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Posts Tagged "divorce"

Child Support: Hidden Income & the Self Employed

Child support calculations in all States are heavily dependent on the income of the parents.  While the income for W2 employees can be relatively straight forward, calculating the income of the self-employed can be substantially more difficult.

A self-employed parent may seek to minimize his income, and therefore child support payments, but hiding his income in his business.  This can mean substantially less support for the child.

An analysis of the income of a self-employed parent’s income must begin with his or her business tax return.  Below are four common places to spot hidden income:

  1.  Office Expenses:  Office expenses are a “catch all” category for purposes of tax returns.  But are the expenses listed really expenses for the business, or are they personal expenses masquerading as business expenses?Look for high dollar items when combing through bank statements.  A common example is writing off a trip and hotel stay as a business expense when it is truly for personal reasons.  Such a trip could be thousands of dollars a year in income missing from a child support calculation.

  2. Home Office Expense:  Like the office expense, “home office expenses” is a common place to hide income.  Furniture or computer equipment purchased for the home or entertainment of the payee parent can be written off as home office expenses for the business. A strong understanding of the purpose of the business at issue is imperative to analyzing the validity of the home office expenses.

  3. Advertising:  Is there a boat other expensive piece of personal property that is in the business’s name?  Check to see if they expenses associated with the property are being paid under the business.  A strange but repeat occurrence is the small businessmen who buys a boat in the businesses name, names it after his business or line of work, and claims it as a business expense.Not uncommon, but equally outrageous:  Watch for the self-employed who records a check to a “big national advertising paper”, when in reality, the parent is writing the check to himself.  Such fake advertising can allow the self-employed to pass large chunks of cash to him-self personally without paying taxes and while keeping it off the books.

  4. Wages:  Check the standard of living of the payee spouse.  Does he have a maid, lawn-care service, or other laborers who work on his home or other personal property?  If so, then check to see if these workers are paid through the parent’s personal income or through the “business”.  If they are paid through the business, then adjustments need to be made to the income of the payor spouse (and his business) to reflect true income.

 

We have had a lot of success in handling complex divorce cases where the spouse is a business owner or self-employed. If you have questions regarding divorce in Arizona and a self-employed spouse, give us a call at (602) 254-8880 to start your free consultation. If you’d like, you can send us a confidential email at your convenience.

 

Women Should Start Financial Preparation for Divorce before Their Marriage

Put Money Away!While many people contemplating marriage do not want to consider the prospect their marriage may not last, the high divorce rate makes it important to engage in economic planning to ensure financial security in the event of a divorce.  This planning should begin before a person even ties the knot, but the process of preparing for divorce is an ongoing endeavor with steps that need to continue both during marriage and during the divorce process.

Although women have made enormous strides in terms of occupational advancement and income equality during the last twenty years, the average lifetime earning capacity for women still lags behind men.  A recent census report found that the average median income for women who work full time was approximately $36,000 whereas the average for men is over $47,000.  This means that women must be especially cautious about protecting their financial future from the potential impact of divorce.

The disparity between the average median income of men and women tends to be magnified by the impact of a divorce.  Researchers at George Mason University conducted a study to analyze how divorce financially affected the standard of living of husbands and wives following a marital dissolution.  The study concluded that on average women suffer a 73 percent decline in their standard of living following divorce while termination of a marriage enhances the standard of living for men by 43 percent.  Given this astounding difference in the impact of divorce based on gender, financial planning for the possibility of divorce is critical for women no matter how unromantic the prospect.  Given these financial realities, we have suggested some suggestions that women can use to safeguard their financial security in the event of divorce:

