The Implications of Divorce and Taxes

How to improve your experience during your divorce

I’m nonetheless here today to help provide to you some tips on how to improve your experience in the divorce process. Today’s episode details the implications of divorce on taxes. For those just starting off in the divorce process, it is important to be aware of the longterm financial implications that divorce can create, especially as it relates to taxes.

Before we start, please consult a financial expert before making long term financial decisions. It’s going to get technical today folks, so buckle up. Starting us off, number five.

It lowers the standard of living of both parties

From a financial perspective, getting a divorce lowers the standard of living of two individuals who are often joined in a dual income union. Many times neither can afford the living arrangements of their previous life and are forced to downgrade. When they go about selling the marital home, they do not consider the tax implications on the sale. The tax levied on the profit of the sale of the marital home is called the capital gains tax. A Supreme Court decision resulted in the transfer of appreciated property in exchange for the release in marital rights, which then resulted in the recognition of gains to the transferrer according to the American Bar Association.

This resulted in the creation of Internal Revenue Code 1041, which states that no gain or loss is recognized on a transfer of property from a spouse or former spouse to a spouse or former spouse if the transfer is incident to the divorce. Basically, if a husband were to give the wife the marital home during the divorce or the home was awarded to one party over another, no money would be exchanged in the transaction.

The liabilities of the property transfer or to which the property is subject exceeding the adjusted tax basis on the property itself under Internal Revenue Code 1041 create the tax consequences when transferring properties. One of the main consequences is in regards to the family’s home’s sale, which allows qualifying tax payers to exclude from gross income gain up to $250,000 or $500,000 for qualifying joint filers according to the American Bar Association.

Typically, the filing status for most couples is determined on the last day of the year. If you were married on December 31, then you file as married filing jointly and still be entitled to the advantages like exclusion limits for capital gain on the sale of principal residence. It is important to note that since you’ll be filing jointly, you’ll both be liable if you were audited.

There are tax related consequences to having to withdraw funds from your 401k account in order to pay an ex spouse according to family law attorney Richard J. Coffey. There is an early withdrawal penalty that is considered taxable income, however, the penalty is dodgeable if you fill out a qualified domestic relations order. The degree that a divorce will impact your retirement is dependent on the duration of your marriage, the types of retirement benefits involved, your spouse’s retirement accounts, and the laws in your state. As much as it may be difficult to cut into part of your retirement and your financial future, it is a necessary evil to acquire funds quickly.

Who gets tax benefits of the child?

Generally speaking, the custodial parent gets to claim all of the child related tax benefits for a child, including the Child Tax Credit, the dependency exemption, the Child and Dependent Care Credit, the exclusion for dependent care benefits, head of household filing status, and the Earned Income Tax Credit according to the Internal Revenue Services of the United States Department of Treasury. There is an exception, which applies to divorced or separated parents or parents who have lived apart for the last six months of the calendar year. It states that non custodial parents may claim the dependency exemption for a child if the custodial parent releases the exemption. Additionally, the non custodial parent can claim the Child Tax Credit if the other requirements for the Child Tax Credit are met, but only the custodial parent can claim the dependency care credit.

Alimony is tax deductible by the payer. It must be reported as income by the recipient according to the IRS. It is also considered an above the line deduction so it can be subtracted from your gross income before you reach your adjusted gross income. According to family law attorney and CPA Joe Cordell, there are four circumstances under which alimony can be deducted. Number one, the payments are made pursuant to a written agreement or judgment. Number two, you are not a member of the same household. Number three, the payments are not child support, which is determined partially by a three year payment analysis.

Number four, payments end upon your ex spouse’s death. Deducting alimony also requires you to understand the three year recapture rule, which is the ability to require you to claim all of the previous deductions within that period. It also implies that the recipient is entitled to the reduced reported income from the alimony payments previously received. This rule is applicable when the payments decrease or terminate during the first three post divorce calendar years and the total payments made in the third year decrease by $15,000 or more from the payments made in the second year, or the payments made in the second and third years are substantially less than the payments made in the first year.

The Basics of Workers Comp in NJ

Hi folks, thanks for tuning into my video. My name is Vincent, I’m a New Jersey attorney and run my own firm in Philadelphia. I handle workers’ comp cases. I’ve been handling them for more than 26 years. And I’ve made this blog just to give a basic overview of the New Jersey Workers’ Compensation System.

Anytime you’re hurt on the job in New Jersey, regardless of how it occurs, with three exceptions, you’re entitled to workers’ compensation benefits. The three exceptions are, self-inflicted injury, intoxication, and horseplay, or fooling around. Outside of those three though, any other type of injury in any way, on the job, entitles you to compensation.

Now the compensation can be up to three different benefits. The first is payment of 100% of the medical bills necessary to treat your injury. However, under the law, the employer or it’s insurance carrier has the right to designate the doctor that you should see. In fact, if you see a doctor who is not designated, the insurance company does not have to abide by that doctor’s recommendations, and does not have to pay that doctor. So you need to see an authorized doctor.

