Minimizing The Tax Impact Of Divorce

Property division, child custody, annoying phone calls with the soon-to-be-ex and his or her attorney, house hunting, car shopping ”“ in divorce, there is a lot of work to be done. So much work that you may not be thinking about next April when your taxes will be due once more. And unless you tackle the problem early, you may end up finding that your newly divorced status comes with some unplanned tax ramifications.

Here are a few considerations to make to ensure that you minimize the tax impact of your divorce.

  1. Know your deductions. Depending on how your divorce plays out, you may be eligible for some tax deductions that you would not have qualified for otherwise. If you have fees related to collecting maintenance (alimony), tax advice or the maintenance and management of property held for producing income (rental properties, for example), you can apply for deductions on those. You cannot, however, deduct legal fees from your divorce or for any child support.
  2. Know your filing status. Your status will depend on when your divorce is finalized; if you are still married come January 1, you will have to file as married filing jointly, married filing separately or as single/head of household. Depending on your income as well as your spouse’s, the tax implications are different. Find out which tax bracket you belong to as an individual as well as a couple, because your combined income may put you in a higher tax bracket than you need to be. You may be able to pay less in taxes if you ensure that your divorce goes through before the end of the year.
  3. Know how changes in your property holdings will affect your taxes. If you sell your principal residence, you qualify for something called a sale of principal residence exclusion. As long as the home has been your principal residence for two of the last five years, you can qualify for this exclusion, but how much you are allowed to claim as tax-free depends on your filing status. For single filings, the gain on your principal residence is tax-free up to $250,000. For married couples, it is $500,000. However, if you transferred your marital home or your share of it to your spouse as part of the divorce settlement, the IRS considers you to have no gain or loss. Because many divorcing couples do decide to sell the marital home, it is wise to think about how a home sale would affect your taxes before you commit to a divorce settlement.

Contempt Is The #1 Predictor Of Divorce ”“ And You’re Probably Showing It In These Ways

The number one predictor of divorce, according to researcher John Gottman, is not money problems or infidelity. It’s contempt for your spouse, or, to be more clear, it is contemptuous behavior toward your spouse. Even if you truly love your spouse and hold no contempt for him or her, you are probably guilty of some of the big behaviors that indicate contempt.

Signs Of Contempt That You Might Not Recognize (But Your Spouse Will)

Communication is the key to any relationship, but not all communication is verbal. Sure, it is easy to say something out loud that displays contempt for your spouse (“I HATE YOU,” for a rather on-the-nose example), but there are certain nonverbal cues that can display the type of animosity and contempt that can poison the well of your marriage and lead to a slow spiral into divorce.

  • Nonverbal Contempt Cues: Eye-rolling. Heavy sighs. Smirking when your spouse tries to bring up an issue that you find trivial, but your spouse does not. Walking away. Ignoring your spouse. Condescending looks when you are speaking.
  • Verbal Contempt Cues: Name-calling. Excessive and biting sarcasm (sarcasm can be healthy ”“ but not when it is used to belittle someone). The word “whatever” in response to a point your spouse makes. “You’re overreacting” when he or she is bothered by something you did. Insults (body-shaming, gender-shaming, insert-type-of-shaming-here)

Contempt is something that builds over time, especially when couples do not communicate to one another effectively. Little things that may not bother you at the time begin to build up, day by day, and keeping that sort of thing bottled up can certainly tear a marriage apart.

Does Divorce Affect Your Diet? Research May Surprise You

Divorce is stressful, and stress can have a big impact on your diet and nutrition. But did you know that women are much more immune to divorce’s effect on diet than men are?

Men vs. Women: Diet After Divorce

According to a study in Social Science & Medicine, men are more likely to suffer from bad dietary practices that could have “clinical significance” than women are following divorce. Women’s diets, oddly enough, tend to stay the same.

The study involved over 11,000 subjects between the ages of 40 and 80. Over a period of eight years, separated by a one-year gap, the subjects went through health testing and reported their consumption of a variety of fruits and vegetables. During the first four-year period, 89 percent of the male subjects and 78 percent of the females were married. Over the course of 3.6 years, a small percentage of both men and women became separated, divorced or widowed.

What researchers discovered was that men who became separated from their spouses consumed 25 percent less produce and also had more monotonous diets than they did when they were married. Women? No statistically significant change in their diets. The study also looked at alcohol use, finding that men drank alcohol at about the same rate regardless of marital status, while women had a slight increase in alcohol intake upon separation.

