Divorce considerations and tax implications

By Shazia Sparkman of Sparkman Law Firm posted in high asset divorce on Tuesday, February 13, 2017.

Death And Taxes

Death and taxes – those two things are certain in life. However, with half of all marriages ending before “’til death do us part,” divorce and taxes could be something you face in your life. Just because assets are split doesn’t mean the process is simplified. High-asset couples often face a complicated tax situation and divorce can add another pile to the paperwork.

Asset Divisions

Asset division is usually the most contentious point of a divorce. People are more financially vulnerable after a marriage ends, and failure to consider tax liabilities can lead to unwanted burdens down the road. When asset division is near 50/50, the black and white numbers can look even, but is the money green in the color of life?

How can a person going through divorce maximize financial security while minimizing tax liability? No one can absolve their legal responsibility, but with the right guidance, there is a balance to be found between duty and disunity.

Capital gains taxes

Items with monetary value are usually subject to taxation when they transfer from one person to another. However, taxes can be avoided if divorce is cited as the reason for the exchange. Still, accumulated assets like mutual funds and stocks that change value over time may be subject to a capital gains tax when one ex-spouse “purchases” the account from the other.

Alimony

Payments for spousal maintenance have tax implications for both the payer and the beneficiary. Alimony payments are tax-deductible for the paying spouse and taxable for the ex receiving them. The spouse making payments must also be careful to consider the timing of payments. Paying too much too soon in alimony as well as ending payments when a child becomes an adult can trigger attention from the IRS.

Children and dependents

The spouse that is awarded primary custody of children will also be able to claim them as dependents. Unlike alimony, child support is not tax-deductible for the paying spouse, but it is possible that the larger settlement could offset the tax implications.

Good Advice Is Worth More Than Two- Cents | Get Help Today

Taxes and divorce are multifaceted issues with lifelong implications. Although you could be single soon, your tax issues should not double. When there are few certainties in life, it is important to take the time to do divorce right.

December 30, 2016April 22, 2017

Getting married? Take time to plan for your financial future

On behalf of Shazia Sparkman of Sparkman Law Firm posted in high asset divorce on Friday, December 30, 2016.

You have the dress. You have the venue reserved. You have the meal planned and the cake designed. Of course, you have the perfect man. You have given your wedding much thought, but have you planned to protect your financial future?

The wedding is only your first day of marriage. Ask any divorce attorney about the leading causes of divorce, and they will probably tell you that finances are a prominent reason couples split. So while you sort out the details for the big day, do not forget to talk to your spouse about how you will handle finances in the future.

Here are a few things you should consider:

1. Create a game plan

When it comes to finances, you and your future spouse might have different expectations. Because of this, it is crucial to create a “game plan” before tying the knot. While these conversations may not be ideal and might feel far from romantic, they are necessary. They can help you build a foundation for having financial conversations – and avoiding disputes – throughout your marriage.

Having these conversations prior to tying the knot is a good way to maintain your financial goals and remain successful in the business endeavors you take on together.

2. Know that ‘what is yours, is also mine’

If you are like most people, you will combine your assets to a certain degree, if not completely, when you get married. This includes a savings account, checking account or investments. Once married, you will likely take on the responsibility of helping pay your spouse’s debt as well.

So what does that mean? It is vital you know exactly what you are getting into when you get married. Once you start making those big and important financial purchases, you will be thankful that you understood your spouse’s financial reputation and habits ahead of time. Also, keep in mind that the debts you incur during the marriage will be a factor should you divorce.

3. Taxes

There is a good chance that you will pay more taxes once married than you would when you were single, and this is true of higher income individuals in particular. The popular name for one of those tax increase, is the “marriage penalty.”

While paying more in taxes should not make you rethink a marriage, you should prepare for these financial changes and challenges that you will face together.

4. Prenup (and the lesser-known postnup)

When your money and property are on the line, a prenuptial (prenup) or postnuptial (postnup) agreement can prove crucial. While it is not the most romantic subject in the world, you should be reasonable. At minimum, you should learn more about these agreements and how they may benefit you.

Today, marital agreements are a norm in our society. You should consider them to be a preventive or proactive contract that helps you and your future spouse set expectations and protect your assets, whether or not you think divorce is a possibility in your future.

A typical prenup usually sets terms for how property should be divided or designated and how spousal support should be handled in the event of a divorce.

