Wednesday, October 12, 2016

Estate Planning and Divorce


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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