There are cases where minor children need to file a tax return. Most commonly a parent or grandparent has opened a trust account in their name in order to gift the child money. The funds will accrue interest or other gains if invested in the stock market. Passive income, such as interest, is subject to taxes.
The amount of tax a minor will have to pay depends on his parent’s tax basis. In situations where a divorce has occurred, the child’s basis will generally depend on which parent claims him as a dependent. In determing whether to file a joint or separate return consider the effect your decision will have on the amount your child will ultimately have to pay in taxes.
Additionally, the separation agreement or divorce decree should clearly spell out who is responsible for covering the children’s taxes. In all fairness, if a joint return is filed during the separation and prior to the actual divorce both parents should be equally responsible to cover the children’s taxes.
A divorce will impact your tax situation. Married couples often file joint returns which gives each spouse the ability to benefit from the other’s deductions. In the alternative, the combined income of a couple could lead to a greater tax burden than would otherwise be incurred by them on an individual basis. Discussions with a reputable accountant whom you trust in order to obtain specific information regarding the implications of your divorce on your taxes is recommended. It is useful to develop a relationship with an accountant independent from your spouse who can advise you regarding your personal concerns without regard to your spouse’s position.
During the divorce proceeding, while you are still legally married, you have the option of filing jointly or separately. In order to present a joint return you must be legally married on December 31 of the tax year for which you are filing. Essentially, even if you are in the middle of a contentious divorce proceeding, you are legally married until all the paperwork has been signed and filed with the court. Your accountant is the best person to advise you whether filing jointly or separately works best. However if you are considering filing a joint return you should wait until the end of the tax year to conclude your divorce. (more…)
During the course of a divorce there are so many unpleasant issues to resolve that it is easy to overlook planning for the care of our children in an event of a personal crisis. Ironically, fully articulated plans for the smooth operation of our employment should an emergency arise are often in place. After years of reliance on a spouse, single parenthood takes preparation. Realizing that your ex might not be available in an emergency situation and taking steps to prepare for such an instance is imperative. (more…)
Regardless of age, planning for retirement is important. Generally women accrue fewer retirement benefits than their male counterparts due to less time in the workforce or lower wages. Taking time off work to raise a family or help an aging parent can affect the amount of benefits received. While you are married you are entitled to share in your spouse’s social security benefits upon retirement. After a divorce you can receive a percentage of these benefits as well.
If your marriage was at least ten years in duration and you do not remarry post divorce you can qualify for a percentage of your ex spouse’s social security benefits when you both reach 62. Receipt of benefits can occur even if your ex has remarried and/or has not retired and begun to receive payments from social security himself. Your right to a share of your ex’s social security payments terminates upon your remarriage. If your subsequent marriage ends you again become eligible to receive a portion of the benefits.
If you are entitled to benefits pursuant to your own work history, you will either receive 100% of your own allowed social security or 50% of your ex’s, whichever is greater. You will not receive both. Your own benefits must be at least one-half the amount of your ex’s at 65 in order for a valid claim for payment of social security pursuant to his work history to exist. Additionally, you must be divorced for at least two years to make the claim.
While your ex is alive you can receive 50% of his benefits. Should he die, you become entitled to 100% of his benefits. Collection of benefits can begin at age 60, or even 50 if you are disabled, in the event of your ex’s death.
If your spouse is remarried, both you and the second wife can receive social security benefits. Collecting pursuant to your ex’s social security benefits will not reduce the amount he or his new spouse will receive. In fact, he will never know when you receive a payment or the amount thereof. It is important to keep a record of your ex’s social security number in order to facilitate a claim. Should you have any questions, you can contact the social security office at (800) 772-1213.