One theory put forth by the lead researcher said that the reason women may be overall more consistent in their dietary habits following divorce may not be a gender thing, but a cultural thing ”“ because the subjects were born between the 1920s and the 1960s, they lived in a society where culinary tasks were largely relegated to women.

You don’t have to let your divorce lead to negative changes in your diet and health. In fact, divorce can be a wake-up call that inspires you to be more health-conscious. Maybe enroll with some friends in a healthy cooking class, or visit some farmers markets for fresh produce for new recipes and to support local business.

Financial Infidelity Can Lead To Divorce

It goes without saying that marital infidelity can lead to the breakdown of a marriage. But adultery is not the only type of infidelity you have to worry about ”“ there is also the notion of financial infidelity.

Financial infidelity basically means to lie to your partner about finances. And it’s a growing trend, according to a Harris Poll for the National Endowment for Financial Education. Two out of five Americans admitted to lying to their spouse about financial matters.

Financial infidelity can be anything from a little white lie to full-blown hiding of a significant amount of assets or debt. Sometimes it can be for a good reason, like saving up for a surprise family vacation. But often, the reasons for lying about money are more malicious, and this type of deception, when discovered (when ”“ not if), can lead to enormous trust issues that may culminate in divorce.

What Are Common Types Of Financial Infidelity?

  • The most common type of financial infidelity is the act of hiding something. This includes hidden purchases, hidden bank accounts, hidden cash stashes, that type of thing.
  • A less common, but still contentious form of financial infidelity ”“ lying about your debts or income.

In the age of cashless transactions, it is easier than ever to engage in financial infidelity. The practice is widespread throughout all demographics, though more common with younger couples. Usually, the moment of discovery is when a major event happens, such as a big purchase (home, car) or even things like medical emergencies. And when the truth comes out, it can destroy your trust and foster contempt ”“ the leading predictor of divorce.

So what should people do to avoid these problems? Maintain open and honest forms of communications about income, assets and debt. Have a weekly or monthly meeting with your spouse to review finances and pay bills. Couples who argue about money and finances should work with a marital counsellor or a financial advisor (or both) to guide them into a better way of handling their household budget, accounts and debt.

Don’t Follow These Terrible Divorce Tips

We dedicate a lot of our blog posts to divorce tips ”“ ways to plan for your finances, the benefits of prenups, things like that. This week, we’d like to take the opposite angle. These tips are terrible. You will regret it if you listen to the tips in this post. Seriously, don’t do it.

Really Though…These Are Bad Tips & We’ll Explain Why

  1. Your spouse is taking his or her sweet time getting out of the house. It’s making you crazy and the kids are not benefiting from it, either. Simple! Are you going to be home when your spouse goes to work? Change the locks when he or she leaves! Why you should not change the locks: Until a divorce decree is finalized and property is divided, your spouse still has a right to the marital home. You need court permission to have your spouse removed from the home. You don’t want the courts thinking you are unreasonable ”“ it will only hurt you in the end. And your spouse will probably be pretty angry too, so that definitely won’t help the divorce.
  2. Stay together for the sake of the children. You and your spouse can handle a little animosity as long as the kids get to stay at home and keep their school and friends. Why you should not stick it out until the kids leave the nest: While it is true that for some couples, staying together for the sake of the children can work out, it sets a bad example for the children. It teaches them to be okay with toxic relationships. It exposes them to future fighting which can be detrimental to their self-esteem. If you can make it work, then we can’t tell you not to do it. But often, separating is smarter.
  3. Your spouse will go after your money, so you should find a place to stash some of it to make sure you are financially stable after divorce. Why hiding marital assets is bad: We’ve only talked about it time and time again. Hiding assets is fraud. Most of the time, the truth will come out. When it comes out, it looks bad on you. Very bad. Just be up front, and plan ahead.
  4. When your spouse files for divorce, act quick ”“ get in those joint bank accounts and take the money before he or she can. Why emptying accounts is terrible: Same reason as hiding assets. It’s not yours ”“ it belongs to your spouse too. Even if you suspect your spouse is planning to do the same thing to you, don’t do it. If your spouse does, you can use that against him or her in court.

There’s plenty more where this came from, but that’ll do for this week.

