We've talked numerous times on this blog about financial issues in a divorce. Most recently, the fiscal cliff dealt with a large number of financial and tax issues. Many of these issues seemingly resolved themselves with the passage of the American Taxpayer Relief Act on January 1, 2013.
The American Taxpayer Relief Act (ATRA) seemed to alleviate many tax woes. But the American Taxpayer Relief Act had some deep implications for those with impending divorces.
In a strange way, as one Forbes writer put it, the provisions of the Act put those people in the midst of a divorce over a fiscal cliff of their own.
For those going through a divorce, particularly those dealing with high-dollar divorce, there could be some serious implications. As a result, it becomes more important than ever for divorcing couples to seek proper financial advice.
This advice could come from a lawyer or from a financial consultant. But when going through a divorce, the most important thing could just be having the ability to have a lawyer on the other end of the phone, taking your calls.
Let's discuss some of these financial issues and hwo they play into a divorce. Take alimony, for instance. Alimony is that income paid pursuant to a separation agreement in a divorce. This income is paid in intervals. Alimony payments are those laid out in the divorce or separation agreement.
In most cases, these alimony payments will count as income to the recipient. This makes the income taxable at a 39.6 percent tax on any income above and beyond $400,000, based on the ATRA.
Child support, however, is not taxable income. As a result, a creative attorney can often work around this tax issue.
When dividing assets, capital gains tax can become an issue. Those single filers with income over $400,000 will now have to pay 20 percent in capital gains.
There's a lot of financial planning to do in a divorce.
For some, the division of assets is simple, and uncomplicated. For others, particularly those with higher net-worth, it's not that easy. It's a good idea to have an attorney on board, helping out and lending an ear.
It's not always easy to have an attorney around and it can get costly. But having alegal plan in place can help. Under some legal plans, for less than the price of a one hour consult, you can get an attorney for the whole year who will take your calls for free.
During a divorce, that's a piece of good news.
Disclaimer: the legal plan LegalStreet and FindLaw are owned by the same company.
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