Money Saving Tips for Divorce Clients

No matter what kind of divorce situation you are in, one thing is certain, it will have significant costs associated with its resolution. That is true whether you hire an attorney or not.

The areas where attorneys help divorce clients the most are gathering documents, answering and filing court documents, and of course, appearing in court at hearings and trials. In the last instance, there is little you can do on your own, as you most definitely will want to have an attorney to at least go into the hearing with you. That being said, having your attorney appear in court with you will be your largest expense in the divorce proceedings.

In the second area, answering and filing court documents, you will again need some legal guidance. Fortunately, there is still a lot you can do on your own that will alleviate the burden on your attorney and possibly reduce some of the cost as well.

In some cases if your divorce is uncontested, involves no property or children, and you and your spouse can come to agreements on your major issues, you will be able to find an attorney who can offer you assistance at a rate based upon the difficulty of your case.

In fact, if you and your spouse are willing to come to complete agreements about every aspect of your divorce before even visiting an attorney, you may be eligible for mediation; which is an extremely affordable solution to divorce for everyone, and is far less stressful and time consuming than a divorce proceeding in the Family Court system.

The current financial climate determines that both attorneys and clients be willing to work together to come to agreements that suit the financial needs of everyone involved. Family law attorneys know and understand the expenses that are faced by couples when they divorce and in almost every instance are willing to tailor their fees and work with their clients to achieve the best possible results for as little expense as possible.

After divorce, assets may not be subject to income tax

Published: Monday, May 09, 2011, 7:06 AM Updated: Monday, May 09, 2011, 7:10 AM

By Karin Price Mueller/The Star-Ledger
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Q. I will be getting a settlement from a divorce, and I would like to know what I can do to minimize taxes. Can you advise what’s the best way to get the most benefit from this money? I have three children and I believe a 529 plan might be an option.
– RA

A. Slow down. A 529 plan can be great for college savings, but before you consider investment options, it’s important to understand what’s taxable and what’s not in a divorce settlement.

Property transferred between spouses incident to a divorce settlement is not typically subject to income taxation, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial Advisors in Berkeley Heights.

Maye said for federal tax purposes, any transfer of property between spouses as a result of a divorce proceeding that happens within six years after the date of the divorce is presumed to be related to the divorce.

"If your divorce settlement is solely the transfer of assets between spouses, there likely would be zero income tax implications," he said. "An exception to this would be if a spouse under the divorce was given a portion of the spouse’s 401(k)."

If the receiving spouse fails to roll the 401(k) proceeds into an IRA, the proceeds would become taxable in the year it’s received as a distribution, Maye said.

"Spouses receiving settlements from deferred retirement accounts should be sure and roll them directly into an IRA to avoid immediate taxation," he said. "Failure to do so may also result in the 10 percent early withdrawal penalty for those under age 59½."

Maye said income taxation only comes into play in a divorce settlement when a marital asset is sold to a third party. For example, if a marital asset was sold to a third party and the spouses split the proceeds, they would also split the gain for tax purposes.

The tax rules before and after divorce are generally the same, said Jerry Lynch, a certified financial planner with JFL Consulting in Fairfield.

He said if you own a mutual fund or a stock, the original tax basis (cost) is what will be used in calculating gains for taxes. A stock bought at $10 that’s worth $20 after the divorce, if sold, for example, would yield a taxable gain of $10 per share.

The best advice?

"Take a step back and speak to someone familiar with taxes and your situation as your entire tax structure has changed," he said. "You are no longer filing as ‘married’ so all the tax brackets are different. Your income is probably less. Take some time to understand your new situation and then it will be much easier to make better decisions."

- Karin Price Mueller----------------------------------------------------------------------------------
If you have questions about this posting or are interested in Divorce, Immigration, or Estate Law in RI or MA contact Massachusetts and Rhode Island Divorce Lawyer Rui P. Alves at 401-942-3100 or CONTACT him via email.

Attorney Rui P. Alves Selected for RI Super Lawyers Rising Stars 2009 and 2010

February 2011 - Providence, RI – Rhode Island Criminal Defense and Family Law Attorney Rui P. Alves has been selected by RI Super Lawyers Top Attorneys in RI and Rising Stars for the second year in a row. Attorney Alves was honored with this distinction in 2009 as well as 2010.