These 5 Life Events Can Lead To Divorce If You Are Unprepared

You might be surprised how these five basic life events can easily go awry, and when they do, you may find a divorce on the horizon.

  1. A new baby. How can it be, though? Aren’t babies supposed to bring a family together, not tear it apart? Yes, they are. Childbirth is one of the most beautiful moments of a parent’s life. But beyond the joy of bringing new life into the world, there are other considerations to make. Financial, emotional and physical responsibilities introduced by a new baby can lead to stress and impatience, especially in the event of an unplanned pregnancy. You and your spouse may have different expectations of how to raise the child. You may find that the person you fell in love with is not the same person after the birth of a child.
  2. Unemployment. If your spouse loses his or her job, that shifts the burden of finances onto you. All of the bills ”“ rent, mortgage, car payment, car insurance, health insurance, Internet, cable ”“ we’re getting stressed just listing them. And then if your spouse has trouble finding a new job, you might start thinking that it’s something they’re doing wrong ”“ maybe they’re just lazy, for example. Unemployment can rapidly create a divide between spouses that can end in divorce.
  3. Moving. Perhaps you just got a new job that pays incredibly well, but to take it, you and your spouse have to move somewhere else. Let’s say New York City. Suddenly, your spouse has to make the decision to uproot his or her entire life to come with you. Changing schools for the kids. Finding a new job in a highly competitive market with a higher cost of living. Losing friends. It’s a lot to take in, and it can be hard to see the greater good beyond the immediate losses.
  4. Meeting Family. Maybe your spouse’s parents are too involved in his or her life, and you do not get along with the in-laws. This can lead to the uncomfortable moment where someone is forced to take a side ”“ leading to an immediate rift that can cause feelings of broken trust and even contempt (the leading predictor of divorce).
  5. This one might come as a surprise ”“ Social Media. Those pages upon pages of your spouse’s history, that flowing list of friends that may or may not include old flames. Maybe your wife’s ex-boyfriend comments on a picture of her enjoying a beach vacation, or maybe your husband’s ex-girlfriend shares an old memory of them on a mutual friend’s page. Did you feel a little fire flare up in your chest just now? It’s easy to see how suspicion and friction can come into a relationship through social media posts.

What Does The Census Says About Divorced Women? Know Your Finances

According to data from the most recent census, women are shown to be disproportionately affected by divorce when it comes to finance. Compared to men, women tend to earn less money and tend to be less likely to be able to afford to live independently. Why is being single so expensive?

There’s the obvious answer ”“ two incomes are better than one. But it’s more than just income. Here are some reasons why being single is just more expensive ”“ and why women often face harsher prospects of independence.

  • Taxes: Married couples can typically save thousands of dollars in taxes when they file jointly. This is because of the bevy of federal and state laws that benefit married couples. When you get a divorce, you lose these benefits, which means your taxes will probably be higher. Additionally, studies from ConsumerReports.org and the University of Central Florida reveal a hidden “woman tax” when it comes to sales. Products marketed to women, even if they are functionally identical to men’s products, are more expensive on average.
  • Health Spending: Did you know that, on average, single women spend more on annual healthcare than single men? The Bureau of Labor Statistics (BLS) reports that while men spend 3.9 percent of their annual income on health care, single women spend 7.9 percent, just over double of what men pay. The National Women’s Law Center says that a nonsmoking woman often pays more for health insurance than a smoking man. Women also have to worry about gynecological costs as well as pregnancy, two things that men do not have an equivalent of. Furthermore, women just go to the doctor more, according to a Louis Harris and Associates study that found that men avoid doctors at three times the rate of women yearly, and that a third of men don’t even have a regular physician.
  • Housing: According to the BLS, single women are ”“ once again ”“ paying disproportionate amounts for housing compared to couples and single men. Couples spend an average 23.9 percent of annual income on housing. Single men, 30.3 percent. Single women, 39.8 percent. It breaks down logically; couples can combine income, single men tend to make more money and single women are victims of the wage gap, thus the higher percentage.

It’s definitely not fair and shows bias against not just singles, but specifically single women, at an institutional level. For these reasons (and several more), it’s just harder to be financially independent as a single woman.

