Taxes, property, and child support are among the special considerations when it comes to a divorce settlement. Let’s take a look at some of the provisions.
Massachusetts is an “equitable distribution” state, which means property is divided according to what is “fair,” but not necessarily equal. If you leave the decision to the court, the judge will determine a fair percentage for each of you and give you an amount of property equal to your percentage.
Property that is considered part of the “marital estate” and that can be divided usually includes anything earned during the marriage and anything purchased or acquired with those earnings. Property or debts acquired with both separate and marital funds are generally considered marital. Gifts, inheritances, personal injury awards, student loans, and property or businesses owned separately before and during the marriage are usually considered separate and will not be divided. These are only general guidelines that may vary with your circumstances. Many decisions will already have been made if you have a prenuptial agreement, but may be reconsidered depending on the circumstances on length of the marriage.
Your family home is often your most important asset and the hardest to let go. The house will usually remain with the “custodial” parent who takes primary care of the children, or the person whose name the title is in. If you have joint ownership of the house and no children, neither of you can be forced to vacate. You will have to decide whether to sell, keep the house, buy out your spouse, keep the house in one person’s name while the other person pays over time, or sell later on and split the proceeds. If you sell the house, consider if you have a good chance in the market and how moving will affect the lives of your children. On a positive note, you may have some funds to begin your new life in a new place, free of emotional attachment. If you keep the home under both of your names, create a plan in case your spouse defaults on the mortgage or agreed-upon payments.
When you file your financial statements, you agree to provide complete and truthful information and sign them under penalty of perjury. However, it is still common for spouses to hide assets. If you suspect this has happened, your attorney can give you some warning signs and may request the help of a private investigator to uncover what has been omitted.
Taxes and Insurance
The most important thing to know about taxes is that one decision about the terms of your agreement could have implications on many different areas during and after your divorce, including unforeseen or unplanned costs.
Many things are tax deductible and some are not, so it is wise to discuss who will benefit the most from each decision. For example, alimony is taxable income, but child support is not. Other things that may change your taxes are filing status and exemptions, childcare credits, the home mortgage, and retirement accounts. An attorney will be able to explain and guide you through the choices involved and how your taxes will be affected.
Read an overview of divorce and taxes
Learn the best options for filing your tax return before and after your divorce
You and your spouse may determine an amount of alimony to be paid while creating your settlement agreement. If your case goes to trial, the judge will follow similar guidelines to those used when awarding property, as stated here (MGL Ch. 208 Sec. 34):
“…the length of the marriage, the conduct of the parties during the marriage, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties and the opportunity of each for future acquisition of capital assets and income.”
The judge may also consider whether the spouse paying alimony has health insurance or coverage available that can benefit the payee. This does not mean alimony will be reduced. Alimony is most likely granted in long-term marriages of 20 years or more or if one spouse has a significantly higher income. It is less likely when the marriage has lasted only a few years, if incomes are fairly equal, or if large child support payments have already been granted.
Traditionally, alimony was intended as help to spouses who would have trouble supporting themselves. Today, there is a shift in thinking about alimony as a temporary solution until the payee is able to earn regular income. The duration of alimony payments is a hot topic in the state.
Read an article about this issue
Once custody has been granted, the amount of support paid will be determined by guidelines as outlined by Massachusetts Law, and will take into account how much each of you earn, how many children you have, and how much care you each provide for them. Other considerations are the cost of childcare if the parent with custody requires it during work hours, and medical expenses not covered by insurance. Dependents between age 18 and 21 may be eligible for support, as well as those between age 21 and 23 who are still at school and dependent upon the parent.
Generally, child support is intended to continue the same standard of living the children experienced before the divorce. Determining a payment amount in writing is important in case the amount is questioned in the future or payments are missed. If you experience a drastic change in circumstances in the future, child support payments are modifiable by filing a Complaint for Modification. An attorney can help you determine if you are eligible for a modification.
Determining beneficiaries for your estate and property after death is just as important as deciding who gets it during your divorce. In Massachusetts, you are legally married until the final divorce decree, which means your estate planning documents like wills, trusts, and health care proxies are still in place unless you change them. If you were to die during divorce proceedings and you named your spouse as a beneficiary, he or she would inherit property and have access to accounts and private information.
Make sure you look over these items very carefully and make changes accordingly so your property will end up with the right person. Documents to look through include your will, health care proxy, power of attorney, trusts for minor children and their education, and the named beneficiaries for all life insurance policies, 401(k) plans, IRAs, and any other accounts with your spouse’s name.
If you live in Massachusetts, your spouse may be entitled to a significant amount of your estate automatically. Your attorney can help you decide the best way to limit your spouse’s inheritance and protect your assets if you wish to change the terms of your estate planning documents.