Important Tax Considerations During a Divorce

When you decide to get divorced, it seems like the tough decisions never stop coming. Unfortunately, this is also true when it comes to your final divorce settlement and taxes. A number of decisions you make regarding your divorce could impact your taxes for better or for worse. Before you agree to finalizing any aspect of the divorce settlement, make sure you know how your taxes will be affected.

Having your own legal representation in a divorce is crucial. To discuss your case in greater detail with our experienced legal team, call Coumanis & York at 251-260-3927 to set up a consultation.

Your Filing Status

If you are not yet legally divorced by the time the end of the year rolls around, you will need to decide which filing status you and your ex-partner will use. Even if your divorce is finalized before you file your taxes, you are still considered married if you aren’t divorced by December 31. In some cases, choosing married filing separately is the ideal choice. This is especially true if your tax return offsets your spouse’s tax liability, since you probably don’t want your tax return subsidizing your ex-partner’s life. However, in general, filing married jointly is the best financial option. This, too, may come with repercussions.

Liability for Returns

This ties in closely to the first item on this list. If you and your ex choose to file jointly, you are both liable for all of the information on that return. That means that if your ex-partner lies on their tax return or doesn’t provide documentation, you are just as criminally liable as them. If you don’t trust them or have any reason to believe they might cut corners, it might be worth the extra cost to file separately.

The Child Tax Credit

Generally, the child tax credit stays with the person who has the child most of the time. If time is split 50/50, this may mean switching off years. Furthermore, there are some situations in which the non-custodial parent may take the tax credit. This should all be decided as part of the divorce negotiations.

Property Transfers

Depending on how property is split up, you may trigger different tax situations. In general, property transfers done because of divorce don’t affect taxation. There are exceptions, though, and you should discuss your best option with your attorney.

Retirement Funds

Many people choose not to split up retirement accounts during divorce, simply because of the complications of transferring them and figuring out how they affect taxes. To transfer part or all of a retirement account, you need a QDRO from the court. This limits tax consequences. Going outside the recommended route could lead to penalties.

Assets That Are Sold

If you and your ex-partner choose to sell assets and split the proceeds rather than give the actual asset to one party, you need to look at how that could affect taxes. Consider, for example, selling a vacation home. If the home is sold and the proceeds go to you, you may get hit with a capital gains tax. This may make your divorce settlement less valuable than you think it is. This means it may also give you more leverage when it comes to negotiations.

Spousal Support

Alimony payments are no longer a taxable/tax-deductible item since the federal tax law changes at the beginning of 2019. This means it does not positively or negatively impact the taxes of the giver or the receiver. However, in many situations, the higher-earning partner might agree to give up more in assets to avoid paying alimony. This may leave the party receiving alimony with unexpected tax consequences. For that reason, you should know exactly what you are giving up if you don’t pursue alimony and how that decision may affect you.

Prepare for Your Divorce with Coumanis & York

Divorce is stressful at best, and things can often get very messy. No matter what kind of divorce you’re anticipating, you need your own legal representation. Divorce represents a fresh start, and you don’t want to be hindered by mistakes made during the divorce process. To make the best decisions for yourself and your future, get in touch with Coumanis & York today. Call us at 251-260-3927 or contact us online to set up a consultation.

Taking Control of Your Finances During a Divorce

Divorce takes a toll on your mental health, your stability, and your finances. Some forget to take care of their finances during a divorce, assuming that there’s no point to it when everything is in free fall. However, this is actually the best time to take control of your finances and use them to prepare for a new stage of your life.

If you’re getting divorced and you’re not sure how to protect yourself throughout this process, let us help. Call the team at Coumanis & York at 251-260-3927.

Create a Brutally Realistic Budget

This isn’t the time to be overly optimistic about what your future will look like. You need to be incredibly honest while looking at your budget and considering what you can spend, especially if you’re leaving the family home and you need to figure out how much housing you can afford. After creating a budget that accounts for monthly bills and necessary expenses, add in periodic expenses.

Don’t forget car registration, vehicle repairs, subscriptions, school fees, and other expenses that you still have to budget for. You don’t want to start out life as a single person with more bills than you can handle because of a budgeting error.

Establish New Accounts

In many cases, simply removing your ex-partner from a bank account or credit card isn’t enough. You should go one step further and establish entirely new accounts. Even though banks shouldn’t grant access to those listed on the account, smooth-talking ex-partners have been known to gain access by saying that they were removed because of a clerical error or by overriding security questions.

