When couples are going through a divorce, what are some of the problems that they face while working through the compromise? Well – probably the two main reasons why couples get divorced are financial and communication issues.
Financially – they look at the different pieces of their collective and individual financial puzzle. They look at the division of assets, tax issues, cash flow and child support. For the division of assets, it is important for the client to understand, first, what state they are living in. Is it a community property state – or is it a fair and equitable division state? Tax issues pertain (pretty much) for federal income tax and must run by the Internal Revenue Service code. Cash flow is exactly what it says. How much cash do I have after I pay federal taxes, state taxes and social security? After I pay all of my taxes, how much cash flow do I actually have in the end? That figure, is what you really have to be able to divide in a divorce!
A lot of times when it comes to the division of assets, we question – is it separate property or is it martial property? That is stated by the state that they live in. For example, if I have an inheritance or gift – is that is separate property? It is something that was left solely to me vs. if I work and my spouse does not work. Just because I make all the income is irrelevant. This is marital property – it is income earned during the marriage.
What are we going to be paying in taxes when we are divorced?