A parent can take the Dependent Care Credit, Child Tax Credit, and College Tuition Credit ONLY if they are also claiming the child as a dependent on the tax return.  Therefore, a parent who waives the dependency exemption also waives the Dependent Care Credit, Child Tax Credit, and College Tuition Credit.  Parents must consider this when discussing waiver of the dependency exemption as a parent might unknowingly waive the rights to several tax credits when they thought they were waiving the right to only the dependency exemption.  Further, a noncustodial parent may agree to pay for a child’s college education thinking that they would be entitled to take the College Tuition Credit but if the child is not listed as a dependent on their tax returns they cannot take that credit.

Is is very important to consider all of the tax credits and exemptions regarding children when negotiating a divorce settlement agreement, and parents should seek competent and specialized tax advice from tax professionals regarding these matters.

Jeffrey A. Landers

Divorce Financial Strategist(TM)

How To Divorce-Proof Your Business: Buy-Sell Agreements

There are a number of things that you can do at the “entity” level of your business that could prevent your husband from keeping an ownership interest in your business.

Buy-Sell Agreements - Almost every business that has two or more owners has, or should have, a buy-sell agreement in place (if you don’t, you need to get this taken care of ASAP!)

A well-drafted buy-sell agreement will determine exactly how, and under what terms and conditions, the transfer of an ownership interest in the business will take place, if and when, certain “triggering events” occur, such as the death, disability, departure (quits, gets fired, retires) or, for our purposes, the divorce of one of the owners.

Since the ownership interests in a closely held business are fairly illiquid, a well-drafted buy-sell agreement should provide for:

• a market for the sale and/or purchase of those ownership interests

• a mechanism to determine the price, terms and conditions for the sale and/or purchase of those ownership interests

• the source of funds for the purchase of any ownership interests (life or disability insurance, a sinking fund, cash on hand, line-of-credit or a loan, a combination thereof, etc.).

In addition, a buy-sell agreement can (and often should) do the following:

• prohibit an owner (or his/her estate) from transferring and/or selling any ownership interests to third parties without the prior written consent of the other owners

• restrict the ownership of any interest in the business to an existing group

• automatically convert the ownership interest into a non-voting interest upon a triggering event

• provide the business and/or other owners with the mandatory right or right-of- first-refusal to buy the ownership interests from any departing owner, the estate of a deceased owner or the ex-spouse of a current or departed owner

• require all owners to have an acceptable prenuptial agreement in place before marriage or remarriage that would require that owner’s soon-to-be-spouse to waive any and all rights to any ownership interest in the business in the event of a future divorce.

Operating Agreement/Partnership Agreement/Shareholders Agreement - For our purposes, all of these agreements are synonymous. In general, Operating Agreements are used with Limited Liability Companies, Partnership Agreements are used with Partnerships, including Limited Partnerships and Shareholder Agreements are used for C and S Corporations.

The purpose of these agreements is to formalize the understanding between you and the other owners as to how the business will be owned and managed. Even though it is not a legal requirement for your business to have such an agreement, it certainly makes good business sense to do so. Without having some type of operating agreement in place, your business might be forced to operate in accordance with your home state’s default operating requirements. Wouldn’t you rather manage and operate your business the way you want to, instead of the way your state has pre-decided?

In addition, a well-drafted agreement will stipulate what is expected of each owner; how profits and losses are assigned; procedures for transferring, buying and/or selling ownership interests; and just about anything else you want it to say, including restrictions on the ability of ex-spouses of owners to have any ownership interests whatsoever in the business.

In most cases, the buy-sell language is either included in the operating/partnership/shareholders agreement or it is contained in a separate buy-sell agreement.