Plumfund: The Crowdfunding Platform For Divorce

There’s a crowdfunding site for everything nowadays. Kickstarter, for pretty much anything; GoFundMe for personal funding; PledgeMusic for up-and-coming bands; the ill-fated SwanLuv, which once promised to pay for your wedding on the condition that you would have to pay it back upon divorce. And now, divorce has a new crowdfunding platform, albeit more traditional than SwanLuv’s lofty intentions. Meet Plumfund.

Plumfund seeks to provide a valuable service for divorcees, who are often hit with exorbitant fees and financial turmoil upon divorce. Things like attorney fees, setting up a new home and even unexpected costs like the chance of a contentious, drawn-out divorce can rapidly deplete a person’s bank account and leave them susceptible to snowballing debt, credit hits and even bankruptcy.

Plumfund works like any other crowdfunding site. After setting up your fund, you promote it through social media in hopes of having your friends, family and other associates donate funds to help keep you afloat and pay for those expensive divorce fees.

Is Plumfund A Good Idea?

Often, divorcing couples tend to keep their cards held close to their chests. It can be a difficult time and it is not uncommon to retreat inward instead of asking for support from those closest to you. Plumfund helps with exactly that ”“ it shows financial and emotional support for friends and family going through divorce.

Not only that; it has attracted the attention of several investors, including Shark Tank star Kevin O’Leary who sees it as a tremendous business opportunity. With so many marriages ending in divorce (general estimates say that somewhere around 40 to 50 percent of marriages end in divorce), O’Leary says he cannot wait to start promoting the company, touting the importance of responsible monetization of divorce.

At any rate, we hope they don’t pull a SwanLuv and bite off more than they can chew.

Our Denver divorce attorneys are skilled in all matters of family law and offer financing options for divorcing couples.

The Truth About Marrying Young

Is it a bad idea to get married young? There are many differing opinions on the subject ”“ the term “shotgun wedding” comes to mind ”“ but as with any other major life decision, no one can tell you whether you are ready to get married. However, you should know that marrying young could have negatives, just as much as it can have positives.

Pros

  • Sometimes, marrying young can have excellent benefits. One example would be if you and/or your spouse are a part of the military. Both military service and even just standard benefits like tax breaks can ease the financial strain on young married couples who perhaps have not solidified themselves within their careers yet.
  • Couples who marry in their mid-20s tend to report higher levels of happiness, based on results from a study from the University of Virginia.
  • Younger parents (not too young, though) are more likely to have healthy children.

Cons

  • Yes, it is true that couples who marry young are more likely to end up divorced. However, the difference is smaller than you think; 20 percent of people who marry between 20 and 24 end up divorced, versus 15 percent of people in their upper 20s. All things considered, that’s relatively similar, so don’t give into the doomsday predictions if you feel that marrying young is right for you.
  • Younger people have less time to build up their financial portfolios. On one hand, this allows you to reap federal benefits that can ease the stress of starting out your professional life, as well as making property division easier if the marriage doesn’t work out; on the other hand, it invites stressors that you might not experience if you marry when you are more financially stable.

Our experienced Denver family law attorneys seek to provide the ideal client experience for families in Colorado.

Cohabitating But Not Married? It Still Pays To Plan For Your Financial Future

It is becoming more and more common for couples to cohabitate without marrying. According to the Census Bureau, the rate of cohabitating couple households has tripled since 1996, and the number of cohabitating unmarried couples with children has jumped 162 percent in the same time period.

Unmarried cohabitating couples have a few more financial hurdles to jump due to their unmarried status. Why? Because marriage affords over 1,000 federal benefits and protections for the couple, meaning that there are some financial struggles that unmarried couples have to face that married couples do not. For example, spouses can share health insurance. Selling a home allows married parties to both reap the benefits of the capital gains exemption. Married couples can transfer unlimited assets between one another with no tax penalties. Surviving spouses can claim an estate tax exemption. These are just a few examples.

So what should you do if you are cohabitating, in the event that the two of you break up? Without marriage, is there anything you can do to make the process of breaking up easier on you financially? Actually, yes there is.

Draft A Cohabitation Agreement

A legal cohabitation agreement would be, basically, a prenup without the wedding ring. With your partner and the assistance of a mediator or family law attorney, draft a document that details how to divide assets and how financial support will work after a split. Additionally, discuss other legal documents that you might need in case of emergency; for example, a will naming your partner as beneficiary for assets you wish to transfer to him or her and an advance directive giving your partner medical power of attorney.

Whether you are married or not, a family law attorney can help you prepare for your financial future with your partner.