Divorce and Taxes Part II – Child Support, Alimony, and Taxes

Divorce and Taxes Part II - Child Support, Alimony, and Taxes

The certainties of death and taxes are inescapable, as is the certainty that divorce will change your tax situation. If you’re getting divorced, you may need to think about child support, alimony, and taxes – along with other tax issues.

In this series, we look at some of the key issues surrounding divorce and taxes so you can gain the clarity you need to have informed conversations with your attorney and your CPA. That can be important to help them protect your interests.

Last time in the series, we discussed four things to consider when mediating or negotiating your divorce decree. When it comes to our topic for this installment — child support, alimony, and taxes — you may find some surprises.

 

Child Support and Taxes

If you receive child support, you don’t have to report it as income.

If you pay child support, you don’t get to deduct it on your taxes… and you don’t get to claim the child on your taxes just because you pay support. The parent who gets to take the dependency exemption for the child depends upon your Divorce Decree, temporary order, and/or the tax code.

 

Alimony and Taxes — A Different Animal

Alimony (spousal support) is altogether different than child support when it comes to tax rules. If you receive alimony, you have to report it on your taxes as income. If you pay alimony, your spousal support payments are tax deductible.

 

Getting Slick with Spousal Support and Taxes — A Sticking Point for the IRS

If your decree structures alimony payments to be high in the first couple of years and then drop off, the IRS may consider those payments to be a property settlement rather than alimony and you may not be able to deduct them.

 

Know Your Decree

Be mindful of child and spousal support tax implications when you’re negotiating or mediating your decree – including who will claim exemptions for the children.

 

A Word About Backsies

If you reach an agreement and a temporary order or final decree is entered, but your spouse changes their mind later, you may want to file your taxes before your spouse. That is unless you need them to sign IRS Form 8332 and they refuse. If that happens, talk to an experienced attorney about enforcement options as soon as you can.

If you don’t need your spouse to sign Form 8332, and they tell you they’re taking the dependency exemption when they aren’t entitled, you may come out ahead if you file first because the IRS will credit the first person who files and claims the exemption.

For more on filing child support and taxes and alimony and taxes, see IRS publication 504.

 

Next in the Series…

Next time in the series we look at things to think about when negotiating the property settlement agreement in your divorce.


This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts. 


Author, Hightower Reff  Partner Attorney Tracy Hightower, holds both a Juris Doctor and  a Master of Laws in Taxation. For more about Tracy, visit her profile page.

If you need help with an Omaha area divorce or other Omaha family law case, contact Hightower Reff Law today and come visit with one of the attorneys at the Omaha office. 

What You Need to Know About Your Divorce Trial that Your Lawyer May Not Tell You, Part II: 5 Things Smart Divorce Clients Do During Their Divorce Trial

divorce trial

What you do before and during your divorce trial has an effect on the outcome of the case. In this second installment of Hightower Reff Law’s series What You Need to Know About Your Divorce Trial That Your Lawyer May Not Tell You, I’ll share five things smart divorce clients do during and before their divorce trial. These five things could help boost your chances of getting what you want at your divorce trial (or at the least, help prevent things that can screw up your case.)

In my years as an Omaha divorce lawyer and child custody lawyer, I’ve noticed that clients who are effective players in their divorce legal team usually share five common behaviors. Those things seem to have a positive influence on not only the outcome of the case but also the way their divorce trial impacts their children’s lives and their own.

In this article, I’ll share with you the five things these smart clients do during their divorce trial that have a positive impact on the outcome of their case.

What you need to know about your divorce trial that your lawyer may not tell you… What you do during your divorce case matters.

Smart clients know that a real divorce trial isn’t like the ones you see on television. How effective your lawyer can be on your behalf is limited by reality. That means actual facts – the way things are.