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Jeffrey A. Landers, CDFA™ is a Divorce Financial Strategist™ and the founder of Bedrock Divorce Advisors, LLC (http://www.BedrockDivorce.com), a divorce financial strategy firm that exclusively works with women, who are going through, or might be going through, a financially complicated divorce. He also advises women business owners on what steps they can take now to “divorce-proof” their business in the event of a future divorce. He can be reached at Landers@BedrockDivorce.com.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

Follow Jeffrey A. Landers on Twitter: www.twitter.com/Bedrock_Divorce

Good article I found on divorce-proofing your business with a prenup:

Jeffrey A. Landers

Divorce Financial Strategist(TM)

How To Divorce-Proof Your Business: The Prenup

So what is a prenup? A prenuptial agreement is a contract signed by both parties before their wedding that details what their property rights and expectations (including alimony) would be upon divorce. A well-drafted prenup can “override” both Community Property and Equitable Distribution State laws and the courts will usually respect such agreements (which is one reason why they are so powerful).

It is very important that each spouse-to-be is represented by their own separate attorney and that the prenup contain the following elements:

1. Agreement must be in writing (No oral prenups)

2. It must be executed voluntarily and without coercion (having your fiancé sign a prenup the day before the wedding is a good way to invalidate that prenup)

3. Full disclosure (no hiding of assets and/or liabilities) – this is another way to invalidate a prenup

4. The agreement cannot be unconscionable (the prenup could be invalidated if the agreement is too lopsided with one party getting almost everything and the other getting only a pittance)

5. It must be executed by both parties preferably in front of witnesses (or a notary).

6. It should be in a recordable format (such as a real estate deed).

Some attorneys even recommend having a judge witness the signing to make sure that no party was coerced into signing.

By using a prenuptial agreement, both parties can decide in advanced what property will be considered separate property and what property will be considered marital property and how that marital property should be divided.

You’d like a prenup but it sounds too legal and unromantic–you don’t even want to ask him.

Okay! Here’s another way to protect your assets:

If you are concerned that the terms of your prenup could be challenged and possibly not upheld in the future; or if your fiancée refuses to sign a prenup; or if you don’t even want to ask, then you should definitely consider setting up a Domestic or Foreign Asset Protection Trust.

In essence, you would transfer the ownership of your separate property into this trust, including your company (this would work for most entities–C Corporations, Limited Liability Companies, Limited Partnerships–but not necessarily for an S Corporation. Only certain types of trusts can own S Corporation stock, so this is something that would need to be discussed with a trust attorney that is experienced with asset protection trusts).

Without going into further detail about the various types of trusts and how they work, suffice it to say that using a trust could make the entire issue of separate property, and its appreciation, a moot point. The reason for this is that the trust, and not you, would legally own your separate property, including your company.

The transfer of your separate property into the trust should be done while you are still single and would not require any approval from your fiancée. The use of this trust would certainly not preclude you from also having a prenup. However, the prenup would no longer need to address the issue of your separate property and its appreciation. Instead it could focus on how marital property (and possibly his separate property) would be divided and who would receive alimony, in what amount and for how long.

What is a postnup? A postnuptial agreement is a contract between spouses. It is similar to a prenuptial agreement except that it is entered into and signed after marriage. In order to be valid, a postnup should include the same important elements as a prenup.

Having said that, a number of states still don’t recognized postnups and even when they do, postnups are challenged and invalidated much more frequently than prenups.

Here’s the reason why: Before marriage, the parties are entering into an agreement much like two business people entering into a contract and neither party has any legal family law rights on the other. Theoretically, if they don’t like the contract, either party can walk away. However after marriage, the situation is very different. The married couple now have very well defined legal rights regarding support and property division and they are considered to be in a fiduciary relationship with each other (meaning each party has to act in the best interests of the other party). Therefore, any transactions between them will be viewed with caution. By negotiating a postnuptial agreement, one party will typically be giving up some of those rights and that’s why postnups will usually be held to a higher standard of fairness than prenups on the theory that individuals have less bargaining power once married.

Nevertheless, if you don’t have a prenup, try to get a postnup. It’s better than nothing. Just understand that a postnup is not nearly as ironclad as a prenup and you never know how the courts would act if one spouse decides not to abide by the terms of the postnup.

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Jeffrey A. Landers, CDFA™ is a Divorce Financial Strategist™ and the founder of Bedrock Divorce Advisors, LLC (http://www.BedrockDivorce.com), a divorce financial strategy firm that exclusively works with women, who are going through, or might be going through, a financially complicated divorce. He also advises women business owners on what steps they can take now to “divorce-proof” their business in the event of a future divorce. He can be reached at Landers@BedrockDivorce.com.

