Your child is not your friend, buddy, and certainly not your counselor or therapist. You are the parent and your children expect you to be in control at all times. If you are out of control, you cannot parent the way you should. Your children need you to be engaged most of all during this emotionally difficult time. If you need to discuss your feelings, hire a counselor or speak with a close friend or adult relative.
4) Reassure your children that both parents love them; tell them directly that the divorce is not their fault and that everything will be okay. In most cases, you should attempt to come up with a game plan (or "parenting plan") so that both parents can be actively involved in your children’s activities. Also, there are “parenting coordination classes” such as “Putting Kids First,” that can be taken to help you work with the other parent for the betterment of the children. Discuss any potential plans or agreements with your respective attorneys, and seek their input, but do not sign anything without talking to your lawyer first.
5) Try to maintain the status quo during the divorce as much as possible. The children have grown to expect such routines from you, and you will cause unnecessary stress if you decide to change all things that are familiar to them. If the divorce does not require moving them out of their house, changing schools, or moving to another city, it is not a good time to make these or other changes. If your children have friends they like to play with, family members that they want to see, or adults involved in their lives (that you approved of prior to the divorce), do not cut off those relationships simply because they may be "more friendly" with (or related to) your spouse. Your children should be encouraged to contact these people by telephone or email if they cannot visit in person. You must be the bigger person about these matters. Take the high road, rather than the low one that is so often traveled.
6) Never ever, ever introduce a new "significant other" into your children's lives during or even shortly after the divorce. This will confuse them, upset them, and will make them very angry and resentful. Take this time to concentrate on the children and building your relationship with them, rather than a new love interest.
7) Children should not be exposed to secondary smoke from tobacco. Children should not be present during the use or possession of illegal drugs. Parents must ensure that children are not transported in a motor vehicle by any person under the influence of alcohol or drugs. Your children deserve to be safe and secure.
8) Parents should discuss, agree, and then mutually enforce appropriate limitations concerning the use of cell phones, computers, video games, television, and similar electronic devices or modes of communication. You should include what ratings are acceptable for television, movies, and video games, as well as appropriate curfews or bedtimes.
9) Do not criticize the other parent. Do not permit, encourage, or allow your children to criticize the other parent. The other parent's failures in life (financial, psychological, relational, physical, emotional limitations, or legal problems) should not be discussed with the children, unless it is first brought up by the child, and only then after a discussion is had with the other parent about the nature and extent of the disclosures to be made to the children.
10) All children should have a place for their belongings in a room separate from their parents, at each parents' location. The children should be allowed to take a reasonable amount of belongings with them to the other parent’s home and they should always be permitted to return with those items that were originally in his or her possession, unless a prior agreement is made with the other parent in advance. The child must be permitted to have photographs, correspondence, and personal items from both parents in their personal space.
Wednesday, January 28, 2009
Parent Education and Family Stabilization Course for Texas Divorces
In 2005, the Texas Legislature added a provision relating to the taking of a Parent Education and Family Stabilization course. See Texas Family Code Section 105.009. Although the courses are not mandatory unless ordered by the Court (although some counties now have local rules requiring that the parties take the course), many people believe that these courses are very productive and help people to focus their attention on what is truly best for their children. The Austin / Travis County Courts have not yet required the course. Of the clients that we have had take these courses, many say that the courses are helpful and report a positive experience. The courses are usually between four and twelve hours in length and are "designed to educate and assist parents with regard to the consequeof divorce on parents and children."
Pusuant to Texas statute, the course must include information on the following issues:
(1) the emotional effects of divorce on parents;
(2) the emotional and behavioral reactions to divorce by young children and adolescents;
(3) parenting issues relating to the concerns and needs of children at different development stages;
(4) stress indicators in young children and adolescents;
(5) conflict management;
(6) family stabilization through development of a coparenting relationship;
(7) the financial responsibilities of parenting;
(8) family violence, spousal abuse, and child abuse and neglect; and
(9) the availability of community services and resources.
When one of the parties to a contested custody case is particularly difficult or is not doing what is best for the children, one option is to request that the Court order that party to take the course. You should be prepared for the likelihood that the Court will simply order both of the parties to take the course, when one party requests. If you have more questions about the Parent Education and Family Stabilization Court you should seek the advise of an experienced family law attorney.
