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Divorce and Taxes
Tax season is coming soon, and spouses getting a divorce need to consider their options.
For those finalizing before April 15th, you may be filing separately, but do you have all of the information you need from your spouse to complete your tax returns? Be sure your Final Decree addresses this by adding deadlines.
For those finalizing after April 15th, how will you be filing? Who will be completing the tax returns? How will refunds or payments be split? Sometimes a spouse will file separately and take the deduction for the children, tell the spouse that he/she is filing jointly, and then not tell the other person that he/she really filed separately. The filing spouse gets the refund, and the non-filing spouse ends up never filing a tax return!
It’s important that you give serious thought to these and other issues, and that you stay on top of what your spouse is doing. Be sure to talk to your attorney about taxes, too, since many attorneys often overlook this simple matter.
Sex after Divorce: Does it get better?
A divorce is one of the most difficult periods in a person’s life. It is both emotionally and financially draining. Many people get frustrated and find it difficult to see any silver lining. However, check out this interesting article on CNN.com about some people’s experiences post-divorce. Sex after divorce – does it get better?
http://thechart.blogs.cnn.com/2012/01/19/sex-after-divorce-does-it-get-better/
Who’s your Daddy? Paternity fraud, child support, and the new law in Texas.
Texas has instituted a new law that will affect fathers, their rights, and child support. What happens when a father finds out, years later, that the child he thought was his, really isn’t? What happens to the child support he was ordered to pay? Read more at http://www.beaumontenterprise.com/news/article/New-Texas-law-allows-fathers-to-contest-their-1447153.php.
Divorce affects adult kids, too…
I am seeing it happen more frequently in my practice now – couples who divorce after 30+ years of marriage. What is the effect of the divorce on their adult kids? http://www.mercurynews.com/entertainment-headlines/ci_18362370?nclick_check=1
Is your spouse hiding assets?
What can you do to protect yourself?
When it comes to marital finances, often the best defense is a good offense. From the very beginning of your marriage, make sure that you are an active participant in all of your financial affairs. Have full knowledge of all marital assets, liabilities, income and expenses, and know where all copies of tax returns and other financial records are located.
If it’s now too late for preventive measures, and you’re already in the throes of divorce, my advice is different. First, you may want to strategize your next financial steps with a divorce financial expert. Second, you should immediately start to be on the lookout for these tell-tale signs that your husband [spouse] may be hiding assets and/or income:
1. Bank and other financial statements are no longer being delivered to your home address. A change in regular delivery could signal that marital assets are being diverted or dissipated. Check with your bank, credit card companies, etc. to make sure that you receive copies of your statements. You’ll want to start gathering these, as well as tax returns, pension/IRA/401K statements and other financial documents, so that you can keep your own records and be alerted to any unusual activity.
2. A sudden decrease in salary. Any dramatic decrease in salary may indicate that your husband has decided to defer salary and/or hold commissions and bonuses for future distribution. (That way this income won’t be “on the books” until after the divorce is final.)
3. Intentional overpayments. What happens if your husband overpays the IRS (or other creditors)? He’ll get a refund later –presumably after the divorce is final. I’ve also known cases where people fabricate loans from family members. The idea here is that they can lower their bottom line by listing these debts in their financial statements or sending the family member cash to “pay the loans,” knowing that the family member will return the funds after the divorce. You should also watch for money that might be transferred to your child’s (or his child’s) name.
4. No new clients. But, surprise! New employees. If your husband owns a business, there are many different ways he can “cook the books” in order to make the business appear less valuable than it is. Maybe he’ll pay employees who don’t exist, or “pay” friends and family who agree to hold the checks until after the divorce is final. He could also delay signing new clients until after the divorce settlement is signed. Remember: The less the business is worth, the less you’ll get.
5. Defensive behavior. A husband who suddenly becomes secretive, controlling or defensive about money could be someone who is diverting or dissipating marital assets. A forensic accountant can help you uncover this type of deceitful activity.
Husbands hide assets and income for a variety of different reasons. He may feel he’s getting revenge for an infidelity. He may fear not having enough money after the divorce. Maybe he’s just greedy and feels that he deserves it! Whatever the reason, hiding assets, income and debt is unethical, immoral, illegal and subject to severe penalties when discovered.
However, the burden of proof is often on the spouse with less financial resources (typically the woman) to prove any such unscrupulous behavior. That’s why women must play it smart. Work with a qualified divorce team to help ensure that you have the professional expertise and support required to receive a fair settlement, keep your finances intact and secure your financial future.
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Written by: Jeffrey A. Landers, CDFA™ is a Divorce Financial Strategist™ and the founder of Bedrock Divorce Advisors, LLC