All articles/blog posts are for informational purposes only, and do not constitute legal advice. If you require legal advice, retain a lawyer licensed in your jurisdiction. The opinions expressed are solely those of the author, who is not an attorney.

Follow Jeffrey A. Landers on Twitter: www.twitter.com/Bedrock_Divorce

Georgia is an equitable division, not a community property, State.  This means that in the event of a divorce, if you and your spouse cannot decide how to divide your marital property and debt, a judge will decide these issues depending on what he or she thinks is equitable under the facts and circumstances of your case (which may or may not mean “equal” division).  Consideration of whether to enter into a prenuptial agreement should begin with an understanding of what “marital property” and “marital debt” are.  Marital property is, in a very general sense, any property acquired during the marriage; it does not matter who “bought” the property, in whose name the property is titled, or who primarily uses the property – if it was acquired during the marriage, it is generally considered marital property.  Marital debt works the same way – any debt acquired during the marriage is generally considered marital debt, no matter who incurred the debt.   Marital property and marital debt go into the “marital pot” to be divided equitably in the event of a divorce; again, “equitable” does not necessarily mean “equal” and property and debt might be divided in a manner that is not equal or “50-50”

The exception to this general rule is that any property inherited individually or acquired by gift individually by either party is their separate property.  In addition, any property or debt the parties brought into the marriage is considered their respective separate property or debt.

So, why might you want to consider a prenuptial agreement?  It is very easy to comingle separate assets and to transform separate assets into marital assets, sometimes without even realizing that this is happening.  For example, if one party owned a home before the marriage individually, and after the marriage placed their spouse’s name on the title, the entire property is considered marital property.  This sometimes happens when a home owned by one party before the marriage is refinanced, and the other party’s name is added to the deed for any reason; the entire property is now marital property instead of separate property.  One way to protect a separate asset such as a home owned before the marriage from becoming marital property subject to equitable division is to have a prenup that states that the property will remain the initial owner’s separate property no matter whether the other party’s name is added to the deed.  Another example involving real property is when one party owns the home prior to the marriage and it remains in that party’s name alone, but the other spouse inherits some money and uses it to significantly pay down or pay off the mortgage; this is a gray area that can lead to litigation regarding just exactly how much of the equity is marital property and how much is separate property.

The parties’ incomes acquired during the marriage are also marital property.  What about the case where one party has a retirement fund before the marriage, but makes deposits into that fund from their income received during the marriage (the income is marital property)?  How much of the retirement fund is marital property and how much is separate property?  You can spend a great deal of time and money on financial experts to help determine the answer to this question, or you can specify in a prenuptial agreement how the division of any retirement funds are to be handled in the event of a divorce.  Are the accounts to be split equally?  Will each party keep the entire value of their own account?  Will some amount be defined as premarital or separate property and some amount as marital property in the prenuptial agreement?  A prenuptial agreement can define exactly what is considered to be marital property and what is considered to be separate property in the event of a divorce.

There is also the case of appreciation in property.  A prenuptial agreement can specify how any appreciation in separate or marital property will be handled in the event of a divorce, as well as how the proceeds of any sale, trade, or other disposition of the property will be treated.

If one of the parties owns their own business prior to the marriage and wants to ensure that the entire business remains theirs after a divorce, they should consider a prenuptial agreement to state that the business will remain the separate property of the business owner spouse and that the other spouse waives any claim to the business.

A prenuptial agreement will specify whether the parties waive any claim to temporary and permanent alimony, and can even put conditions on the right of either party to claim alimony; for example, the prenup can state that the right of one or both parties to claim alimony in the event of a divorce be tied to the number of years of the marriage (i.e., a party cannot claim alimony if the marriage lasts less than five years or any other amount of time).  The right to claim alimony can be conditioned on the absence of certain behaviors, such as adultery, viewing pornography, violence, or almost any other behavior the parties wish to specify.