Pusuant to Texas statute, the course must include information on the following issues:
(1) the emotional effects of divorce on parents;
(2) the emotional and behavioral reactions to divorce by young children and adolescents;
(3) parenting issues relating to the concerns and needs of children at different development stages;
(4) stress indicators in young children and adolescents;
(5) conflict management;
(6) family stabilization through development of a coparenting relationship;
(7) the financial responsibilities of parenting;
(8) family violence, spousal abuse, and child abuse and neglect; and
(9) the availability of community services and resources.
When one of the parties to a contested custody case is particularly difficult or is not doing what is best for the children, one option is to request that the Court order that party to take the course. You should be prepared for the likelihood that the Court will simply order both of the parties to take the course, when one party requests. If you have more questions about the Parent Education and Family Stabilization Court you should seek the advise of an experienced family law attorney.
Sunday, January 25, 2009
What is a Guardian or Attorney Ad Litem in a family case?
A Guardian Ad Litem (“Ad Litem,” meaning for purposes of the litigation) is appointed by the Judge in family law cases and will attempt to inform the Court as to what he or she believes is in the “best interests” of the child. In situations where legal action may be required, the Court can also appoint an "Attorney Ad Litem."
The Guardian Ad Litem usually has an advanced degree in either sociology or psychology and has special training in assisting children. The Guardian is usually appointed in termination or adoption cases, but, in special circumstances, also can be appointed in contested child custody cases.
In contested child custody cases, upon the appointment of either (or both) a Guardian / Attorney Ad Litem, the parties will lose some degree of control over what goes on at hearings and at trial. However, when a party is convinced that greater disclosure and investigation will be advantageous to his / her side (and, of course, the "best interests" of the child), then the appointment may be requested. These factors (and others) should be carefully weighed and it is recommended that you consult with an experienced family law attorney. Some of the things that the Guardian / Attorney Ad Litem can / may do are:
1) meet with and interview the child(ren);
2) interview the parents and other family members;
3) interview teachers, counselors, neighbors & others involved with the children;
4) interview other witnesss / third parties;
5) request that the Court order a home study and/or investigate the neighborhood;
6) collect evidence by serving subpoenas on schools and medical or psychological providers;
7) suggest (or request in Court) that the child (and/or parents) see a qualified psychiatrist, psychologist, or counselor for evaluation and/or treatment;
8) initiate (or merely attend) depositions in the case;
9) the filing of Motions concerning matters such as child support, visitation, conservatorship, temporary injunctive relief, health or psychological problems with the children, abuse or neglect of the children, or other matters that have not yet been brought to the attention of the Court;
10) the filing of a formal report to the Court;
11) initiate meetings between the Judge and the child(ren);
12) subpoena witness to hearings and trial;
13) attend hearings and trial; and/or
14) the making of formal or informal recommendations to the Court concerning custody, visitation, powers of conservatorship or other matters.
The Guardian Ad Litem usually has an advanced degree in either sociology or psychology and has special training in assisting children. The Guardian is usually appointed in termination or adoption cases, but, in special circumstances, also can be appointed in contested child custody cases.
In contested child custody cases, upon the appointment of either (or both) a Guardian / Attorney Ad Litem, the parties will lose some degree of control over what goes on at hearings and at trial. However, when a party is convinced that greater disclosure and investigation will be advantageous to his / her side (and, of course, the "best interests" of the child), then the appointment may be requested. These factors (and others) should be carefully weighed and it is recommended that you consult with an experienced family law attorney. Some of the things that the Guardian / Attorney Ad Litem can / may do are:
1) meet with and interview the child(ren);
2) interview the parents and other family members;
3) interview teachers, counselors, neighbors & others involved with the children;
4) interview other witnesss / third parties;
5) request that the Court order a home study and/or investigate the neighborhood;
6) collect evidence by serving subpoenas on schools and medical or psychological providers;
7) suggest (or request in Court) that the child (and/or parents) see a qualified psychiatrist, psychologist, or counselor for evaluation and/or treatment;
8) initiate (or merely attend) depositions in the case;
9) the filing of Motions concerning matters such as child support, visitation, conservatorship, temporary injunctive relief, health or psychological problems with the children, abuse or neglect of the children, or other matters that have not yet been brought to the attention of the Court;
10) the filing of a formal report to the Court;
11) initiate meetings between the Judge and the child(ren);
12) subpoena witness to hearings and trial;
13) attend hearings and trial; and/or
14) the making of formal or informal recommendations to the Court concerning custody, visitation, powers of conservatorship or other matters.