The court makes its findings for your divorce decree based on evidence – or, in other words, proof of relevant facts. Things like financial circumstances, including income, retirement savings, and debt are important facts the court considers. In child custody, your lifestyle and behavior also come into play as the court evaluates the best interests of the child. During the trial, it’s your lawyer’s job to present all of this evidence to the court.

What you do or don’t do during your divorce case will affect whether your divorce lawyer is able to present evidence effectively to prove your side of the case. It may also bear upon how much credibility or weight the court gives some of the evidence both sides present.

 

 

 

 

 

Next Time in the Series

Next time in the series What You Need to Know About Your Divorce Trial that Your Lawyer May Not Tell You, we’ll step inside the courtroom to prepare you for what to expect on the big day (or multiple days) of your divorce trial.

(If you missed Part I of this series, What You Need to Know About Your Divorce Trial That Your Lawyer May Not Tell You – Has my Lawyer Fallen From the End of the Earth? Don’t fret, you can catch up here.) 

 

This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts. 


For More Information:

Learn more about Hightower Reff  Partner Attorney Tracy Hightower.

Find out more about Hightower Reff’s family law services.

If you need help with a Nebraska divorce or other family law case, contact Hightower Reff Law today and come visit with one of the attorneys at the Omaha office. 

5 Ways to Turn Your Divorce Case Into a Train Wreck

Divorce Case

There are plenty of opportunities for divorcing spouses to make a mess out of everything during a divorce case. In this article, I’ll tell you about five things that will turn your divorce case into a train wreck.

Divorce is tough. It’s emotional. Your soon to be ex-spouse may also be a complete bag of (insert preferred expletive). Maybe they’re so bad that you’re considering doing whatever you can to stick it to him/her during your divorce case out of spite.

Maybe spousal retribution isn’t your goal, but you’re just so emotional about the ordeal, you don’t know

I’ve seen clients employ these five tactics with great success… if your goal is screwing up your divorce. Read on and learn the secrets so you too can turn your divorce case into a train wreck, or avoid it (the preferable goal).*

 

1. Listen to everyone but your lawyer.

divorce case

If you really want to make sure your divorce is a gruesome train wreck, be sure to listen to everyone except your attorney.

Base your expectations for your case on what everyone but your lawyer says will or should happen in your divorce. Do this regardless of whether these people are Omaha family law attorneys familiar with the facts of your case, or laypeople who watched that Divorce Court TV show a time or two.

Pay attention to what your friend got in their divorce, or what you heard your friend’s friend got in theirs. Even if their circumstances are completely different from yours.

Set unrealistic goals based on the unrealistic expectations you’ve made… no matter what your lawyer says.*

 

2. Use your kids as a weapon.

divorce case

Use your kids to make your spouse suffer. Tell your kids what a giant bag of monkey turds their other parent is. (Double bonus if you can actually make your kids dislike the other parent and refuse to spend parenting time with them.)

Sure the judge may not like it, and it’ll probably eventually backfire on your and end up damaging your kids, but just think of how ticked your spouse will be in the meantime.

Also consider teaching your kids to spy on your ex and tell you everything. It just makes sense. They work cheap, they’re small, and can easily go unnoticed.

Psychology experts would poo-poo all of these ideas. Remember, though, they would be concerned with your child’s best interests. All you care about is wrecking your divorce, no matter the impact on your kids.*

 

3. Order or suggestion? You decide.

divorce case

If you don’t like the judge’s Order, do what you want. The Order is probably just a guideline or a suggestion anyway. It’s not like it’s a Court Order…

Wait — uhh, well. I guess it is a Court Order. But still.

Your lawyer might say fancy words like “willful disobedience,” “show case” and “contempt.” The important thing here is making your spouse suffer and making yourself feel good for a little while. (Plus, your friend Larry says your lawyer is wrong.)*

 

4. Make a scene on social media.

divorce case

The more photographic evidence of your inappropriate behavior you post on social media, the better to irritate your spouse with. It’ll show them you’ve moved on. If your child’s a social media connection, make sure they also see the post and point it out to your spouse.