A prenuptial agreement will specify how certain marital property will be divided.  For example, if the husband is an avid fisherman and he buys a bass boat during the marriage and outfits it with all of the latest expensive accoutrements, it is considered marital property and is subject to equitable division, regardless of whether the boat was titled in the husband’s name or what funds were used to purchase the boat.   Rather than taking the chance of having such property go into the marital pot to be divided, the prenuptial agreement can specify that any such property that is acquired in one party’s name alone or for their exclusive use and enjoyment during the marriage is their separate property even though it was acquired during the marriage.  A prenuptial agreement can also state that any property bought with funds from a certain account, such as a savings account in one party’s name individually, will be that person’s separate property (so if that bass boat was purchased with funds from a savings account that was held in the name of the husband alone, the boat would be considered his separate property).

There are cases in which one spouse, who is the spouse with the majority of premarital assets, might want to specify that a portion of those assets might still be divided in the event of a divorce.  For example, a party with a significant investment account before the marriage might specify that a certain percentage of that account would be awarded to the other spouse under certain conditions, such as the length of the marriage (i.e., 10% of the account would be awarded to the other spouse if the marriage lasted 10 years, 20% if the marriage lasted 15 years, 30% if the marriage lasted 20 years, etc.).

A prenuptial agreement should also be considered by parties getting married for the second time and who want to specify the exact parameters of how the property they bring into the marriage and the property the acquire during the marriage will be divided in the event of a divorce, especially if the have children that are the beneficiaries of retirement, investment, or other financial accounts.

A prenuptial agreement can state that any debt incurred by one party individually or in that party’s name individually during the marriage remain their debt after the divorce and that such debt not be subject to equitable division.

A premarital agreement is not just for “rich” people.  It can be a good idea for people who want to define what their separate property is, what marital property is, and how they are going to divide their assets and debts in the event of a divorce.  The parties do not have to worry about comingling their assets, transforming separate property into marital property unknowingly and unintentionally, or the uncertainly of how courts would determine what property is separate and what property is marital and therefore subject to equitable division.

Consult with an experienced family law attorney to discuss whether a prenuptial agreement is right for you.

Co-parenting after divorce is complicated and stressful for many parents – and their children.  Separated and divorced spouses are typically coping with residual feelings of loss and anger, which may spill over when they are together for activities involving their children.  One of these events occurs when children go back to school and both co-parents want to actively participate in their academic lives.

Nearly everyone has heard horror stories of ex-spouses fighting in school hallways over who should bring the child to school, scuffling on the sidelines of their kids’ extracurricular sports events over whose “week” it is, or yelling over the phone at a step-parent who wants to change the time for a scheduled visit.  Children are unwilling witnesses to and even participants in many of these exchanges.  For their children’s sake, it behooves parents to negotiate workable co-parenting arrangements surrounding school and school-related activities, and there’s no better time to do so than when kids are going back to school.

Back-to-school issues co-parents should discuss and agree on parameters for include:

-Enrollment in school-related and extracurricular activities, including payment of fees and transportation. A schedule which allows some degree of flexibility in case of work problems or other minor emergencies is helpful, as is participation in carpools with other parents.  Agree on how to give notice of changes to the schedule as well as acceptable alternatives (for example, paying for an extra hour of after-school care instead of asking for the co-parent to leave work early).

-Parental attendance at school-related and extra-curricular activities. Most co-parents can attend these events together by remembering to keep the best interests of the child in mind during the session.  If co-parents are unable to do this, a mediator or counselor can help them prepare for these meetings, as well as write a contract for how both parents can put aside their acrimony in order to participate effectively in the child’s life.

-Sharing copies of all documentation of events, including back-to-school / meet-the-teacher night, homework, progress reports, report cards, parent-teacher conferences, school performances, school pictures, and names and phone numbers of teachers and activity leaders. It’s helpful to include a folder for the co-parent in the backpack or suitcase the child takes from house to house; parents can send school papers back and forth this way without directly involving the child.

-Agree to give one another the benefit of the doubt, including where step-parents are concerned. Miscommunications and misunderstandings present an issue to be discussed in the next meeting, not an opportunity to mete out punishment by retaliating in kind.  Focus on the problem, not the person, and on the child, not the other parent.

