As a Hudson Valley divorce attorney, there are certain matters I am always asked about when consulting with potential new clients.
These are the “obvious” questions such as how will my child’s residence be determined?
How will divorce affect my relationship with and ability to see him?
How much will child support be?
Who is going to responsible for paying off the car loans?
How will my property be divided? The list of questions is endless.
Prospective clients usually want to know about the process and the immediate outcome of a divorce. There are myriad considerations which are not obvious at the outset. Some of these considerations can even require expertise beyond that of many of the Hudson Valley’s divorce attorneys.
For starters, the tax implications of a divorce are usually not an item the client is thinking about as they sit down for a consultation with a divorce lawyer. These tax implications can be consequences in a divorce depending upon the changes in income status or types of property that will be divided as a result of the proceeding.
For example, the wife may have a salaried position with her employer who withholds payroll taxes. After the divorce, and often times even during the divorce, she begins receiving spousal maintenance, formerly known as “alimony”, and still often referred to as such. She may not realize these payments constitute taxable income to her. Her divorce attorney should be able to tell her that the income is taxable, but, since her husband will not be withholding taxes from these payments as her employer does, it may be wise for her to consult with a tax professional to see if she should be making estimated tax payments on the spousal maintenance or if she can get away without doing so.
Division of assets presents problems as well. Generally, property distributions incident to a divorce are tax-free, but rules always have exceptions. Specifically, while money in a bank account is not going to subject a spouse to a tax problem, the same may not be true for the division of assets subject to capital gains, like stocks, where the “tax basis” could subject one to huge tax liability.
In the same regard, the division of retirement accounts such as pensions is not as simple as most clients think. They are assuming that their Judgment of Divorce, which will usually establish their entitlement to their portion of the marital share of a pension, also divides the pension so that they actually receive it. This is not so. Rather, they will be in need of a Qualified Domestic Relations Order (“QDRO”) to effectuate the distribution. Qualified professionals are required to draft such orders, and often, the person’s divorce attorney does not include that service in conjunction with the matrimonial representation.
The shift in assets and tax positions also lends itself to consideration of the future. Different investment strategies may be required or desirable. Depending upon the client’s plans in providing for future generations, estate planning should be reviewed.
There are also issues that simply require “follow up” by the client. They are not necessarily complicated, but are often overlooked. Life insurance beneficiaries do not automatically change upon the entry of a judgment of divorce. One could forget this step, and then pass away leaving the benefits to their ex- probably not what was intended. In the same regard, one should probably update their will after a divorce. A judgment of divorce may require the spouse who retained the marital residence to refinance and exonerate the other spouse from the mortgage lien. It is important to note that if there is no follow up by the other spouse, it may never happen.
The sum of all this is that there are many considerations when going through a divorce that are not apparent to clients at the outset. They may only become apparent if they are represented by a qualified divorce attorney. Often those divorce attorneys must advise that the services of other qualified professionals are required in determining these issues. As a divorce attorney, I am often faced with these situations and am thankful for the convenience of working in a same firm that also offers the services of highly qualified tax and estate planning attorneys, who in turn have their own network of highly qualified financial planning and accounting professionals.
He can be reached by phone at 866-303-9595 toll free or 845-764-9656 and by email.