Tax And Financial Planning In The Context Of Divorce
Divorces often present complex financial planning and tax issues. The issues may be related to property division, maintenance or alimony payments, child support payments, and past and future tax returns.
At V. Freitas Law, we have unique experience and insight into this area. Our founding attorney, Veronica Freitas, has an LL.M. in tax law (an advanced degree on top of her J.D.) and can effectively guide you through the tax issues relating to family law. Whenever possible, we advocate for settlements or final decrees that do not waste assets through the triggering of unnecessary income, estate or gift tax costs. Our goal is often to maximize the after-tax dollars to our clients while preserving each party’s estate.
Our Lawyers Can Explain The Impact Of Divorce On Your Financial Life
Regardless of your financial circumstances, divorce tends to put an economic strain on everyone involved. Families separate and now have to support two households instead of one. The families’ available income remains the same, while their costs double.
At V. Freitas Law, our lawyers are highly experienced in all types of divorce cases, including high net worth divorces. We work with our clients to structure support and settlement agreements that take advantage of tax deductions and exemptions available in dissolution actions.
Taking Care Of Your Tax Needs While Getting Divorced
Divorces can take up a lot of your attention. One area that divorcing spouses often overlook is how a divorce can impact their taxes.
The following tax issues should be considered in every dissolution action:
- Spousal maintenance is income for the recipient spouse.
- Spousal maintenance is tax-deductible for the paying spouse.
- Child support is not considered income for the recipient spouse.
- Child support is not deductible by the paying spouse.
- Real property transfers completed as part of a divorce are exempt from excise and transfer taxes.
- Retirement fund transfers from one spouse to another are exempt from taxes and early withdrawal penalties if performed pursuant to a Qualified Domestic Relations Order (QDRO).
- Transfers between domestic partners are not exempt from taxes and penalties because they are governed by federal and not state law.
Our lawyers are very familiar with these and other tax considerations.
How A Divorce Can Become A Tax Shelter To Minimize Your Tax Burden
A “tax shelter” is a legal method of minimizing taxable income that you have to report to state and federal taxes. Your most recent marital status is the one you use in your taxes, regardless of how long that status has been affected. For example, if you were to marry or divorce on Dec. 31, 2021, you would use that marital status for the entire year on your 2021 taxes. The timing of your divorce finalization can have a big impact on your tax burden.
Each person has unique circumstances in their life, meaning that one solution may not work for everyone. We can review your situation and determine when it’s most advantageous to finalize your divorce in order to avoid unnecessary taxation.
Trust Us To Look Out For Your Financial Interests
High-asset divorces call for extra efforts to protect you and your assets. We do everything in our power to look after our clients. We are dedicated to helping you minimize the tax consequences of your divorce.
If you want a Washington attorney with decades of experience in representing clients through even the most complex divorces, contact our Seattle office today. We have more than 50 years of combined legal experience in guiding our clients through their divorce and all the ramifications that come with it. We pride ourselves on offering our clients the support and guidance they need to navigate through the complicated process of divorce.
Call us at 206-536-2875 or email us here to schedule your initial consultation.