-Parents must realize that by definition, co-parenting means each parent must give up some control over the children’s lives. The other parent might choose another outfit for the first day of school, pay for tennis lessons instead of encouraging the child to play the piano, or tell the child about the birds and the bees when the child is eight years old instead of nine.  Occurrences such as these may frustrate the other parent, but they aren’t likely to make a measurable difference in the child’s life, especially if the objecting parent makes an effort not to overreact to them.

-Co-parents should meet regularly in a calm, neutral environment to address issues that arise throughout the year. Focus on logistics and the child’s needs, not emotional issues.

For parents who are new to co-parenting with an ex or who have had trouble with this issue in the past, August offers an opportunity to get off on the right foot for the new school year.  And co-parents who are successful at negotiating back-to-school matters can be proud of creating a peaceful, structured environment that their children will thrive in and appreciate more and more as they grow into adulthood.

Personal Injury and Workers’ Compensation Awards are generally divided into three components: (1) compensation to the injured spouse for pain and suffering, disability, and disfigurement; (2) compensation to the uninjured spouse for loss of consortium; and (3) compensation to the injured spouse for strictly economic damages, such as lost wages, lost earning capacity, and medical and hospital expenses.

Compensation to the injured spouse for personal and noneconomic loss (such as pain and suffering, disability, and disfigurement) is that spouse’s separate property and is not subject to equitable division.  Compensation to the injured spouse for economic loss is subject to equitable division.  Compensation to the uninjured spouse for loss of consortium is the uninjured spouse’s separate property.

The manner in which a Personal Injury or Workers’ Compensation award is classified and broken down in regard to how much of the award is for noneconomic damages and how much of the award is for economic damages can be critical to the determination of whether and how much of the award the uninjured spouse might have a claim against in equitable division of the parties’ marital property in a divorce case.  The divorce attorney and the PI/WC attorney should work together in structuring the award to help ensure that their client is able to retain the maximum amount of the award possible in a divorce case as their separate property which is not subject to equitable distribution of marital property.

It is possible for a spouse’s separate property to be awarded to the other spouse as alimony or spousal support rather than equitable distribution in a divorce case.

If a divorcing spouse is expecting a Personal Injury or Workers’ Compensation award, they should consult closely with both their divorce attorney and the attorney that is handling their Personal Injury/Workers’ Compensation claim, and those two attorneys should work closely together for the benefit of their mutual client.

Child support obligations are enforced by filing a petition in court. An attorney practicing family law likely has filed several petitions with the court. The petition allows for several methods to collect, including civil contempt, criminal contempt, and other methods:
1. Civil contempt is used to enforce a court order. The person who is obligated to and is able to pay child
support can choose to pay it or be incarcerated.
2. Criminal contempt is used to sentence the person who is obligated to pay child support and willfully
refuses.
3. Child Support Recovery Act makes it a federal crime for a person who is obligated to and willfully
chooses not to pay child support if the amount owed exceeds $5,000 or extends more than 1 year in
arrearages.
4. Tax refund proceeds can be used by the state against the person is obligated to pay child support and who owes $500 or more.
5. Automatic wage withholding (wage garnishment) is used to require an employer to deduct the ordered
sum from the person who is obligated to pay child support and to pay the court clerk the amount.
6. State license renewals, both professional and drivers licenses, can be contingent upon the person
obligated to pay child support.

Above is a list of available options to enforce child support. If a parent needs help with any of the items listed, that parent should contact a lawyer who practices family law.

This article was authored by Jeff, Butler
PEARSON & BUTLER, PLLC
1682 Reunion Avenue
Suite 100
South Jordan, UT 84095

Too often, a divorcing individual accepts an unfair settlement and finds that a few years later he or she is experiencing serious financial challenges. Was he or she intimidated or pressured to settle? Did the offer appear to be equitable? What ever the reason, this outcome can be significantly improved upon, if not altogether avoided, if you first understand the seven most costly financial mistakes commonly made in divorce settlements.
Following are brief summaries of these seven mistakes. Each of these areas can be quite complex, so we strongly recommend that you consult a professional prior to making a financial decision that may affect the rest of your life.
This list is not exhaustive, and depending on the complexity of your case, there may be many more areas that require thorough analysis.

