Everything You Need To Know About QDRO’s

What is a QDRO?


QDRO stands for Qualified Domestic Relations Order. The simplest way to describe it is as a legal document that splits up the funds in an ERISA (Employee Retirement Income Security Act) qualified retirement account. It is filed with the court as a part of a divorce or separation agreement stating that one spouse gets a pre-determined percentage of their ex-spouse’s retirement plan assets. One thing to note, if you choose to split retirement assets without a QDRO, the account holder is still responsible for taxes on the assets transferred. If you have a QDRO, your former spouse is then responsible for taxes once the funds are transferred.


Can a QDRO be reversed?


If you decide you’ve changed your mind about wanting a QDRO but it has already been received and processed, it is nearly impossible to reverse. The only way to have it changed is if the courts and the administrator agree that the QDRO goes against your divorce agreement and needs to be modified. If there is a misalignment, you might have to go back to your ex-spouse and re-negotiate in order to get the QDRO amended.


Do You Need One?


It is a good idea for anyone with retirement plan assets going through a divorce or separation to have a QDRO. In many cases, issues related to QDRO’s are overlooked and left unresolved, so it is important to speak with an experienced attorney about your retirement accounts to ensure you have a QDRO in place if necessary and that you’ve cover everything correctly in your divorce agreement.  Not many attorneys draft QDRO’s, but Divorce Matters attorney Ashley Balicki is skilled in drafting QDRO’s specifically. If you would like to speak with Ashley or any of our other experienced attorneys about your situation, contact Divorce Matters today or call us at (720) 542-6142.

How Taxes on Alimony Will Be Calculated Differently for Denver Residents in the New Year

If you filed for divorce recently in Denver, or if you are considering filing for divorce once the holidays are over, you may know that changes to federal tax law will impact how alimony or maintenance payments are taxed beginning in 2019. More specifically, the Tax Cuts and Jobs Act (TCJA), most of which took effect earlier, flipped the tax implications of alimony and maintenance payments, meaning that the party who used to pay taxes on maintenance no longer will be taxed, and vice versa.

We will say more about the TCJA implications for alimony and maintenance payments in 2019, and then we will explain how changes to Colorado alimony law are intended to offset the federal tax law changes.

Federal Tax Law Changes to Alimony and Maintenance Payments

An article in CNBC explained how the Tax Cuts and Jobs Act will eliminate the alimony tax deduction for payor spouses beginning on January 1, 2019. If you are currently in the process of getting divorced and could finalize the divorce before the New Year, then you will not be subject to the new system of taxation. However, all divorces finalized on January 1, 2019 and afterward will have to use the new model.

Under the federal tax law prior to the passing of the TCJA””the law that remains in effect until 2019–the payor spouse (the one making the payments) is permitted to deduct alimony payments from his or her income prior to paying federal income taxes. In other words, The spouse who pays alimony has not been paying taxes on the amount of income earned that goes toward alimony. Instead, the payee spouse (the one receiving the alimony payments) pays federal taxes on that money as if it were income.

The TCJA changes this. Starting on January 1, 2019, any divorces finalized in which alimony or maintenance is awarded will result in the payor spouse being taxed on alimony payments and the payee spouse being allowed to deduct the alimony payments. In other words, the alimony payments will be taxed as part of the payor spouse’s income instead of the payee spouse’s income. Since the payor spouse earns more money than the payee spouse, and higher incomes are taxed at higher rates, the new system means that the federal government will be able to collect more in income taxes for the alimony when it is taxed from the payor spouse’s income.

How Colorado Maintenance Law Has Changed in Response to the TCJA

Recognizing that the TCJA will affect Colorado residents, the Colorado legislature revised the state’s maintenance law. These changes aim to offset the TCJA shift in taxation.

Under Colorado law (C.R.S. § 14-10-114), a maintenance cap was instituted for couples whose divorces were finalized on August 8, 2018 and after. Then, largely in response to the TCJA changes that will take effect for divorces finalized in 2019 and afterward, the payee spouse (the one receiving the maintenance payments) will only receive 80 percent of the maintenance amount calculated if the parties; combined gross income totals $10,000 or less. If the combined gross income of the parties is between $10,000 and $20,000, then the payee spouse will receive 75 percent of the maintenance amount calculated under the cap formula.

The idea is that awarding only a percentage of the maintenance calculation to the payee spouse will offset the tax that the payor spouse will be responsible for paying.