Social media is also a great place to publicly embarrass your spouse by airing your grievances and/or posting private things about them. Who cares if it does long-term damage to your ability to work with your spouse to parent your kids. This is about short-term revenge.*

 

5. Freak out.

divorce case

If your spouse says things like, “I’m going to get full custody,” or, “I’m taking you to the cleaners,” believe them. Freak out every time they say something l like that. It will wreck your divorce case really well.

Although probably lacking a law degree, your spouse is likely psychic or knows something you don’t. Also, your spouse’s lawyer is presumably awesome and your lawyer is, in all likelihood, a clown — just like your spouse keeps telling you.

The ideal reaction is to freak out. A lot. Really flip out. Lose sleep, don’t eat, and be sure to tell your kids all about it (refer back to number two). Ultimately, your goal is to dance like a marionette every time your spouse pulls your strings.

Also, habitually call or email your lawyer to report your spouse’s prophecies. Ask your lawyer for a detailed plan regarding how they intend to stop each and every one of your spouse’s predictions from coming to fruition. Not only will this help screw up your divorce, it will also make your legal bills skyrocket.*

 

divorce case

Hightower Reff Law doesn’t endorse any of these, and strongly suggests you do the opposite.

 

Consider keeping your nose on your face instead. 

Doing any or all of these things is likely to make your divorce case take longer and cost both you and your spouse more. More in financial and emotional resources.

If you choose to turn your divorce case into a train wreck instead of behaving prudently, you’ll also have to wait longer before you can move on with life.

Notice that I’m talking about you, not your spouse? If making the divorce tougher to spite your spouse is your goal, you may accomplish it. However, you’re also quite likely to cut off your own nose to spite your face.

Consider as well that acting in these ways is likely to harm your credibility with the court. Bad behavior that calls into question your parental judgment or fitness could also negatively affect your child custody case.  Moreover, in some circumstances, the court could sanction you for contempt of court. (Your friend Larry is wrong.)

At any rate, if you act badly during your divorce case, you’ll cause major collateral damage. The victims likely to be hurt most… your children.

 

*Hightower Reff Law doesn’t endorse train wrecks.

As you may have gathered, Hightower Reff Law doesn’t endorse these ill-advised spite tactics or purposefully turning your divorce into a train wreck in any way. We strongly suggest you not try these five ways to turn your divorce case into a train wreck, or any others.

These kinds of bad behaviors are very likely to harm the outcome of your divorce case and/or damage your family relationships. Most concerning, some of these emotionally driven, poor choices hurt children.

I hope this information will help readers avoid these mistakes. The client who makes well reasoned, rational choices, instead of emotional poor choices can be at peace, knowing their family relationships and children won’t suffer avoidable negative consequences.


This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts.  


Author, Hightower Reff  Partner Attorney Susan Reff, is a well respected Omaha, Nebraska family law and criminal law attorney with more than fifteen years of law practice experience. For more about Susan, visit her profile page.

If you need help with an Omaha area divorce or other Omaha family law case, contact Hightower Reff Law today and come visit with one of the attorneys at the Omaha office. 

Divorce Property Settlement Tax Pitfalls – Hiding won’t Help. Divorce and Taxes Part III

Divorce property settlement tax pitfalls can be an unpleasant post-divorce surprise. Hiding, unfortunately, won’t make the problem go away.

Marital property transfers to one spouse or another during or related to a divorce generally don’t bring tax consequences. However, like most generalities, there are always exceptions.

In Part I of this series, I talked about your divorce dream team. I suggested that, along with an experienced divorce lawyer like those at Hightower Reff law, a tax attorney or a CPA may be a valuable part of your divorce team. Possible divorce property settlement tax pitfalls are yet another reason to consider enlisting a tax pro during your divorce.