Mistake #1: Not Knowing the Liquidity of Assets
Liquidity refers to the ability to access the cash value of an asset. For example, a bank savings account is highly liquid, because you can simply withdraw funds from an ATM when you need them. An antique automobile, however, is nearly illiquid because it is very difficult to quickly sell this asset to access the actual cash value.
Often in a divorce settlement, one party will receive mostly illiquid assets, including the home, while the other party receives liquid assets such as retirement plans, brokerage accounts etc.
What is the potential problem with this type of settlement?
On the surface, this scenario may appear to be equitable assuming that the home and other assets are of approximately the same value. However, the challenge lies in cash flow. How will the party that keeps the home pay the bills if his or her major asset is illiquid?
 One can borrow against the equity of the home, but that’s costly (closing costs, interest etc.) and it takes time to close the loan. In worst-case scenarios, the home must be sold, a smaller home is purchased and the remaining equity is utilized for living expenses.
If your proposed financial settlement has very little liquidity, be sure that you will have enough cash flow throughout the years to handle your living expenses. If not, you may have to consider selling the home, other assets or significantly decrease your expenses in order to meet your budgetary needs.

Mistake #2: Failure to Consider the Impact of Taxes
The effect of your settlement on various taxes can be very costly if not addressed thoroughly. Capital gains, income tax, and alimony are just a few of the areas that may be impacted.
Capital gains taxes need to be analyzed when property is being divided. Capital gains refer to the fair market value of an asset minus its cost. For example, if you paid $5 for a share of stock and it is now worth $25, you have a capital gain of $20. This applies to other assets such as real estate (including your home), mutual fund accounts and just about any investment that has appreciated in value.
Be very careful that the property you are receiving in a settlement does not have large capital gains as compared with your ex-spouse’s property. Don’t be fooled if your spouse offers you property of equal value but conveniently forgets to inform you of the tax liability.
As an example, you may be offered an investment account worth $150,000, but the cost basis is only $50,000. That means there is a gain of $100,000 that you must pay at minimum long-term capital gains tax (15% in 2004). There could possibly be short -term gains as well, which are taxed at your own marginal tax rate (as high as 35% in 2004).
In the case of your personal residence, the federal government eased the tax burden in 1997 by allowing a $250,000 capital gain exclusion per spouse if you’ve lived in your home for at least 2 of the past 5 years. If the home is to be sold and there is a considerable gain in value (over $250,000), you should consider selling before the divorce to take advantage of the full $500,000 exemption.
If you had sold a home prior to 1997 and rolled over the capital gain to the existing home, the old rules will apply to determine the cost basis of the current home. This will increase your gain and possibly further the need to sell while still married.
Income taxes are effected primarily by alimony payments and filing status. Alimony received is taxable as ordinary income, so a $50,000 payment received is actually worth $35,000 after taxes, assuming a 30% marginal state and federal tax bracket.
 On the other hand, the payer of alimony receives a tax deduction, so the same $50,000 payment actually costs the taxpayer $35,000 assuming the same tax bracket.
Filing status is an important decision after the divorce. If you were still married on 12/31 of the tax year, you have the option of filing a joint return. If you can peacefully deal with your spouse after the divorce, you should consider this option as it could save considerable tax for both parties.
If you were divorced after 12/31 and you qualify, filing as head of household versus single can also save considerable tax dollars. Your best course of action is to consult with a tax professional regarding these options.