The second benefit is payment of what’s called temporary total disability. It’s a payment for the time that you’re out of work following an injury, during the course of treatment usually. For 2012, it’s limited to $810 dollars a week. And the benefit is 70% of your gross weekly pay. And your gross weekly pay is the pay you make before any deductions come out of it. Typically, the employer will send the insurance carrier 26-week wage statement. The carrier will then take an average and pay you 70% of that. And again, the maximum is $810 dollars a week, for 2012.

The third, and what I think is the most important benefit, is a payment for the permanent effects of the injury. Essentially, when all your treatment end, you’re entitled to file a document called the Claim Petition with the Workers’ Comp Court. That starts your claim for permanency. You would then be examined by a doctor for your side of the case, and a doctor for the insurance company’s side of the case. Each doctor writes a report giving an estimate of disability. When each side has the report, we meet in court, we discuss the case, sometimes with a Judge of Compensation, and we try to work out a fair award.

By way of example, for 2012, lets say you suffered a pretty common injury, called a torn meniscus. It’s a ligament in the knee that’s frequently injured in work accidents. It’s typically repaired by arthroscopic surgery. The award for that, in 2012, is around $12,600 dollars. A more serious injury, and frequently work related, is a torn rotator cuff, that’s an injury to the shoulder. Again, if that requires arthroscopic surgery, the award is typically around $28,000 dollars. There are additions and subtractions to these awards, depending on other factors.

 

Defending Against DUI by Challenging the Stop

Challenge the Reason for the Stop

Challenging the motor vehicle stop is one of the ways that a lawyer can defend against your DWI case in New Jersey.  If the police had no right to pull you over in the first place, then anything that they discover, they’re after, is inadmissible. It’s known as fruit of the poisonous tree, and should be secluded, suppressed, dismissed.

There was a client who was arrested for drunk driving, based on a DWI checkpoint. In New Jersey, for a DWI checkpoint to be valid, it must meet certain criteria. It must be published to the public beforehand. Usually they put it in the newspaper. They have to show a prior history of DWI offenses in that area. Third, it has to be supervised properly by local law enforcement. If the police failed to do any of these things, the DWI checkpoint is invalid, and the charges against you should be dismissed.

An example of a DUI Case

In this case, the officers at the PNC Arts Center were conducting a seatbelt check, where they were looking to see whether or not the drivers were wearing their seatbelts, and pulling them over. However, they were pulling every vehicle over, whether or not the driver had their seatbelt on. As such, this was a veiled DWI checkpoint. This was essentially a DWI checkpoint that wasn’t approved, wasn’t published, and wasn’t being called a DWI checkpoint. It was being called a seatbelt check. As a result, I got the discovery, took a look at the police reports, conferenced the case with the prosecutor, and he agreed with me. He knew that this DWI checkpoint was not constitutionally valid. As a result, the DWI charge, and all the other charges were dismissed against my client.

If you want to hear about any of the other ways that I challenge a DWI case in New Jersey.. You can also get my contact information from my website. I offer free consultations, and I’m happy to talk to you about your case.

 

Why a Life Insurance Claim May Be Denied

This week’s subject is why a life insurance claim may be denied. You know, the death of a loved one is a difficult time and most people buy life insurance to replace the income that is gone when someone leaves this earth. Now, once a life insurance policy is purchased, many think that they’ve solved this financial problem. But the purchase of a policy doesn’t necessarily guarantee that the death benefit will be paid. Insurers examine the terms of the policies carefully before paying claims.

Now, here are some common reasons that the proceeds from a policy aren’t paid to the beneficiaries. The first one is called the incontestability clause. Now this allows the insurer to deny paying a claim if the insurer finds the applicant made misstatements on the application and subsequently died. Now the period for dealing with these misstatements is usually two years. However, if the applicant deliberately tried to defraud the company, there is essentially no time limit to contest the policy benefits.

Now, if the cause of death was suicide, the insurance company typically has a two-year incontestability clause for suicide. Now, remember with these policies that if you take an old, existing policy and you replace it with a new policy, you are likely to start this incontestability clause all over again with the new carrier.

Also, other reasons that policies lapse is because people just don’t pay the premiums on a policy. In the case of term insurance, it might have run out. If you had 10-year terms and you’re past the 10 years, the policy may no longer be enforced at that point in time. Now, typically insurance companies will try to contact you and if you haven’t paid a premium, there’s a 30-day grace period in which you can pay the premium and they will reinstate the policy just as it was. Longer than that, it may not get reinstated the same way or you might actually lose the coverage.

Now, if the policy is a whole life policy or universal life, you may be able to use the cash value in the policy to pay the premiums or actually make loans against the premiums. Now there are some things that you can do as an insurer that can help make sure that the death benefit does get claimed. Review the insurance application carefully when you apply for insurance and be honest. Do not withhold any information, even though you think it is not pertinent. Pay the premium on time and a lot of companies will actually ask you to give another individual’s name where they can send a premium notice to, if you don’t pay the premium.

Let’s say you move to another state and you forget to notify the insurance company, for example. Also, if your policy is a group life insurance policy through your employer, make sure that it is still in force each year and that the employer hasn’t changed the coverage. Especially if the employer is paying for the coverage.

And finally, if you are denied coverage, at least your beneficiaries are, there is an appeal process that insurance companies have in order for you to follow.