  • Consider a Prenuptial Agreement: The popular depiction of prenuptial agreements by the media and Hollywood focus on these marital agreements as documents designed by men with a high net worth or substantial earning capacity to ensure they get the best of their spouse in a divorce.  This distorted view of a prenuptial agreement ignores the fact that with the exception of attempts to limit a court’s power to determine a child support award, the parties are free to agree to engage in financial arrangements that provide for protection, predictability and security for both parties.  A prenuptial agreement can even be modified during the marriage to reflect the changing economic circumstances of the parties.  Any agreement regarding property division or alimony should be reduced to a writing prepared by an experienced Divorce Lawyer rather than just an oral agreement.
  • Understand the Family Finances: In many households where the husband is the primary wage earner, he also controls and manages the finances for the couple.  While this is not necessarily a problem, you want to make sure that you are at least a co-pilot for the family’s financial journey rather than a passenger.  If you do not have at least a rough idea about the value of your marital estate and the composition of the assets that make up that estate, it can make it easier for your spouse to hide or divert assets.  Although both spouses have a financial disclosure requirement toward the other, many spouses try to hide income or assets to gain an advantage in the financial settlement.  It is also a good idea to establish independent bank accounts and credit cards as well as squirreling away a little money for a rainy day.
  • Gather Relevant Financial Documents: Although both parties will be required to provide disclosure regarding assets and debts as well as financial income affidavits, your ability to gather copies of financial records like W-2s, tax returns, profit and loss statements, insurance policies, statements for retirement accounts, mortgage statements, credit card bills, bank records and similar documents will facilitate a divorce attorney or forensic accountant’s ability to flag questionable transactions or track hidden assets or income streams.

While this is certainly not a comprehensive list of ways to financially prepare for divorce, an experienced Divorce Attorney can advise you regarding strategies tailored to your unique circumstances.  While no one enters into marriage with the expectation that they will one day face the prospect of divorce, people also do not purchase car insurance because they expect to be in a car accident.  Sometime life just happens.

The guest writer is Howard Iken, a SuperLawyer rated attorney in Florida. Mr. Iken helps clients with divorce and custody matters in Florida.

Thanks to Ken Teegardin for the photo.

The Differences between Divorce, Legal Separation, and Annulment

When couples decide to end their relationships, they usually have three choices: get a divorce, become legally separated, or to get an annulment. However, couples usually do not know the differences, the advantages, and the disadvantages of each option. This guide will explain each option so that couples will know the differences between each option.

Divorce

Divorce, otherwise known as dissolution of marriage, is the legal process in which a couple terminates their marital union. In effect, the couples are relinquishing themselves from the rights and responsibilities of marriage. Thus, when a couple goes through a divorce, there are many issues that the couple must address. These issues include child custody, child support, division of assets, division of debt and spousal support.

Each state has their unique divorce laws and has different residency requirements. Unlike a legal separation, divorces often take a long time to be finalized, usually around six months. But when a couple finalizes a divorce, each party is no longer liable for any future debt of the other spouse and no longer has to equally share their income and profits with the other spouse.

Legal Separation

Legal separation, also known as a judicial separation, is a legal process in which a married couple formalizes their separation but remain legally married. Legal separations are granted through a court order. When a couple files for a legal separation, they address the same issues as in a divorce, such as child custody and spousal support.

A benefit of a legal separation is that certain rights are not eliminated, such as social security and medical benefits. Another advantage is that a legal separation does not take long to finalize. In addition, if a couple decides to move forward with a divorce, the court will use the separation agreement as a template for the divorce settlement agreement. Again, each state varies in their laws regarding legal separations.

Continue to read our Legal Separation page to learn more.

Annulment

An annulment is similar to a divorce in that it dissolves a marriage. But an annulment differs from a divorce in that a judge will proclaim the marriage null and void. In other words, the marriage is considered to be invalid from the inception.

To be granted an annulment, the parties must have legal grounds for an annulment. Grounds for an annulment include fraud, concealment, inability to consummate the marriage or a marital misunderstanding. A religious annulment differs from a civil annulment in that each religion has their specific grounds for annulment.

If a couple decides to end their marital relationship, it is important to consult with an attorney who is experienced in this field. An attorney could review the case and decide which option would best suit the couple.

 

This guest post is provided by Wallin & Klarich: A Law Corporation of experienced Divorce Lawyers in Orange County, CA. Wallin & Klarich aggressively represents all California Family Law matters with the belief that every client is our own family member. If you would like to know more about Divorce in California visit their website at: http://www.wkfamilylaw.com/divorce.shtml

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