Mistake #3: Not Understanding the Rules of Retirement Accounts
Retirement accounts are a tax related issue, but their complexity merits a separate category. If a large portion of your settlement consists of retirement assets, you need to be aware of the many tax ramifications and potential penalties involved.
Normally, distributions from a retirement plan prior to age 591/2 are considered “early distributions” and are subject to a 10% penalty tax as well as ordinary income tax. An exception to this rule, however, is a transfer to an ex-spouse as part of a divorce settlement. A Qualified Domestic Relations Order (QDRO) is used to affect this transfer. Income taxes still apply, so any assets you receive from a “qualified plan,” such as a 401(k), will be subject to a mandatory 20% tax withholding. For example, if you are awarded a $100,000 distribution from an ex-spouses 401(k) you will actually receive only $80,000.
To avoid this mandatory withholding, the transfer must be made directly to another retirement account, such as your own IRA. Once the assets are in your retirement account, you are now subject to the early distribution rules. If you need some of the assets to live on, or pay bills, make sure you take them out prior to transferring them to an IRA to avoid the 10% penalty.
To simplify, let’s look at an actual example of how this transfer works:
Barbara and Stanley are both age 55 and going through a divorce. Stanley has $560,000 in his 401(k) that will be divided by a QDRO, transferring $280,000 to Barbara.
She could transfer the money directly to her IRA and pay no taxes until she starts withdrawing funds after age 591/2, at which time she would pay ordinary income tax on the amount withdrawn. But Barbara needs $80,000 for a down payment on a new house. So she holds back $100,000 before transferring the remaining amount to her IRA. 20% is withheld for taxes, leaving her with $80,000 to spend without incurring a 10% penalty.
After she transfers the remaining $180,000 to her IRA, Barbara is held to the early withdrawal rule. If she says, “Oh, I forgot, I need another $10,000 to buy a car,” it is too late. She will have to pay the 10% penalty and the taxes on that money.
It is important to note that IRA’s are not qualified plans, so a QDRO is not needed to divide the assets. Also, there is no 20% mandatory tax withholding on a transfer. To avoid paying taxes, you must deposit any distribution from an IRA directly to your own IRA. If a check is sent to you, you must deposit the money into your own IRA within 60 days to avoid a taxable distribution.

Mistake #4: Overlooking Debt and Credit Rating Issues
Nothing is worse than starting out a new life with bad credit. Several steps can be taken during the divorce process to minimize the chances of this occurring.
First, obtain a copy of your credit report. This will identify all joint accounts, accounts you may not have been aware of, and any potential credit problems.
Next, be sure to pay off and close all joint accounts prior to the divorce settlement and open new accounts in your own name. Unfortunately, creditors don’t care how a separation agreement divides responsibility for joint debt (joint credit cards, auto loans etc.). Each person is liable for the full amount of debt until the balance is paid, hence the importance of dealing with this issue prior to your divorce.
Regarding income tax debt, even if the divorce is final, you may not be exempt from future tax liability. For three years after the divorce, the IRS can perform a random audit of a divorced couple’s joint tax return. If it has good cause, the IRS can question a joint return for seven years.
To avoid any potential problems down the road, your divorce agreement should have provisions that spell out what happens if any additional penalties, interest or taxes are found as well as where the funds come from to pay for any expenses associated with an audit.

Mistake #5: Not Maintaining Control Over Insurance Policies
Most divorce decrees call for one of the parties to obtain a life insurance policy to insure the value of alimony payments, child support or some other financial need. If you are the person for whom the insurance is obtained, it is critical that you are either the owner or irrevocable beneficiary of the policy.
If you are not, the ex-spouse who took out the policy could easily stop making payments and you would never know about it until the policy is needed and it no longer exists. This could be financially devastating. As the owner or irrevocable beneficiary, you would be notified of any outstanding issues with the policy, such as non-payment of the premium, and could therefore take action and prevent the policy from lapsing or being cancelled.

Mistake #6: Failure to Budget
One of the most common mistakes made post-divorce is the failure to budget based on one’s new lifestyle. We see this happen most often when one spouse keeps the home for the sake of the children or perhaps due to an emotional attachment. Because of the high value of the home, there are few other assets awarded in the settlement. The expense of maintaining the home and the lack of liquid assets often results in a rapid depletion of cash, leaving no choice but to sell the home.
This scenario can be avoided if you take a good hard look at your expenses versus liquid assets and income. A Certified Divorce Financial Analyst can help you project several years into the future and determine if you’ll have enough resources to support your current lifestyle as well as your retirement years.
This analysis should be completed prior to a settlement. If it is determined that you will be unable to maintain your lifestyle with the proposed offer, you have established a good case to request more assets, alimony or child support.

