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Tax and Financial Planning In the Context of Divorce

Divorces often present financial planning and tax issues, including those relating to property division, maintenance, child support, and sometimes previously filed or yet to be filed tax returns. Whenever possible, we advocate for settlements or final decrees that do not waste assets through the triggering of unnecessary income, estate or gift tax costs. Our goal is often to maximize the after-tax dollars to our clients while preserving each party's estate. At V. Freitas Law, we have unique expertise in this area. Veronica Freitas has an LLM in tax law (Masters Degree) and can effectively guide you through the issues.

Divorces often present financial planning and tax issues, including those relating to property division, maintenance, child support, and sometimes previously filed or yet to be filed tax returns. Whenever possible, we advocate for settlements or final decrees that do not waste assets through the triggering of unnecessary income, estate or gift tax costs. Our goal is to maximize the after-tax dollars to our clients while preserving each party's estate. At V. Freitas Law, we have unique expertise in this area. Veronica Freitas has an LLM in tax law (Masters Degree) and can effectively guide you through the issues.

Our Seattle Family Lawyer can explain the impact of divorce on your life

Regardless of the parties’ economic circumstances, divorce tends to put an economic strain on everyone involved. Families separate and now have to support two households instead of one. The families’ available income remains the same, while their costs double. At V. Freitas Law, we are experienced and work with our clients to structure support and settlement agreements that take advantage of tax deductions and exemptions available in dissolution actions.

The following are basic tax issues that should be considered in every dissolution action:

Spousal Maintenance is considered income to the recipient spouse and is tax deductible in full to the paying spouse.

Child support is not income to the recipient spouse and is not deductible to the paying spouse.

Transfers of real property as part of a dissolution action are exempt from excise/transfer taxes.

Transfers of retirement funds from one spouse to the other in a dissolution action are exempted from taxes or early withdraw penalties if accomplished via a Qualified Domestic Relations Order (“QDRO”). Transfers between Domestic Partners are not exempt from taxes and penalties because they are governed by federal and not state law. Generally, any withdraws from defined contribution plan (401(k), IRA, 403(b), 401(a) Profit Sharing Plans and 457 Deferred Compensation Plans) prior to age 59 ½ are subject to a 10% percent penalty for early withdraw if funds are withdrawn by the owner of the account. When funds are transferred from one spouse to the other via a QDRO, the receiving spouse, at the time of the transfer, may withdraw funds from their share of the account without a 10% early withdraw penalty because the transferee spouse is not the owner of the account.

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