Divorce & Family Law Blog

Here are 10 things about taxes and divorce you should know:

1. Property settlements are tax-free.

If you divide property between spouses (or within limits, even after marriage), Section 1041 of the tax code says there’s no tax to either party. Enacted in 1984, this provision reversed a Supreme Court case that ruled property divisions were taxable. This tax-free rule means you can divvy up property between spouses however you want. (That’s provided they’re both citizens; if one isn’t a citizen, there may be income and gift tax issues.) But when you divide property, you’d better consider future taxes and the tax basis of the property in addition to its fair market value.

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In 2010, the divorce law changed in that the legislature created a presumption that the monied spouse (the spouse with more money and a higher income) must pay the legal fees of the spouse who pays less. This means the spouse with more money pays the legal fees of the spouse who pays less unless there is a compelling reason why he shouldn’t. How much in legal fees the monied spouse is required to pay is up to the judge. The amount of legal fees depends on a variety of factors including how much money the parties have, how complicated the case is expected to be, how much money each party makes and where the case is litigated (NYC attorneys charged more than attorneys In Long Island). The exception to this is if the parties agree to pay their own expenses. This often occurs as parties negotiate other matters which are of interest to them.

If you are going through a divorce and if you have children, it is important you think about a holiday schedule. When people divorce, they typically know that they must come up with a schedule for the children. But, when thinking of a schedule people usually think of their everyday lives, i.e. when they have work and the children have school or daycare. However, people also need to think about holidays and special occasions.

There should be two separate schedules – a regular schedule for everyday life and a separate schedule for holidays and vacations. The holiday and vacation schedule should trump the regular schedule. In other words, if the holiday and the regular schedule conflict, the holiday schedule wins. Otherwise, luck will govern who has the children on important holidays like Christmas and Thanksgiving. So, if you are getting divorced, try to work out a separate schedule for holidays. It could be as simple as listing the holidays that are important to you and your soon to be ex and stating that each parent will have parenting time every other year. Another approach is that each holiday is divided even (maybe 9-2 and 2-8). This only works if both parties’ families are close to each other geographically. The schedule will of course have to be suited to your needs and the needs of the children.