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S.T.E.P.S. - Smart, Tailored, Event-Driven, Packaged Solutions
provided by Women's Financial Network at Siebert
Understanding Property
Settlement, Alimony, and Child Support -- Part IV
When considering divorce, it's almost certain that you'll be faced with one or more of the following:
It's important that you have a working knowledge of each of them.
Property settlement
As with many divorce-related issues, property settlement is done according to the law in the state you live in. There are two main classifications of properties to be divided as a result of a divorce: - Martial property
- Separate property
1. Marital property
Property that was acquired during the marriage is considered marital property. - It must be divided based on state laws of where you live at time of divorce, unless you sign a prenuptial agreement that is legal and binding.
2. Separate property
On the other hand, if property was acquired before the marriage, after the separation, or as an inheritance or gift during the marriage, it's considered separate property depending on state law. - This rule holds true only as long as the property in question has not been co-mingled with marital property.
Alimony
Alimony is what an ex-spouse is required to pay according to a divorce or separation agreement. - Time periods and amounts vary from case to case.
- Payments can be made on a monthly basis or in one lump sum. Monthly payments are better for budgeting purposes and provide your spouse with a tax deduction. On the other hand, taking your alimony settlement in one lump sum ensures that you will in fact receive the total amount agreed upon.
- Alimony is considered earned income, so it may be eligible for a contribution to an Individual Retirement Account even if you are not currently working.
- Payments do not cease if your spouse remarries or co-habitats with a new partner.
- The payments are tax-deductible to your spouse, taxable to you.
- Since there are no taxes taken out of alimony checks, you will probably have to file quarterly tax returns on the funds. Your accountant can estimate them for you.
Child support
Child support differs by state. Unfortunately, fewer than half of all women awarded child support get the full amount that they are entitled to. Here's how it works: - Payments can be based on your child's standard of living or on a percentage of your ex-spouse's income.
- Payments typically continue until your child is no longer a minor.
- Child support is not taxed as income for you, and your ex-spouse cannot deduct it from his taxes.
Continue to: Part V: Taxes and real estate
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