Make Sure Your Documentation is in Order

You should begin this step as soon as possible once you’ve made the decision to divorce. Get copies of bank statements, retirement account statements, tax returns, insurance policies, and other financial documents. Put them in a safe place away from the marital home. You may need these to start changing beneficiaries and double-checking spending after you leave the marriage. If you worry about your spouse finding or destroying the documents, consider making a digital backup to a cloud-based service.

Prepare for the Worst

There are a lot of unknowns in divorce, especially when it comes to your finances. Until all of the paperwork is signed and the debts are paid, anything could change. Rather than planning for the best-case scenario where you get to keep the assets you want and divvy up the debts in a fair way, plan for the worst. Assume that you will lose access to some assets and that you’ll take a larger portion of the debt than expected. This allows you to make a cautious, conservative plan. If things go your way and you end up in a better situation, you will have extra funds and assets at your disposal.

Hold Off on Major Changes

Divorce has a way of making you want something new. Maybe you want to start investing aggressively, get a brand-new car, or buy a vacation home. Take a deep breath and hold off on any major financial decisions for a while. Your mind is likely not in an ideal state during divorce, and you want to wait on those decisions until you can think them through clearly.

Contact an Attorney

An attorney is one of the best resources you can have during divorce. Preparing your finances for the future isn’t helpful if you’re doing so based on false assumptions about what will happen during your divorce. Your attorney can take a long, hard look at your finances, the history of your marriage, and what the likely outcomes of your divorce are. From there, you can make practical plans that will help you create the life you have always wanted.

Take the First Step Toward a Healthy Divorce with Coumanis & York

If your marriage is ending and you’re not sure how to protect yourself and your assets, let Coumanis & York help. Our team has extensive experience with all types of divorces, including amicable, contentious, and high-asset divorces. Let us help you with your divorce. To schedule a consultation, give us a call at 251-260-3927 or reach out to us online.

Holiday Custody Issues During COVID-19

In case holiday custody struggles weren’t already hard enough, 2020 brought us COVID-19. COVID-19 has highlighted serious disagreements between co-parents, whether they disagree on the severity of COVID-19, how best to keep their children safe from it, or their role in limiting its spread.

At the holidays, when many people gather in multi-family celebrations, the risk of contracting COVID-19 is even higher. What do you do if your co-parent doesn’t take steps to protect your child from COVID-19 or your coparent thinks they have the right to keep your child from you because of the pandemic?

These are complex issues with no clear-cut answers. Learn more about holiday custody issues and for more personalized advice, contact Coumanis & York at 251-260-3927.

Don’t Stop Following Your Custody Agreement

If you are considering keeping your child at home because of unsafe holiday arrangements at your co-parent’s house, do not do so without a change in the custody agreement or written confirmation from your co-parent. You simply do not have the unilateral right to change custody arrangements without the approval of your co-parent or the court.

Recognize Risk Factors and Take Note of Them

Regardless of which side of the dispute you are on, take note of the risk factors of COVID-19 spread and try to understand your co-parent’s point of view. If you believe they are too cavalier about the disease and take unnecessary risks, jot those down and provide examples. You may use this when you speak to your lawyer. If you think your co-parent is being too harsh about their COVID-19 restrictions and you believe they may withhold visitation because of it, note the steps you take to keep your child safe and how you plan to protect them over the holidays.

Collaboration is Ideal

As is the case with virtually any custody dispute, collaboration is the best way to go whenever possible. No matter how different your points of view may be, it comes down to you both wanting what is best for your children. You may have different ideas about how to get there, but the goal is the same.

Approach any discussions with your ex-partner with this in mind. Rather than going after them about how they are hurting you or how they are endangering your child, approach them with the sense that you are in this together and you can work out an agreement that benefits everyone. In many cases, simply being acknowledged and included in the conversation is enough to create space for an agreement.

Look for Alternatives

In some cases, compromise simply isn’t possible. Consider a case where the custodial parent is immunocompromised and truly cannot risk getting COVID-19 because their risk of dying is so high. In this case, a court order for temporary custody changes may be required. However, try to be flexible and find ways for your child to spend time with loved ones in a safe manner. Virtual visitation is an option. You may also want to “trade” the holidays for extended visitation when the pandemic has ended.

