Los Angeles Divorce Law Blog

On average, 40 to 50 percent of marriages will end prematurely, and some will end in a financial mess. When couples call it quits, what happens to the debt incurred during the marriage and who determines how it is distributed after a divorce? This may be determined by where one lives. California is one of nine community property states that recognizes that all debts are the responsibility of both parties.

All other states are known as equitable distribution states or common law states. Both parties are held accountable only if they are joint owners of the account. For joint credit card accounts, both spouses are responsible, but they may appeal to the account issuer to request that the debt is split. Mortgage debt is handled similarly; one spouse may refinance the home in his or her name only or initiate a buyout. Regardless of whether one is in a community state like California or an equitable distribution state, assets are divided along with debts during a divorce.

A growing number of grandparents find themselves raising their grandchildren instead of retiring to pursue hobbies and travel. Studies show that with the ever-present opioid epidemic sweeping the country, an overwhelming number of children are being removed from parents who are battling addiction problems. In California and other states, grandparents are being called upon during child custody cases to assume the parenting role.

According to a group focused on the support of intergenerational families, one-fifth of grandparents who are caring for grandchildren live at or below the poverty level. It is reported that 26 percent have a disability, and 39 percent are over 60 years old. They often skim money from retirement plans, go back to work to make ends meet, or they continue working to pay for unexpected expenses such as court and attorney costs.

During the process of ending a marriage, is it best to separate finances or file taxes together as a married couple? According to the IRS, couples in the process of divorce but have not yet finalized are still eligible to file taxes together as a married couple. If filing separately, both must either take the standard deductions or both must itemize. In California and other states, couples can file joint tax returns if they are still married on the last day of the previous year.

One disadvantage of filing income taxes separately is that higher tax rates apply at lower levels of income. The amount of standard deductions declines, and itemized deductions are reduced or eliminated. More Social Security benefits are taxable when filing separately, and the likelihood of paying the Alternative Minimum Tax increases. Credits such as the Earned Income Tax Credit, educational Lifetime Learning Credits and Elderly and Disabled credits are off limits to those filing separate tax returns.

Ending a marriage is rarely a pleasant experience. With new changes coming in the form of scrapping the current alimony tax laws, negotiations could get even more ugly. In California, the change in tax incentives for alimony payments could have lasting consequences for other payments such as child support that is often calculated together during divorce negotiations.

Under current laws, spousal support or maintenance can be deducted from taxable income to lower the tax burden of the spouse paying support. The recipient, who in most cases has a much lower income and is often in a lower tax bracket, pays taxes on the money received. With the present incentive, it allows people to pay more alimony because they are reaping the coveted tax benefit.