Divorce Property Settlement Tax Pitfall 1 – Selling the House 

You must report gain or loss from the sale of jointly owned property on your taxes in the tax year of the sale. Your individual state’s law determines what your share of that gain or loss amounts to. This is another area that can get sticky, and where a tax attorney or CPA can be helpful.

If you sell your primary home when you’re no longer married, watch out. Your tax basis on the capital gain is different than it would have been when you were married. Married couples filing jointly can exclude up to $500,000 of gain from the sale, while single tax filers can only exclude half that amount, at $250,000.

When the Primary Residence Exclusion Doesn’t Count

One of the most common divorce property settlement tax pitfalls happens when a divorcing couple keeps the family home in both of their names after the divorce. It’s often so one spouse can live there with the children until they’re grown.

The spouse who no longer has the house as their primary residence often ends up with an expensive tax consequence when it’s sold years later.

 

IRS Publication 523, Selling Your Home, is a helpful read that includes special rules you should know if you’re separated or divorced and selling a main home.

The non-recognition rule – isn’t always recognized

Usually you don’t pay taxes on division of marital assets because of divorce. That’s because the “non recognition rule” doesn’t recognize a gain or loss on property transfer between spouses or former spouses (so long as the transfer between former spouses is because of divorce.)

However, there are some circumstances in which the IRS considers a property transfer as a gain by one spouse – which means it’s taxable.

 Non-taxable transfers

Some other things you may not think of that you can transfer without tax consequences during or incident to a divorce (under definition of IRS regulations):

  • Health savings account (HSA)
  • Archer medical savings account (MSA)
  • Individual retirement arrangement (IRA)   (stay tuned for more on this)

Next in the series

Next time in the final installment of Divorce and Taxes, we’ll have a look at key points to know about retirement account division roadblocks when it comes to your tax bill.

(If you missed Part I or Part II of the series, you can catch them here.)

This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts. 

Author, Hightower Reff  Partner Attorney Tracy Hightower, holds both a Juris Doctor and  a Master of Laws in Taxation. For more about Tracy, visit her profile page.

If you need help with an Omaha area divorce or other Omaha family law case, contact Hightower Reff Law today and come visit with one of the attorneys at the Omaha office

 

Divorce and Taxes Part I – Four Things to Think About

There’s an old saying that only two things are certain – death and taxes. Thinking about both is usually about as unpleasant as sucking a lemon. Tax consequences of divorce are also a certainty, and can be equally as sour. Unpleasant as it may be, divorce and taxes go hand in hand. That means tax consequences of divorce are a key component to consider when mediating or negotiating your divorce settlement.

In this series we’ll look at some of the key tax issues to think about during your divorce. Having some information going into the process can help gain the clarity you need to have informed conversations with your attorney and your CPA to help them protect your interests.

Your divorce dream team

If you have substantial assets, your divorce dream team should have both substantial legal and financial knowledge. An expert team will give you the best chance of minimizing the negative tax consequences of divorce.

Your team should include an experienced divorce attorney, like ours at Hightower Reff, as well as a tax attorney or an experienced CPA.

When you choose collaborative divorce instead of traditional divorce, a financial expert is routinely a member of your collaborative divorce team, and can help with planning for your divorce and taxes.

First steps – filing status and figuring out a plan

 

For more on filing status and divorce, see IRS publication 504 [LINK TO https://www.irs.gov/publications/p504/ar02.html#en_US_2016_publink1000175818].

Watch for Divorce and Taxes Part II

Next time in the series, in Part II, we look at possible support payment tax pitfalls you may not have pondered when it comes to paying or receiving spousal support or child support.

 

This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts. 


Author, Hightower Reff  Partner Attorney Tracy Hightower, holds both a Juris Doctor and  a Master of Laws in Taxation. For more about Tracy, visit her profile page. 

