It seems that the grey divorce is on the rise. According to a post on CNBC.com, 1 in every 4 divorces is from a couple over 50. I find that amazing.
Divorcing moments before retirement can be a dangerous proposition. I have seem many of my over-50 clients finding themselves in serious trouble. They often don’t realize that the community property portion of the retirement is cut in half in California. Nearly 100% of my clients lose money in the divorce. Dividing assets and no longer pooling resources can make for some serious budgetary heartburn. Younger couples can bounce back pretty well, but I often worry for the older couple. There just isn’t enough time to rebuild the nest egg. If one spouse stayed home to take care of kids and never reentered the workforce, there simply isn’t enough time to rebuild new job skills and earn sufficiently to save for retirement in such a short time. Support payers are often faced with the prospect of alimony payments for the rest of their lives.
This article on CNBC.com by Ilana Polyak does a good job of laying it out: http://www.cnbc.com/id/102083712
Let me know what you think? What thoughts or ideas do you have for older couples facing a divorce?
Social Security and Divorce: Can you collect on your x’s benefits? http://ow.ly/BoIPs
The National Law Review: IRA Rollover trap in divorce cases. What do you think? http://ow.ly/AdyTe
Rules regarding who can claim a child on his/her taxes can be found in IRS Publication 596. In general, you can only qualify to claim a child for a tax credit or dependency exemption if the child has lived with you for over half of the year.
However, sometimes in crafting child support orders, family law professionals and courts deliberately plan to give the noncustodial parent the dependency exemption and child tax credit. This is especially true if the support recipient has lower income and is in a lower tax bracket and the supporting parent is in a higher tax bracket. The party in the higher tax bracket may be able to make better use of the exemption and credit. Sometimes allowing that person to claim a child will enable us to order a higher amount of support because there is more disposable income available to pay support. It’s a win-win for everyone.
The IRS allows the noncustodial parent to claim a child if each of the following requirements are met:
“1. The parents:
a. Are divorced or legally separated under a decree of divorce or separate
b. Are separated under a written separation agreement, or
c. Lived apart at all times during the last 6 months of 2012, whether or not they are
or were married.
2. The child received over half of his or her support for the year from the parents.
3. The child is in the custody of one or both parents for more than half of 2012.
4. Either of the following statements is true.
a. The custodial parent signs Form 8332 or a substantially similar statement that he
or she will not claim the child as a dependent for the year, and the noncustodial
parent attaches the form or statement to his or her return. If the divorce decree or
separation agreement went into effect after 1984 and before 2009, the
noncustodial parent may be able to attach certain pages from the decree or
agreement instead of Form 8332.
b. A pre-1985 decree of divorce or separate maintenance or written separation
agreement that applies to 2012 provides that the noncustodial parent can claim
the child as a dependent, and the noncustodial parent provides at least $600 for
support of the child during 2012.”
Remember, without a signed Form 8332 or equivalent, the noncustodial parent may not claim the child.
This article is intended for informational purposes only and should not be construed as legal or tax advice. Remember, because every case is different, nothing replaces personalized advice from a professional. For further discussion of divorce and custody related tax issues, call attorney Shawn Weber at 858-410-0144 for a free telephone conference or go to his website at WeberDisputeResolution.com.