A postnup is the “nup” that you do not hear about as frequently. The postnup is helpful in the event that a spouse has a major change in financial situation during the marriage or you acquire substantial holdings or investments as a couple.

5. What if divorce does happen?

While you have likely heard it before… It is important to repeat; divorce does happen. The statistic that “50 percent of marriages end in divorce,” is accepted as general knowledge.

In the end, do not allow your emotions to trump your judgment. The wonderful news of your upcoming marriage is nothing but wonderful. But, do not let the excitement cloud the fact that there are important financial factors to consider prior to tying the knot.

Taking the time to discuss finances or draft a marital agreement prior to walking down the aisle could not only help you maintain harmony in your marriage but, if divorce should happen, it can make the process much smoother.

November 28, 2016April 22, 2017

How to protect your inheritance through marriage and divorce

By Shazia Sparkman of Sparkman Law Firm posted in high asset divorce on Monday, November 28, 2016.

The gift of an inheritance often provides an earnest task for the beneficiary. A loved one has passed away, and now you want to make sure that you handle the money or property with care. An inheritance can provide you with the nest egg to pursue your goals in life. You want to ensure that you are able to reach your goals while protecting the intent of the person from whom you received the inheritance.

However, life changes as we grow older and the legal obligations we face throughout it can modify the strategies you could use to protect your investment. At its most basic level, an inheritance is a gift to the beneficiary and is not subject to equitable distribution in a divorce, but what you do with the money or property after the initial gifting can change your entitlement to its sum.

Here are three strategies to protecting your inheritance through marriage and divorce:

1. Sign a prenuptial agreement

A prenuptial agreement is a contract signed before marriage that outlines ownership of property. Couples are often hesitant to write a prenuptial agreement because it appears to presuppose the feelings of love involved in a relationship. However, a prenup is a pragmatic way to protect your future interests in an inheritance even under the best circumstances.

2. Save documents

If your inheritance was specifically intended for your use, you can provide documentation to prove it. A copy of your tax return or the will is often sufficient evidence enough to prove your ownership. Documents can be kept in a safe deposit box or with your attorney for security.

3. Keep separate accounts and paperwork

The best way to protect money for its intended use is to hold it in a separate account. Long terms savings, an investment account or a trust fund can ensure the safe keeping of your inheritance. If you put the money into an account with your spouse’s name on it too, then it could become mutual property.

If the inheritance is something more tangible like real estate or a vehicle, maintaining one name on the title of property can clarify ownership.

Simple strategies can secure significant assets

Pragmatic foresight in the handling of your inheritance can help protect its original intent. An experienced family law attorney can offer a personalized approach to ensuring the security of your long-term assets and goals.

August 18, 2016April 22, 2017

Hiding assets before divorce: a mistake that could cost you

On behalf of Sparkman Law Firm posted in high asset divorce on Thursday, August 18, 2016.

If you are affluent and getting divorced, money is undoubtedly a primary concern for you during this tumultuous time. You probably recognize that your marital assets will be distributed in the process, but you also want to protect yourself and ensure you will be financially stable in the years following the divorce.

This pull between having to split up your assets and wanting to keep what is rightfully yours can prove to be much more powerful and frightening than some people expect. In some cases, spouses feel driven to take drastic measures to protect themselves. Unfortunately, this can be a very big mistake if you try to protect yourself by hiding assets.

Hiding assets before your divorce is illegal. Both spouses are expected to be truthful and forthright when it comes to disclosing assets during a divorce, and failure to do this can result in serious consequences.

Among the many consequences that can be handed down, as noted in this Forbes article, you could face:

Financial penalties that favor your ex
Orders to pay your ex’s legal fees
Loss of all hidden assets to your ex
Contempt of court charges that result in jail time

These penalties can prove to be financially devastating if there is a significant sum of money at stake; instead of protecting yourself by hiding assets, you could be seriously damaging your financial future.

Rather than resort to unlawful measures in an effort to turn the tables in your favor during your divorce, it can be much wiser to work with an attorney experienced in high-asset Florida divorces to pursue legal means of doing so instead. With legal guidance, you can make sure your separate assets are protected and that any settlement regarding asset distribution is fair.

Personalized Commitment to Our Clients and Our Community

"Our Commitment To Our Clients And Community Is The Cornerstone Of Our Practice" - Shazia Sparkman