Divorce is another
important aspect that requires careful deliberations in relation to the estate planning. The occurrence of the divorce subsequent to the preparation and
execution o f the will is quite similar for the ex-spouse in relation to the
estate planning. In both the cases, ex-spouse is entitled to nothing. The
ex-spouse is not entitled to any sort of legacies, nominations in relation to
the executor or trustee. The alimony also came into consideration and is
includible in the nature of the taxable income in relation to the recipient and
is deductible by the payer of the same. The
divorce decree requires the payments that need to be made. The parties can
consent in relation to the payments that the same need not be taxable or
alternatively deductible. Similarly, the parties need to consider the recapture
provisions if the quantum of the payments is modified or alternatively
terminated.
Taxability
of the Estate and Property Transfer
The process of the
transfer of the estate and property among the spouses subsequent to the divorce
is not a taxable event. Consider the liabilities that exceed the basis owing to
the face that it can be rationale to trigger the taxable income. The future tax
implications and ramifications need be consider in the event of division of the
property. The point can be illustrated in such a way that if the husband is the
recipient of the Stock AA which has a current fair market worth of about
$150,000 and the historical cost basis of the same is $145,000 and the wife is
the recipient of the Stock BB which has a current fair market worth that is
exactly equal to $150,000 but the historical cost basis is varied and is equal
to $150,000 it will lead the wife requiring to pay more in relation to the
income taxes in the event of the sale of the stock.
Claiming
of the Personal Tax Exemptions
The claiming of the
personal tax exemptions in relation to the children can be called for by the
parents that are custodian of the children. However, both of the husband and
wife can consent in relation to letting the parent who is not custodian to
claim the same tax exemptions. The personal exemptions are usually discontinued
subsequent to the gross income that is adjusted to reach a certain threshold.
It is not disadvantageous in any way that the parent who is high income earner calls
for and requests those exemptions.
Qualified
Domestic Relations Order
United States issued a
judicial order that is referred to as the Qualified Domestic Relations Order
(QDRO). It is specifically relation to the estate and property division in the event
of the divorce. It subsequently provides for in relation to spouse sharing in
the retirement plan benefits that are the holdings of the other spouse. As per
the express provisions of the Internal Revenue Code §72(t) a state court order
in relation to the child support or the amount of alimony or likewise the
property transfer leading to the payments from the specific retirement plan
will not be levied penalty that is charged on the basis of the 10 percent in
relation to the early withdrawal. Further, the payments will not be subjected
to the penalty that is charged on the basis of the 15 percent in relation to excess
distribution from the said retirement plant and additionally the payments can continued
and rolled over into another retirement plan referred to as the IRA.
Filing
of the Joint Return
Use your judgment in
the case where the ex-spouse requests you to sign a return for the objective of
filing a joint return in relation to income tax and all the income streams are
not specifically reported or alternatively there is presence of the deductions
that is doubtful. The signing of the return in such a case and subsequent the
audit of the same by the Internal Revenue Service would hold you liable in the
real-time for the levy of the additional taxes individually. In such a case it
is recommended that you file with the check on the Married status and option of
the filing separately as a cautious approach.
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