How Your Lawyer Can Help

No matter where you are in this process or what side you fall on, you need to discuss it with your attorney. Your attorney can review your custody agreement and help you find options. They may help you draft a letter to your co-parent asking for cooperation or assistance, and if that fails, they can help you pursue legal remedies.

This is a difficult time, and it is particularly challenging for co-parents who have to navigate custody and visitation. Try to extend grace to yourself and your co-parent, but do not back down from what is best for your child.

Turn to Coumanis & York for Help with Your Custody Case

Are you facing serious custody issues over COVID-19? You aren’t alone. Parents all over the country are in the same situation you are in. Coumanis & York is here to help you fight for what is right. To schedule a consultation, call our team at 251-260-3927 or contact us online. We are ready to go to work for you!

What Factors Will Affect My Child Support Payment in Alabama?

Whether married or not, both parents have a continuing legal responsibility to provide financial support to their children. Like most states, Alabama has laid out clear rules to determine the financial duties of single, divorced, or separated parents and for making sure that parents pay child support.

However, the interpretation of these rules can be somewhat complicated. Consult an experienced Alabama family law attorney for assistance if you have trouble navigating through the myriad forms and calculations for child support.

Child support calculations depend on various factors, which vary between states. The below-mentioned aspects are almost always taken into account when determining child support payments in Alabama.

Considering Both Parents’ Income

In the calculation of child support in Alabama, both parents’ actual income and the earning capability of a parent who is voluntarily underemployed or unemployed, is taken into consideration. For instance, an educated parent who is licensed to work as a medical practitioner, but decides to work for only four months in a year, will still have their child support payments calculated based on the figure that they could reasonably earn if they worked throughout the year, based on their training, education, and experience.

The above consideration ensures that child support calculation in Alabama is not unfairly biased when a person chooses to earn less than their earning ability merely to reduce the child support amount due from them.

Custodial Arrangements

The parent with the child’s physical custody in Alabama will incur more expenses in taking care of the child, such as clothing, groceries, and extracurricular activities. The calculation of child support aims to ensure that all the needs of the child are met. Therefore, the custodial parent will usually receive child support payments.

But the non-custodial parent could also be entitled to a child support payment, which will depend on the custody arrangement details and if the parents’ incomes are wildly disproportionate.

Age, Number, and Marital Status of Children

It is expensive to raise a child in Alabama. Therefore, child support is determined on the basis of the number of kids that the parents are legally obligated to support. When one child attains the age or status that the parents are not obligated to financially support them any further, the child support figure will be decreased to reflect the fact that the parents are now duty-bound to monetarily support one less child.

In general, child support agreements allow parents to stop financial support when the child attains the age of majority. But some states require that the child graduates from college or marries before the support can end.

Standard of Living of the Child before the Divorce or Separation

Family law courts also assess the standard of living for the child in Alabama. All child custody and support proceedings aim to uphold the child’s best interests. Thus, the court will attempt to ensure that the child achieves the same standard of living after the divorce or separation to mitigate the negative effects and disruption on the child.

The Child’s Needs

Aspects, such as age or medical status, influence the amount of financial support a child requires. For instance, considering a child who is still too small to go to school, the family court will typically direct what part of daycare costs each parent is liable for.

Similarly, a custody agreement will usually determine which parent is responsible for providing medical insurance and how any miscellaneous expenses are to be divided. The court will also direct how additional expenses should be managed for special needs children.

What Other Factors are involved in the Calculation of Child Support in Alabama?

Alabama family law courts are designated “courts of equity.” This means that they can and do take into account all pertinent information and circumstances to ensure the most fair and impartial outcome of the case. 

The following factors are commonly taken into consideration:

  • Financial support obligations for children from other relationships
  • Necessary traveling visitations with the child
  • Retirement contributions

Further, it is vital to understand that there are limitations on how frequently child support determinations can be re-calculated as enabling parents to request modifications to child support at any time and as often as they desire could lead to an overload of cases for the judicial system. While the time limit differs between states, it is typically a few years. Therefore, a child support arrangement must be made appropriately the first time itself.

Talk to a Qualified Alabama Family Law Attorney

It is vital to ensure that the interests of the children are upheld during a paternity or divorce case. At Coumanis & York, we have extensive experience in this field and a thorough knowledge of the family law and divorce cases in Alabama.

Our attorneys have a nuanced understanding of laws pertaining to child support. We work closely with our clients to understand and resolve family legal issues in a constructive, positive, and inclusive manner. To speak with one of our attorneys, message us online or call our office today at 251-990-3083.