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Birmingham Divorce Law Blog

2 tax issues to consider during an Alabama divorce

Dividing a family's assets is one of the biggest challenges for a divorcing couple. There are multiple approaches that can be taken, and each Alabama couple has a set of goals when it comes to splitting up their accumulated assets. When it comes to brokerage accounts, there are also serious tax consequences associated with various divorce choices. Couples should be aware of the tax obligations that accompany each option and make decisions that preserve the greatest possible share of wealth.

One mistake that many couples make is dividing shares of stock by simply splitting them down the middle. This approach ignores the fact that shares are often bought at different prices. When the time comes to sell those stocks, capital gains tax will be computed based on the difference between the purchase price and the sales price. This means that a spouse who walks away with stocks that were purchased for lower prices could incur a larger tax bill than the spouse who received the higher cost shares, even though the face value of the shares is the same at the time of property division.

New loan type could ease divorce concerns for some spouses

For many divorcing spouses, the primary concern is keeping the family home. Many people have a great deal of time, effort and money invested in their houses, and there are some who are willing to do almost anything to retain the properties during divorce. Unfortunately, retention might not be an option for some in Alabama. A new type of lending product currently being considered by British lenders could change that reality, and many American spouses are waiting to see if the "divorce mortgage" seems likely to cross the Atlantic.

When a couple has built up a significant degree of equity in a home, that equity must be divided during the property division process. This is usually accomplished when the retaining spouse cedes his or her interest in other assets to the departing spouse. However, when there are few assets other than the home, the party who wishes to retain the family home is placed in a difficult financial position.

Child custody and tax ramifications: Tips for parents

Once a family has gone through a divorce and settled matters of custody, most Alabama parents believe that the issue of who can claim a child for tax purposes has also been effectively settled. In reality, however, there are ways that a non-custodial parent can still benefit from tax breaks tied to his or her child. This is an issue that should be considered during divorce and child custody negotiations, as the outcome can have a significant impact on one's taxes.

In order for a non-custodial parent to claim tax breaks based on one or more children, the custodial parent must formally cede his or her right to claim those dependents for that tax year. This can be accomplished by IRS Form 8332. In addition, the parents must be divorced at the end of the applicable tax year, or must have lived apart for at least six months of that year.

A different approach to child custody scheduling

Virtually all Alabama parents, whether divorced or not, are familiar with the basic outline of how divorced parents share custody of their kids. The child or children usually move between the homes of both parents, spending most of their time with one parent while the other receives liberal visitation time on weekends and school holidays. While this child custody arrangement is the most common, it is not the only way that parents can divide their parenting time and responsibilities.

A new trend among divorced parents is known as "birdnesting." This approach flips the traditional model outlined above on its head: the child stays put in one home and the parents rotate in and out of that household. This arrangement allows the child to have all of the stability and security of living within one home (similar to how things were when the family was intact.)

Maintaining good credit during and after an Alabama divorce

One of the most distressing aspects of any divorce is the manner in which the change in family status might affect one's credit standing. Alabama residents need good credit scores to buy homes, purchase vehicles and even to establish utility accounts in their own names. Without the proper degrees of attention and effort, divorce can cause a drop in one's credit score.

One of the most important things for any divorcing spouse to consider is the degree to which he or she is financially entangled with his or her soon-to-be-ex. Many couples share credit cards, bank accounts and loans. Under those circumstances, the financial habits of one spouse can have a significant impact on the credit score of the other. It should also be said that everyone reacts differently to the end of a marriage, and a spouse who has always been careful with money could lash out at his or her partner by making a series of poor credit decisions during the divorce.

How a mortgage is affected by a couple's divorce

One of the primary concerns of any Alabama couple going through divorce is how to divide marital wealth in a manner that is fair and balanced. Often, the family home represents a significant investment during the marriage, and spouses may be at odds over how to handle the disposition of this valuable asset during divorce. Unless both spouses agree to sell the home and divide the proceeds, the mortgage on the home will pose a challenge for both parties.

If one spouse wants to keep the home and the other is willing to walk away, then the retaining spouse will have to come up with some other item(s) of value to make up for the equity that the departing spouse will lose. Even when that hurdle can be crossed, the fact remains that both spouses will still be listed on the mortgage until such time as the loan can be refinanced by in the sole name of the retaining spouse. This can leave the spouse who departs from the home with no ownership interest in the property, but still on the hook from the perspective of the lender if payments are missed.

Child custody case will focus on in vitro fertilization

Many Alabama couples turn to fertility procedures to increase their chances of adding to their families. In vitro fertilization is a popular option, as it allows an embryo to be created in a lab and then implanted into a woman's womb. There are a variety of possible links that a woman can have to the child she carries, from surrogacy (in which the woman has no biological link to the child) to full parenthood (the mother supplied the egg and the sperm was provided by the intended father). One recent child custody case centers on the issue of parental rights and in vitro fertilization.

The case features a former same-sex couple and their two children. The women were not married, as their state of residence did not recognize same-sex marriage during the time they lived together as a family. When they were ready to have children, they used one woman's egg and donor sperm to conceive their daughter. Later, they had a son by means of a donated egg and a sperm donor. Both children were carried by the woman who provided the egg for the first pregnancy.

An unconventional approach to child support problems

Parents in Alabama who are no longer involved in a romantic relationship often struggle over the care and custody of shared children. Child support is one of the most contentious topics that parents can face, and there are frustrations on both sides of the issue. Instead of allowing the matter to turn into a series of increasingly negative interactions, parents may want to try taking a different approach.

When two people have a child together and later separate, it can be easy to focus solely on the negative interactions that have taken place. Each set of circumstances is different, but feelings of betrayal, anger, jealousy, abandonment or disappointment can come into play and can cloud the co-parenting relationship. Both parents have an obligation to address these emotions, work to put those feelings behind them and move forward in partnership as parents.

Child support app aims to decrease tension between parents

When an Alabama family goes through a divorce, the end result is often a custody arrangement where one parent has primary physical custody of shared children, while the other receives liberal visitation time. The non-custodial parent is usually tasked with making child support payments to help provide the financial means of caring for the child. Often, each parent is expected to contribute to additional costs that fall outside of the monthly child support payments. This can lead to a high degree of contention between the parties, which can sometimes result in a return to court.

One company has created a phone app to help families deal with child support struggles. The app is called SupportPay, and it provides divorced parents with a platform by which to share information about child support matters. Parents can use the app to upload invoices and receipts, send messages and track payments.

Financial discussions could result in a prenuptial agreement

Marriage is the act of combining two lives into one, and there are many considerations that must be made to ensure that a match will be rewarding and fulfilling for both parties. Aside from physical attraction and romantic love, there are a number of practical matters that will define the days and years that make up an Alabama marriage. Financial concerns are one of the most important topics that should be discussed prior to marriage, and those discussions often reveal the need to draft a prenuptial agreement.

When discussing money matters, it is imperative for both parties to fully disclose the amount of debt that they will bring into the marriage. Paying down debt will have a considerable impact on the couple's ability to purchase a home or start a family. In addition, the source of that debt will give some insight into the spending habits of each party. Debt that is obtained by way of student loans is far different than excessive credit card debt.

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