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Property Settlement Agreements

Lost in a divorce? Use Divorce Checklist as your GPS

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Divorce Guidebook

When a couple ties the knot, they plan on a lifetime union. Unfortunately, close to 50 percent of marriages end in divorce.  A divorce is never pleasant, but careful planning may make the process less stressful and enable you to obtain a better financial arrangement. To help you through this difficult time, Urbach & Avraham, CPAs has prepared a Divorce Checklist that outlines steps couples should consider.

Click here for Divorce Checklist

Diversion of assets? Unreported income? Family business?

The checklist is an easy-to-understand guide, starting with pre-divorce planning, guiding you through the financial aspects of the proceedings, and highlighting post-divorce issues. This comprehensive list can assist you in navigating through this nerve-wracking ordeal.

The roadmap can help with technical and other questions for your CPA, legal or other financial advisors. We work with many qualified divorce attorneys to seamlessly coordinate your issues.

The Urbach & Avraham Divorce Checklist also highlights complexities presented when a family owned business is involved: Have you engaged a valuation specialist? Suspect unreported income? Accounted for five years of business records?

You’re already coping with many emotional and other issues. We’re here to help lift the burden by assisting you with financial, tax and other matters during this trying time.

 

Creative Advanced Divorce Tax Tip – Monetizing NOLs

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All family law attorneys understand the basics of income taxation as it relates to a marital dissolution: Alimony is taxable to the recipient and deductible by the payor and child support is not taxable.

In complex cases with closely held businesses, it’s important the attorney (or an expert) review not only the business tax returns, but, the personal income tax returns as well.

If one spouse owns all or part of a pass-through entity such as a Subchapter S or Partnership, there may be hidden assets not usually found on the marital balance sheet. Those assets are called Net Operating Losses (NOLs) carry-forwards.

Taxpayers can carry back these losses two years (and get refunds) and/or elect to carry them forward against future income. (NOLs can be carried forward twenty years.)

Well, guess what? When assets are split, the NOLs travel with the business owner. And, assuming its material, they have a value which needs to be monetized. Why does it have value? Because it will save the business owner spouse $ X amount of taxes over the next twenty (or less).

A very, very simple example. The couple divorces and a $1,000,000 NOL travels with the husband. (No you can’t split the NOL) The non-titled spouse’s lawyer never thought to monetize the NOL (or even the expert CPA, who is a generalist without matrimonial litigation experience).

Two years after the divorce the company turns around and the owner spouse has income of $200,000. Pick your bracket, whether it’s 28% or 35% or 40% (I rounded.). The NOL was could be worth somewhere between $56,000 and $80,000. Three years after the divorce, the owner spouse has income of $200,000. Another $56,000 to $80,000. You get the picture. What if all the NOL is used? That can be a savings of possibly as much $400,000.

Failure to monetize this asset and award the non-titled spouse an off-set, can be the basis of a malpractice suit!

Property Settlement Agreement Missing “Little” Detail makes for Big Consequences

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Overlooking a minute detail in the Property Settlement Agreement (PSA) is by no means as minor as it may seem. It often results in much grief, wasted time, and squandered money – for both litigants, as well as taxpayers funding the judicial system. In Dawn Zera v. Kevin Krushinski, an incomplete PSA resulted in just that.

Dawn and Kevin were divorced in Jan. 2006. The judgment of divorce (JOD) failed to designate who could claim the children as dependents on his or her tax return. While the JOD ended the marriage, an ensuing nightmare was just beginning. More than six long, costly years of litigation later, on May 22, 2012, the NJ Supreme Court ruled that the parents alternate odd and even years.

The Moral: Divorcing spouses must scrutinize the PSA, making sure the lawyers covered everything. It is wise to have a tax accountant review the PSA for all tax issues.   The investment of time and effort may spare you loads of grief.      

 

Divorcing Couple Ordered to Swap Facebook Passwords

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A divorcing couple in today’s day and age may be asked to
give up more than just their money, cars, TVs or the kids. They may be ordered
to hand over their social networking passwords, as well. At the end of
September, Judge Kenneth Shluger ordered that the attorneys for Stephen and
Courtney Gallion, a soon-to-be divorced couple from Connecticut, exchange
“their client’s Facebook and dating website passwords.” [Read more…] about Divorcing Couple Ordered to Swap Facebook Passwords

Valuation of Real Estate in NJ Matrimonial Case

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A recent Supreme Court decision in Sachau v. Sachau, 206 N.J. 1 (2011), highlights the impact of silence on key terms involving real estate in property settlement agreements (PSAs). Sachau centers on a PSA that was incorporated into the parties’ final judgment of divorce. The PSA, which was executed in 1979, provided that the marital residence would be held jointly by the parties until it was sold. Moreover, Ms. Sachau and the two children would be entitled to reside there until the youngest child reached 18. At that time, the PSA further stated, the house would be appraised and listed for sale within 30 days. Upon sale of the house, Mr. Sachau would receive $15,000, Mrs. Sachau would receive $10,000, with the remainder split evenly between them. The PSA failed to address, however, the amount to be divided if no action were taken by the parties to sell the house within 30 days. This in fact is exactly how the scenario played itself out. [Read more…] about Valuation of Real Estate in NJ Matrimonial Case