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Englewood Cliffs Legal Blog

Money moves to make in divorce

New Jersey couples who are planning on divorcing soon may have incentive to finalize them before 2019 begins. This is because a change to the tax treatment of alimony will soon take effect. For divorces that are finalized on or after Jan. 1, 2019, alimony is no longer income to the recipient, nor is it a tax deduction for the person making the payment.

However, alimony is just one issue that needs to be decided in a divorce. It is also important that retirement accounts are properly split. If the account is a 401(k), for example, it will need to be divided under the terms of a qualified domestic relations order, which will specify either a fixed dollar amount or a percentage to be transferred into an IRA owned by the other party.

Selling the family business is only one option in a divorce

If you are facing divorce, you may have significant assets to divide with your soon-to-be ex-spouse. If your family business is one of those assets, its fate may be the most important consideration when you reach the property division stage of the divorce proceedings. Here are three options to think about.

1. Put the business on the market

Myths and misconceptions about prenuptial agreements

Prenuptial agreements can make divorce less stressful and more efficient, but there are a number of misconceptions about prenups that make New Jersey couples less likely to have them. People often believe that prenups are only useful where one or both spouses are wealthy, that executing a prenup makes divorce more likely or that they are only useful in the event of divorce.

Contrary to popular belief, prenuptial agreements might be useful in many situations where neither spouse is particularly wealthy. They are designed to handle any and all marital assets, which might include money or real property as well as pets or future spousal support payments. A prenup might also address distribution of assets to children or division of debts among spouses.

Fathers and child custody

Determining who will have custody of the children when parents go their separate ways can be a very contentious issue. Fathers in New Jersey who are seeking full custody of their children should be aware of what steps they should take to have their children in their care.

The first step is to understand the distinction between full and joint custody. Full custody, which is also called sole custody, refers to custody in which the responsibility of the children belongs to one parent. With joint custody, parents have to share legal or physical custody of the children. Fathers should be mindful that the preference of the court is to give both parents joint custody.

Regaining child custody requires meeting court requirements

When New Jersey judges deny child custody to parents, they base their decisions on the best interests of the children. Although the loss of child custody naturally distresses parents, it does not have to be the final word on the subject. A parent can take action and potentially regain custody.

Self-reflection begins the process. A parent should take an honest look at why a court chose not to award custody. Accusations of child abuse or neglect, even when false, could prompt a judge to withhold custody. The violation of a court order might cause a court to withhold access to children. After identifying the reason, a parent can take steps to correct the problem. Sometimes a court specifies what a person needs to do before requesting custody again. These contingencies could be drug or alcohol treatment, counseling or parenting classes. The person should strive to fulfill any requirement imposed by a court.

How does wealth impact child support calculations?

Child support is a complex and contentious issue. No parent wants to write a check each month in lieu of spending time with his or her child. For parents who do not have primary custody, though, this is often the sacrifice that they must make. If you are in this situation, you may be wondering how your income, assets and wealth will ultimately determine the amount of child support the court orders you to pay.

All of these factors do play a role in calculating your monthly support payments, but the system does not necessarily treat parents with a high net worth differently than any others. Still, you should be aware of the following questions when you are wondering how your income will impact child support. 

Working together for successful co-parenting

New Jersey parents who decide to divorce may face some special challenges. Because the parents are still connected through their children despite their differences and relationship problems, each parent will still need to maintain a connection with the other. Successful co-parenting is important to help the children move on from the divorce and still feel supported by both parents. When the parents are committed to working together in the interests of the children, the divorce process may be less high-conflict and the kids will feel more secure with both of their parents.

A co-parenting agreement can be an important step toward a successful future of joint child-rearing, especially as it can be finalized as part of the divorce. A family law attorney might be able to help divorcing parents to create a parenting plan that includes key decisions about who will be responsible for major parts of the child's life. It will lay out where the child will live, what the custody schedule will be and how the parents will exchange the child during parenting time. In addition, the plan can address how parents will resolve disputes and how holidays will be shared.

Tax reform could have significant divorce effects

People in New Jersey who are planning to divorce may be concerned about the tax implications of ending a marriage. The Tax Cuts and Jobs Act passed Congress and was signed into law in December 2017, but one of its most wide-ranging effects on divorce will go into effect with the new year in 2019. This aspect of the law changes the way that alimony is treated under the tax code, reversing the treatment of spousal support payments for the past 80 years.

Divorces that are finalized before the end of 2018 will not be affected by the change; people will continue to pay taxes as they always have. Because of this, many people -- especially wealthy couples with lots of assets -- have been hurrying to finalize their divorces before the end of 2018. Others are working with their lawyers to develop strategies to offset the impact of the tax reform. Historically and at present, the payor of spousal support can deduct the amount paid from his or her yearly taxes. Instead, the recipient will have to pay taxes on the income, usually as part of his or her lower tax bracket.

Dealing with business assets during a divorce

New Jersey residents who are getting divorced will discover that dividing assets can be a complex and lengthy process. This is particularly true if one or both partners own a business.

To ensure a fair division, both parties have to be aware of exactly what the business is worth. There may be a concern about balancing the valuation of the business against any child support or alimony obligations the owner may have. There may also be an issue of trust regarding whether the spouse who owns the company is being completely forthcoming about the business income.

Raising children after the divorce

For New Jersey parents who have decided to seek a divorce, it is vital to ease the transition for the children. This often involves developing a co-parenting plan for after the divorce.

Even once the child custody issues are settled and a parenting plan is drafted, there might be questions about how to proceed. Co-parenting can be challenging, but when both parents keep their children's best interests at heart, they can find success. For this, they will need to maintain open and honest communication with each other and their kids. The communication between the parents should be as tension-free as possible, and one way to achieve this is to avoid face-to-face contact. Email and text messages as well as family communication apps could all help reduce tensions. These methods also provide a written record of all communication between the parents that can be used as evidence if they ever need to go to family court.