Mistake #7: Failure to Identify Hidden Assets
Hopefully, you’re not in a situation where you distrust your spouse and fear there are hidden assets that should be included in the settlement. Unfortunately, once a divorce is initiated, many individuals will do whatever they can to preserve what they feel is their own money. Some individuals maintain secret accounts or other financial activities throughout an entire marriage. If these assets are not exposed, one spouse is certain to obtain an unfair settlement.
There are multiple resources and methods used by financial professionals and attorneys to uncover potential hidden assets. Being aware of these may help you avoid being victimized by a dishonest spouse. Forensic accountants are generally the most commonly utilized professionals to assist in this area.
Tax returns are one of the best places to start. Most people are uneasy about misleading the IRS for fear of penalties, fines and even prison. Go back at least 5 years to look for any inconsistencies in income, the presence of trusts, partnerships or real estate holdings.
If your spouse is a business owner, corporate or partnership returns may show a change in salary, charging personal expenses to the company, or excessive retained earnings. Another common trick is to put a “friend” on the payroll, who agrees to give back the money paid to him after the divorce. A forensic tax professional is of tremendous help in this area.
Checking account statements and cancelled checks for the past few years can also be quite revealing. A cancelled check for a purchase you never knew about, such as an investment property, can make a substantial difference in total assets to be divided.
Savings accounts may reveal unusual deposits or withdrawals in amount or pattern that could point to a hidden asset such as a dividend producing investment. In addition, cash may be hidden almost anywhere.
Brokerage statements are valuable in tracking the purchase and sale of securities. If securities are sold and the proceeds are not accounted for, you can be sure that the assets are out there somewhere.
Expense accounts can be abused when corporations give employees a great deal of leeway in their expense account reporting. Cross checking between expense account disbursements and savings/checking account deposits may indicate a pattern of abuse if the deposits exceed legitimate business expenditures.
Children’s bank accounts may be opened as a custodial account for the intent of hiding assets as well. In some of these cases, interest is not reported as income on tax returns, and no return is filed for the children.
This is not an exhaustive list of places to look for hidden assets. If you suspect this is occurring, you owe it to yourself to seek help from a financial professional.

In Summary
There are thousands of articles, books, manuals and other publications written about the financial issues of divorce. It is a complex area, and certainly deserves the attention it gets.
But reading this article or any other resource will probably not make you an expert. If you think you may not be receiving fair treatment, or you are simply uncomfortable dealing with these issues, it might make sense for you to consult with a financial professional who is trained specifically in divorce related issues.
A Certified Divorce Financial AnalystTM (CDFA) has endured extensive training in the financial issues of divorce. He or she will analyze the long-term financial impact of a proposed settlement and help you determine if it is feasible. Remember that a proposed settlement might look fair initially, but without proper analysis and forward looking projections, it can lead you to a future of financial hardship.
The bottom line is don’t settle until you know how it will affect your financial future!

This article was written by Wood, Atter, and Wolf, PA
333-1 East Monroe Street
Jacksonville, Florida 32202
Local: 904.355.8888
Toll Free: 800.737.9376
Fax: 904.358.3061
dwolf@woodatter.com

Under Georgia law, if you owned your home prior to your marriage and placed your spouse’s name on the deed after your marriage, that is considered a gift from you to the marriage and the entire value of the home becomes marital property.  It does not matter what the reason was for the transfer.

I have seen several cases in which a home is refinanced after a marriage, and the person who owned the home prior to the marriage placed their spouse’s name on the deed as a result of the refinance.  If the parties divorce after the refinance, the entire value of the home is considered marital property.

Before you put your spouse’s name on the deed to the home you owned prior to your marriage, contact an attorney who is knowledgable about family law.  Talk to an attorney about the consequences of putting your spouse’s name on the deed to the home you owned before the marriage, and whether you need a prenuptial or even a postnuptial agreement to make your intentions clear.