The selection process employed by Super Lawyers, Law & Politics, is extensive and encompasses every aspect of character, skills, peer opinions, and history of the candidates selected. The selections are made annually, state-by-state, and evaluate 12 categories. The resource created by the selection process is made available to help clients find attorneys, as well as a resource for other attorneys.

When asked to comment about this distinction being offered for two years in a row, Attorney Alves stated, “It's refreshing to see that this process is helping so many people connect with professionals who can help with some of the legal issues they may be facing. I am honored to be included and distinguished for the second year in a row, and will continue to provide the best possible assistance that I can to those in need of legal advice and guidance."

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If you have questions about this posting or are interested in Divorce, Immigration, or Estate Law in RI or MA contact Massachusetts and Rhode Island Divorce Lawyer Rui P. Alves at 401-942-3100 or CONTACT him via email.

Separation and Money

For Some Couples, Economic Indicators Say Split

by JENNIFER LUDDEN

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EnlargeDavid Kennedy

More couples are filing for divorce, thanks to gains in the U.S. economy that make it easier to divide assets.

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February 10, 2011

In a grim sign of the economic recovery, the divorce rate, which dipped during the recession, appears to be on the rebound.

Divorce is expensive, so when the economy tanked, a lot of unhappy couples decided it just wasn't the time to split. Some held off when they couldn't sell their home. Federal figures suggest the divorce rate fell about 7 percent between 2006 and 2009, and divorce lawyers across the country saw business dry up. But that's changing.

"I would say that over the last six months, the activity in our firm has probably picked up by 20, 25 percent," says Sandy Ain, a divorce lawyer in Washington, D.C.

In fact, Ain is getting so many calls that he can't handle them all. He sees several reasons for the uptick.

"One is the credit markets are actually loosening up," he says. "Banks are starting to lend money again."

That means someone can borrow money to buy out a spouse — to pay for one's share of the house, for example. Or, as is common for business owners, to give a spouse his or her legal share in the family enterprise.

Another big change is that the stock market has nearly doubled from its darkest days. When retirement funds and savings accounts are fatter, people feel more secure striking out on separate lives.

Finally, there is simply pent-up demand.

"When a person is ready to have a divorce, they generally don't like it to take two or three or four years to get finished," says Linda Lea Viken, president of the American Academy of Matrimonial Lawyers. "So I think there's a part of the population who just doesn't want to wait anymore."

Still, crude as it seems, the business cycle can play a crucial role in a divorce settlement. Some lawyers say they've been advising certain clients to put off separation during the down economy. Viken says that whether now is the "right" time depends on several variables.

"If a person receives a business, for example," she says, "and the other person receives a house, the value of those two assets is extremely important in determining what else happens."

That's because the aim is often a 50-50 split of a couple's assets. So if, say, a man receives a business that's declined during the recession, giving it less value, he'll likely get to keep more of the couple's other assets. And that property settlement is final — there's no re-doing it once the economy rebounds, and that business, or a house, is worth a lot more.

Viken says there's also something else to consider. It used to be that if your ex-spouse took over a joint credit card or mortgage after a split, the bank or lender would take your name off the contract. But Viken says they've largely stopped doing that since the recession hit.

"Because they want to be assured that they have two people they can go after for these debts," she says. "So if the other person defaults on it, you may not even know that — and yet your credit's going to be affected, and eventually you're going to get that phone call about this huge debt that hasn't been paid."

Overall, divorce has been on the decline in recent years. And Brad Wilcox, of the National Marriage Project, says a lot of couples report the recession actually strengthened their union. Still, money woes are notoriously tough on marriages, and Wilcox says the recession has hit lower-income Americans hardest.

"My view is that as we move forward, we're going to see the long arm of the recession reaching out and grabbing working-class and poor couples a lot more than college-educated and more affluent couples," he says.

In a survey released this week, Wilcox finds that married people without a college degree are twice as likely to say they are thinking of divorce.If you have questions about this posting or are interested in Divorce, Immigration, or Estate Law in RI or MA contact Massachusetts and Rhode Island Divorce Lawyer Rui P. Alves at 401-942-3100 or CONTACT him via email.