From start to finish there is no question that divorce is expensive. Sometimes it is a juggling act; do you spend the money for the expensive expert or do you agree on a shared one? Or do you skip an expert altogether (which can be dangerous)? The most commonly needed experts, outside of parenting matters, are residential real estate appraisers, business valuation experts, commercial real estate appraisers, defined benefit pension valuation experts, and forensic accountants.
If money is tight – and no matter how much you have, money is tight when you are in the process of divorcing – maybe you can share the costs of a joint expert. This is often a plausible idea for residential real estate because there is a common sense way to reality-check the results. Most folks have a reasonable idea of their residential real estate values, thanks to Zillow.com and your town assessor’s office.
It also makes economic sense to share the cost of the actuary doing the defined benefit pension valuation. There generally will be some form of information from the pension provider which also will provide a good reality check.
With most Massachusetts health insurance plans, provided he/she has not yet remarried, an employee with at least one dependent child can add a former spouse to the coverage for no additional cost, so there is no additional cost to the employer either. In these situations, one would presume that no income should be imputed to the employee because the employer is not required to pay the insurer any additional premium for the benefit of continuing coverage of a former spouse. Unfortunately, not all human resource departments share this view. Some human resource departments are deciding that the former spouse is receiving a benefit that is equal to the value of the employee’s own individual coverage and, thus, are imputing the fair market value of that coverage to the employee on his/her Form W-2.… Keep reading
April 15th is creeping up on us. I find doing my taxes while its snowing, AGAIN, a real insult.
This week and next week’s post were written by my terrific colleagues, Ron Barriere and Jen Green. They highlight a tricky complexity in the new health insurance laws for divorcing couples.
Divorcing spouses have many issues to consider in negotiating the terms of a divorce agreement. One of the seemingly “easier” issues for divorcing spouses and their counsel is health insurance. While the issue of health insurance coverage is typically included within the divorce agreement, the federal tax implications are often overlooked. Recent interpretations of federal tax law underscore the need for divorcing spouses to use skilled divorce counsel and tax practitioners in negotiating the terms of their divorce agreements.
It is commonplace for a divorce agreement to contemplate one spouse continuing to provide health care coverage through his/her employment for an ex-spouse. Under the Affordable Care Act (ACA or “Obamacare”), the IRS will require reporting by the employer of the cost of such coverage of employer-sponsored insurance. In some instances, the reporting requirement may facilitate the apportionment of the cost … Keep reading
This week my very smart colleague Jen Green is back with Part 2 in her series of important tax issues that need to be considered when dividing marital property during a divorce.
4. Principal Residence
The marital residence is one of the largest marital assets. In general, the tax code provides that a single taxpayer can exclude up to $250,000 of gain from the sale of a principal residence, provided he or she has lived there for two out of the last five years .
5. Business Interests
The existence of business interests as marital assets may create tax consequences when dividing those interests pursuant to a divorce agreement. Tax planning for transferring business interests depends on the type of entity involved, and specific care must be taken to ensure that certain tax attributes are not lost or that inadvertent tax liabilities are not somehow triggered. For example, interests in S corporations can result in suspended losses (losses that are carried into future years) instead of being able to be deducted in the year that they are incurred. When those interests are transferred pursuant to a divorce, those suspended losses may be … Keep reading
It’s tax time again! I know this because I am cleaning closets at home to avoid pulling my taxes together. If you are in the middle of a divorce, you need to be careful about how you file your taxes. Jennifer Green, my very knowledgeable tax colleague, has some suggestions for this.
Married spouses who are in the process of seeking a divorce should think twice about filing a joint income tax return. That decision should not be made in haste. Although you can amend your income tax return to change your filing status from married filing separate to married filing joint, once you file a joint income tax return, you cannot later change your mind and amend your tax return for that year to change your filing status to married filing separately.
Many married couples choose to file a joint income tax return in order to take advantage of certain tax credits and other benefits attributable to this filing status. However, there is major disadvantage in filing a joint income tax return. As joint filers, both spouses are jointly and severally liable for the tax and any additions to tax, interest or penalties … Keep reading
Massachusetts is an equitable division state. This means that all property, whenever and however acquired, may be subject to division as well as utilized for support in a divorce case. If you are an owner or a shareholder in a closely held business and are facing divorce, you need to be braced for the discovery that will soon be headed your way.
The documents which are considered basic and minimal in order to value both the business and determine the owner’s true income with perks, are often some of the most private documents of the business. At least five years of tax returns, audited or unaudited financial statements, buy/sell agreements, offers to sell or buy the business, inventories, insurance policies, customer lists, patents, the list goes on and on. It is a good idea to have either in-house counsel (if you have them), or hire outside counsel, perhaps referred to you by your divorce attorney, so that the proper protections for the business during the litigation can be put in place. At the very least, a confidentiality agreement should be signed and approved by the court before the documents are produced.
Most valuation experts and forensic accountants … Keep reading
This tip sounds simple, but many folks have ignored the finances of their marriage because their spouse is in control (and often controlling), or because they have not “needed” to become knowledgeable.
If this has been you, right now, you NEED to find out as much as you can. Where are your assets (i.e. retirement accounts, bank accounts, investments, etc.) held? In whose name? What is the income stream coming into the family? Gather and make copies of recent bank, retirement and investment account statements and the three most recent years of tax returns. If none of this is possible because your spouse keeps the records away from you at his or her office, ask about them. The nature of the response you get may help you decide what to do. If your spouse is uncooperative when you ask for this information, then that tells you there is a problem.
Also check on your liabilities. What is the mortgage payment? How much is left to pay on the mortgage in comparison to the equity in your home? Do you have credit card balances? What are they? In whose name are the cards? You should also pull a … Keep reading