Family law attorneys provide a number of legal services, not the least of which are financial. Due to the nature of the disputes family law attorneys deal with on a day-to-day basis, most family law attorneys are actually quite knowledgeable about financial matters. In matters involving complex asset division this knowledge is essential. Minnesota couples, particularly those with family-owned businesses, might find the following information helpful.
Among the many serious legal matters an attorney must address in a divorce proceeding, there are three common forms of financial payments. Such financial payments can include property settlement agreements, spousal support payments and child support payments. While these types of payments are well known, few people understand the consequences that accompany them -- and understanding the consequences is the key to a good divorce.
To begin, property settlement and child support payments do not create taxable income for the payee, like alimony, or spousal support, does. Alimony payments are considered ordinary income for the party receiving the check, which means the party receiving spousal support must declare the payments and pay tax on it. Since the tax ramifications are so different with each type of property division, it is important that each party understand what type of payment they are making or receiving after a divorce.
In addition to understanding the effect these different characterizations can have on a person's financial payments come tax time, the manner in which property is transferred from one party to another in a divorce can be equally important. Some property, such as retirement accounts, can carry significant tax penalties if divided incorrectly. Understanding these and other tax considerations during the divorce settlement process is vital to a happy ending.
Source: Forbes, "Are Divorce Attorneys Trying To Whipsaw IRS?" Peter J. Reilly, Sept. 11, 2012
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