Contact a Denver Alimony Lawyer

If you have questions about alimony or maintenance payments in Colorado, a Denver divorce lawyer can assist you. Contact Divorce Matters today to speak with an experienced advocate.

Navigating Divorce when You Co-own a Business

Navigating Divorce when You Co-own a Business

In a divorce, a judge unwinds a couple’s financial entanglements. But what happens if you own a business together with your spouse? In addition to being co-owners, you probably both contribute to the business, and it will suffer if either one of you disappears altogether. For this reason, unwinding a couple’s finances when they own a business together presents unique challenges.

Decide What to Do with the Business

Divorcing couples have options for what happens to the business. For example, you can:

  • Sell the business to a new owner.
  • Buy out your spouse’s share of the business.
  • Continue owning and running the business jointly.
  • Close the business down entirely.

If the business is profitable, closing it down is probably not the best option. However, you should take a close look at how much money the business makes. Also assess your own desire to continue working in the business. A divorce might be the right time to cut the cord to your business””along with your spouse.

How to Sell a Business

If you want to sell to a new owner, you need to value how much the business is worth. This might be tricky. Many business owners hire a valuation company, but both spouses should agree on the company hired. Valuation companies charge high fees, and you want each spouse to trust the valuation report issued. What you should avoid is each spouse obtaining their own valuation, which simply creates another disagreement.

After valuing the business, you can advertise it for sale. You might also want to jointly hire a lawyer or broker to manage the sale. Again, both spouses should agree on who to hire. Disagreements about whether to sell can actually cause buyers to flee.

Buying Out Your Spouse’s Share

You will also need to value the business so that you know how much your spouse’s share is worth. If you cannot obtain a loan to buy your spouse’s share, you should discuss giving them marital assets of equivalent value. For example, you might take the business while your spouse receives the home and other assets.

Running the Business Jointly

This option, though not ideal, is also possible if you can separate your personal issues from business ones. According to Michelle Crosby, CEO of Wevorce, you should clearly define your business roles so that there is no confusion. You should also protect yourself by drafting a buy-sell agreement in the event one ex wants out of the business at some point in the future.

Speak with a Fort Collins Divorce Lawyer Today

At Divorce Matters, we help divorcing couples divide property, including family businesses, in a way that works for everybody. Contact us today, 720-580-6745, to schedule your free consultation with one of our Lakewood divorce attorneys.


How Divorce Will Affect Your Lakewood Taxes

A divorce is probably the biggest headache a married couple in Lakewood could potentially face. A divorce splits apart a family, as well as the assets. One home becomes two. A divorce has financial implications for all involved.

You may have just finalized your divorce and now you have another concern: taxes. This year, tax day is on April 17, so you have just a couple more months to get your return filed with the IRS.

If you think your taxes were difficult in the past, they’ll be even more challenging now that you’re divorced. The date your divorce was finalized, as well as child support, child custody and alimony, will all affect your taxes

While programs such as TurboTax will be able to walk you through the process of filing your taxes after a divorce, you may want to invest in the help of a Lakewood accountant or other financial professional, especially if you are newly divorced. Here are some things to keep in mind throughout the process.

Choose the Right Filing Status

Your marital status on December 31 controls how you file your taxes. If you were not officially divorced by December 31, you have the option to file a joint return or file separately. If you were divorced by that date, you will need to file separately. You can file head of household if you had custody of a child for more than half of the year.

Child Support and Alimony Comes With Taxes

Tax laws regarding child support and alimony can be confusing. Child support is not reported as income and is not deductible to the payer. Conversely, alimony is tax deductible for the payer and is counted as income.

Claiming Children as Exemptions

The exemption for children goes to the custodial parent, unless the divorce decree says otherwise. If you share joint custody, the exemption goes to the parent who had the children for the greater number of days in the year.

Consider Changing Your Tax Withheld

If you are employed, a change in marital status may require you to change your exemptions on the W-4 form. Now that you are single, you may not be having enough money taken out of your paycheck for taxes. This is especially true if you are now receiving alimony or have other tax liabilities. If you owe money this tax season, make some changes to your W-4 so you’re not having to write a huge check to the IRS next April.

Do You Have Questions About Taxes and Divorce? Seek Advice from an Experienced Lakewood Divorce Attorney

A divorce can impact many areas of your life, including finances and taxes. The Lakewood divorce lawyers at Divorce Matters can help you understand what to expect when tax season rolls around, and advise you on other matters involving family law in Colorado. To learn more about what you can expect in your new life after divorce, contact us at (720) 408-7469.

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.