It is imperative that spouses are truthful and fully disclose any and all income and assets standing in his/her name, whether individually or jointly with another person, during the divorce.,. Dishonesty and misrepresentations of one’s income and/or assets may lead to the divorce to be “reopened” on the basis of fraud and the fraudulent party may be subject to sanctions and forfeiture of non-disclosed assets. Further, during the divorce you will be signing your financial statement under the pains and penalties of perjury; meaning that you would be committing perjury should you knowingly submit false or incomplete information on that financial statement.
What is most important during your divorce is to walk through the process with a reasonable, yet fair mindset; specifically, with an accurate understanding as to the laws in Massachusetts relating to your divorce and whether your desired outcome is reasonable in light of said laws. . Below are subjects that must be taken seriously to ensure a successful divorce.
Attorney: High net worth divorce mistakes can be eliminated by the preliminary action of obtaining the right attorney. Your divorce may be the most devastating and emotionally draining experience that you go through, and it is vital to have an attorney who will strategically represent you and work with you. Ensuring success and clarity comes with hiring an attorney that understands you and will create a well-defined road map to help you prepare for your future.
Emotions: Emotions will undoubtedly run high throughout the divorce process. Taking control of your emotions and not allowing third-parties to influence your expectations regarding the divorce process is imperative. This will allow you to make rational decisions based on the best interest of you and your children; rather than decisions fueled by emotions or inaccurate information provided by family and/or friends..
Fraud: In high net worth divorces, at least one spouse is financially affluent. Fully investigating your spouse’s finances and making sure that all funds are accounted for is essential for you to be comfortable with a divorce settlement. . Performing your due diligence will only allow for success and clarity in your divorce.
Hiding assets is another problem that many high net worth divorces face. An opposing attorney is able to track transfers and withdrawals of funds, as evidenced on bank statements that will be exchanged during the divorce. As previously stated, any non-disclosure of assets or income could subject that party to sanctions from the Court. Therefore, it is foolish to attempt to hide income or assets from your spouse during the divorce. . Full and complete disclosure is the only way to allow for an effective, fair, and productive divorce process.
Taxes: It is important that you are mindful of the tax consequences of the terms of your divorce, as they may be significant. Therefore, we encourage our clients to confer with an accountant so that they are properly advised as to said tax ramifications prior to the divorce.
A taxpayer who is married on the last date of the year may file their taxes as: married, filing jointly, married filing separately, or in some circumstances, as Head of Household.
With respect to alimony, alimony paid by the payor spouse is deducted from the payor spouse’s gross taxable income. . Conversely, the alimony that is received by the recipient spouse is taxable as income to the recipient spouse. It is important to consider the tax-ramifications of alimony when fashioning an alimony order. Unlike alimony, child support payments are included in the payor’s taxable income and tax-free to the recipient spouse.
If instead of alimony, you and your former souse have agreed on a one-time settlement, also known as an “alimony buy-out” in the form of a disproportionate division of the assets, the general rule is that asset transfers pursuant to a divorce result in no tax consequences. However, depending upon you and your spouse’s basis in different assets allocated at dissolution, the subsequent selling of assets awarded at divorce could result in tax consequences. For example, selling the house, raises possible tax considerations. Under current tax laws, each spouse may exclude up to $250,000 (or $500,000 as couple) from any capital gains tax if they have lived in the house for any two of the last five years.
Stop and Think: Throughout your divorce, make sure you take the time to care for yourself and your children. Do not let guilt or third parties influence your decisions. At times, you must remember to take a deep breath and be assured that with the right attorney, and with the right mindset, your divorce will be a new beginning for you.
-Christina Pashou
