Does the court consider tax consequences in a divorce?

As the income tax filing deadline approaches, we are all wondering how we can reduce our income tax bill and increase our refund. Anyone who is considering divorce, going through a divorce, or has been divorced should consider how their divorce case could affect that tax bill.

We previously posted a series on Divorce & Taxes including the following topics:

Divorce and Taxes: Issue #1. Marital Status

Divorce & Taxes - Issue #2. Child Support v. Alimony

Divorce and Taxes: Issue #3. Child Dependency Exemptions.

Divorce and Taxes: Issue #4. Property Transfers.

Divorce and Taxes: Issue #5. Joint Tax Liability.

Divorce and Taxes: Issue #6. Same Sex Marriages.

Whenever any of these issues arise in a case, it is imperative that divorcing spouses and their counsel consider the tax consequences when negotiating a settlement.

In a recent opinion, the Massachusetts SJC confirmed the importance of considering income tax consequences of divorce orders and specifically ordered that a Judge, even when applying their broad discretion, must consider the potential impact of taxes on the divorce settlement. In L.J.S. v.s. J.E.S. the SJC remanded a Judge's alimony decision finding that the Judge erred by not considering the potential Federal tax consequences.

For practitioners and parties, this decision underlines the importance of getting proper tax advice during your divorce case or negotiation. The Judge must consider the impact of taxation on your settlement, but the Judge won't know unless you present the evidence of what that tax impact will be.

Comments

2024 U.S. Presidential Party Platforms - What are the policy positions that could affect families?

While the laws that affect family formation, marriage and divorce are often made at the state level, there are also many policies and laws at the federal level that affect families and children. Just some examples from recent years that have impacted families in my mediation practice include changes to the federal tax laws (such as the elimination of the alimony tax deduction ) and U.S. Supreme Court rulings on same sex marriage and reproductive health rights. In just over a month, the United States presidential election will have a significant impact on these federal policies going forward, and could choose the next appointments to the U.S. Supreme Court as well. In 2016 and 2020 we shared what each presidential platform said about families and policy regarding family formation and dissolution, and below we'll provide you an update on the 2024 presidential platforms. As Maya Angelou said, "When someone shows you who they are, believe them the first time."...

Updating your Divorce Agreement Template - More Lessons from Cavanagh v. Cavanagh

We recently posted a lengthy review of the the Massachusetts SJC decision in Cavanagh v. Cavanagh (2002) which included some recommendations for drafting divorce agreements, also typically called Separation Agreements. The Cavanagh case is best known for it's clarification of how the courts should evaluate support calculations when a case may have both alimony and child support. However, the case also contained numerous rulings that should make practitioners review their Separation Agreement templates and change some of the ways in which they may have previously drafted certain sections. In this post we'll share actual language from the Gray Jay Endeavors, LLC form Separation Agreement template which addresses each of the issues raised by the Cavanagh decision. If you are a professional interested in purchasing the full Separation Agreement template, check out Gray Jay's forms subscription which includes editable Massachusetts court forms and financial st...

Massachusetts Family Court Financial Statement - Instructions & Best Practices

During a divorce, or other case in the Massachusetts Probate & Family Court that involves your finances, such as a child support case, you will likely be required to file a court form Financial Statement. In Massachusetts there are two versions of this form: a "short form" if your income is under $75,000 and a "long form" if your income is $75,000 or more. Many people find these forms confusing and we've compiled a list of helpful information for filling them out. First , to access the forms, the court has provided pdf or online versions here: Massachusetts Rule 401 Short Form Financial Statement (pdf) Massachusetts Rule 401 Long Form Financial Statement (pdf) There are also some basic instructions provided by the court explaining the sections of the forms and providing access to a Schedule A (for self-employed people) and Schedule B (for rental income): Massachusetts Rule 401 Short Form Financial Statement Basic Instructions Massachusetts Rule 401 Long F...

Search This Blog