If you need help with an Omaha area divorce or other Omaha family law case, contact Hightower Reff Law today and come visit with one of the attorneys at the Omaha office

Reasons to Consider Settling Your Nebraska Family Law Case Out of Court

img_3340Divorce, child custody, and other family law cases are among the most emotionally intense kinds of litigation. There are several sound reasons to consider settling your Nebraska family law case out of court.

Court proceedings aren’t punishment

Going to trial isn’t a good way to try to punish or penalize your spouse for their wrongs. Nebraska is a true no-fault divorce state. That means that, in the vast majority of circumstances, your spouse’s status as a giant jerk isn’t going to have any bearing on the outcome of your case.

Also keep in mind that emotions can get the better of you during a family law case. It’s usually a really hard time in your life. Very rarely – if ever – does a trial do anything positive to ease the raw nerves or wounded feelings of a divorcing spouse or to heal a hurting family.

Different options, same outcome –  settling your Nebraska family law case

Whether you reach a divorce settlement agreement through the collaborative divorce process, mediation, or negotiations between your lawyer and your spouse’s lawyer – this infographic outlines some good reasons to consider settlement:

 

Additionally, settling your family law case out of court can save money in the long and short run. Settlement can be less expensive in the short run because it saves the costs of trial – which can be very expensive. In the long run, you and the other party are more likely to follow an order upon which the two of you agreed, as opposed to one decided by the judge. That means you’re less likely to have to spend money going back to court in future.

If you and the other party are able to reach a settlement agreement:

  • your attorneys or the mediator will put it in writing
  • both parties will sign it
  • the judge still needs to approve and sign a Divorce Decree incorporating the provisions of your settlement agreement
  • that Decree will be the court order that you and the other party must follow, unless the court modifies the order down the road

Not for everyone

Settlement isn’t appropriate in every case. However, in the majority of cases, good attorneys can help guide you along the path to reaching an amicable and fair settlement for your Nebraska family law case.

 

This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts. 


For details about the author, Hightower Reff  Partner Attorney Tracy Hightower, visit her profile page.

More information about Hightower Reff’s family law practice is available here.

If you need help with a Nebraska family law case, contact Hightower Reff Law today and come visit with one of the attorneys at the Omaha office. 

 

Nebraska Marital Property Law – How it Works (Infographic)

Nebraska-marital-propertyIn our divorce practice at Hightower Reff Law, we find that new clients’ most common misconceptions are often in the area of Nebraska marital property law and how it works.

A common marital property misapprehension

When they first meet with us, a number of new divorce clients mistakenly think that because they kept their money in a separate account or titled an asset in their name only, their spouse won’t be able to touch the account or the asset in the divorce. However, that isn’t how Nebraska marital property law works.


Hightower Reff Law is a team of confident, clear, committed attorneys representing clients in the Omaha metro and surrounding areas in family law and criminal defense/dui.


Pre-nup or no dice

Unless you have a well drafted prenuptial agreement that complies with Nebraska law, the property and debt accrued during your marriage is part of the marital estate, no matter whether the account or title is in your name only. That means it’s marital property subject to equitable division between you and your spouse – with very few exceptions.

 

This infographic isn’t meant to be a complete rundown of Nebraska marital property law in divorce. The law can change often depending on new case law and/or changes to Nebraska statutes. Also, there may be other exceptions or special circumstances, depending on the facts of your divorce case.

Get help

That’s why, when it comes to Nebraska marital property law and how it works – or any other legal issue – it’s best to get the advice and assistance of an attorney experienced in that specific area of law. However, arming yourself with some basic knowledge, like what you’ve learned by reading this article, can help you have a more informed conversation with your attorney. It can also give you clarity and peace of mind.

 

This article should not be construed as legal advice. Situations are different and it’s impossible to provide legal advice for every situation without knowing the individual facts. 


For details about the author, Hightower Reff  Partner Attorney Tracy Hightower, visit her profile page

Our additional resource on marital property division is available  here

If you need help with a Nebraska divorcecontact Hightower Reff Law today and come visit one of the attorneys at the Omaha office.