Sunday, January 18, 2009
Spousal Maintenance, Alimony and Tax Tips for Texas Divorces
Spouses can agree to the payment of spousal maintenance (or what is basically alimony in Texas) . However, spouses in the process of a divorce would regard a Court Order requiring the payment of spousal maintenance to be an unfavorable scenario. This may not actually be the case. Because of how the IRS treats the payments for tax purposes, this may actually be favorable for both spouses. If structured properly, the paying spouse (Obligor) may be able to deduct the payment from his or her income. As a result, this liability actually removes income from the paying spouse's reported income, thereby reducing the Obligor's tax liability. The effect of this over time could be significant, especially if the payments drop the Obligor into a lower tax bracket.
On the other hand, the receiving spouse (Obligee) must report the payments as additional income on his or her Form 1040. By structuring the settlement in this manner, the Obligor could hang on to additional assets and reduce his or her tax liability at the same time. Conversely, the Obligee could obtain the security of payments over time and, assuming the Obligee is in a lower tax-bracket, reduce the overall tax liability of the marital estate.
Under IRS publication 504, the following types of payment are not considered to be spousal maintenance (alimony):
· Child support,
· Noncash property settlements,
· Payments that are your spouse's part of community income,
· Payments to keep up the payer's property, or
· Use of the payer's property.
In order to qualify to be alimony (or spousal maintenance), the settlement must be structured properly. The following seven requirements are mandatory:
1. The payments must be made as part of a written divorce agreement;
2. The payments must be made to your ex-spouse and usually not to third parties;
3. The divorce (or agreement incident to divorce) should not expressly disclaim that the payment is for alimony (spousal maintenance);
4. After the divorce, you and your spouse cannot live together in the same household and should not file the taxes jointly;
5. The payment must be in cash or equivalents (checks, money orders, cashier's checks) and not money from a property settlement;
6. The payment cannot be considered to be child support; and,
7. The obligation to make payments must cease if your ex dies.
If you have questions, you should consult an experienced divorce attorney or CPA.
***** Treasury Circular 230 Disclosure - To comply with requirements imposed by the Internal Revenue Service, to the extent this blog posting could be construed to include "tax advice," the information is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed on the person. This blog post is intended for informational purposes only, the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
On the other hand, the receiving spouse (Obligee) must report the payments as additional income on his or her Form 1040. By structuring the settlement in this manner, the Obligor could hang on to additional assets and reduce his or her tax liability at the same time. Conversely, the Obligee could obtain the security of payments over time and, assuming the Obligee is in a lower tax-bracket, reduce the overall tax liability of the marital estate.
Under IRS publication 504, the following types of payment are not considered to be spousal maintenance (alimony):
· Child support,
· Noncash property settlements,
· Payments that are your spouse's part of community income,
· Payments to keep up the payer's property, or
· Use of the payer's property.
In order to qualify to be alimony (or spousal maintenance), the settlement must be structured properly. The following seven requirements are mandatory:
1. The payments must be made as part of a written divorce agreement;
2. The payments must be made to your ex-spouse and usually not to third parties;
3. The divorce (or agreement incident to divorce) should not expressly disclaim that the payment is for alimony (spousal maintenance);
4. After the divorce, you and your spouse cannot live together in the same household and should not file the taxes jointly;
5. The payment must be in cash or equivalents (checks, money orders, cashier's checks) and not money from a property settlement;
6. The payment cannot be considered to be child support; and,
7. The obligation to make payments must cease if your ex dies.
If you have questions, you should consult an experienced divorce attorney or CPA.
***** Treasury Circular 230 Disclosure - To comply with requirements imposed by the Internal Revenue Service, to the extent this blog posting could be construed to include "tax advice," the information is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed on the person. This blog post is intended for informational purposes only, the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
Sunday, January 11, 2009
I’ve been served with a Divorce Petition in Texas, what should I do / not do?
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