January | 2012 | The Divorce Guy

Celebrity break-ups make headlines. For everyone else, break-ups make headaches. Deciding when enough is enough is never easy. There are multiple considerations including the effect on children, financial and emotional happiness. Whenever a relationship is on the rocks, I always advise my client’s of the three choices. They are simple and obvious:

First, do nothing.

Second, go to counseling.

Third, a divorce, or divorce alternative, such as, a post-nuptial agreement or legal separation.

What is not obvious is that there is no “right” decision.

Sometimes, doing nothing at all is best. For instance, if the fear of starting over, being alone, or the financial realty of divorce, outweigh the benefits, it might be best to do nothing. Counseling may be best if both parties are committed to solving the core problems in the relationship. A divorce or divorce alternative may be best if there is no desire to preserve the marriage or if staying in the marriage is no longer tolerable.

Experience dictates that the best decisions are made after becoming informed. You already know how to do nothing. If both you and your spouse are committed to solving the nature of the problem, you should consider counseling. Prior to deciding to file for divorce you should talk to an attorney. The knowledge you gain may provide the strength and freedom you need to regain your happiness, your children’s happiness and possibly the quality of your life.

Simon Cowell, Heidi Klum, Johnny Depp, and you. Deciding when enough is enough is easier after becoming fully informed.

Daniel Findling

Addressing potential tax issues in your negotiations can avoid problems in the future. For example, many lawyers believe that alimony payments are always tax-deductible to the person paying and taxable as income to the recipient. This is not the case. In order to qualify for the taxable or tax-deductible status certain requirements must be met. These requirements are often overlooked.

Under I.R.C. sec 215, payments made for alimony are allowed as a deduction. However, in order for payments to be tax deductible, the eight requirements of I.R.C. sec, 71 must be met.

The eight requirements of I.R.C. sec. 71 are:

1. The payments must be made in cash; (e.g. providing a car is not deductible)
2. The payments must be to a spouse or on behalf of a spouse;
3. The payments must be made pursuant to a divorce or separate maintenance instrument;
4. The payments must not be designated as non-qualifying by the payor or non-taxable to the recipient;
5. Spouses may not be members of the same household;
6. The payment must terminate at the recipient spouse’s death;
7. Spouses may not file a joint return; and
8. The payment cannot constitute child support.

The mere use of the word “alimony” or “spousal support” does not make the payment taxable or tax deductible. The proper application of I.R.C. sec. 71 is required.

Attention to details can make the difference in accomplishing or neglecting a client’s goals.

Daniel

Monthly Archives: January 2012

Simon Cowell, Heidi Klum, Johnny Depp, and you. When enough is enough!

Alimony and tax considerations.