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Divorce Law

WHILE DIVORCES often trigger endless wrangling, there’s less room for maneuver than you might imagine, because much depends on state law:

Community vs. common law states. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Couples in Alaska can also create community property if they opt to enter into a community property agreement. In a community property state, the wealth acquired during the course of the marriage is considered equally owned by you and your spouse, and would usually be divided equally.

Other states are so-called common law or equitable distribution states. If you end up in court because you can’t reach an agreement, a judge will order what he or she believes is an equitable division of the wealth acquired during the marriage. Equitable won’t necessarily mean equal. You may not like the result, which creates a strong incentive to settle matters yourself. To learn more about divorce law in your state, head to DivorceNet.com.

In community property and most common law states, you should be able to keep the wealth you brought to the marriage, as well as gifts and inheritances received during the marriage. But if this separate property was mixed with marital property—let’s say you put it in a joint account with your spouse—then you may lose a portion in the divorce proceedings.

Alimony. Today, stay-at-home and lower-earning spouses are less likely to receive alimony and instead are expected to return fulltime to the workforce unless, say, they are in their 50s. But it’s hard to generalize. If the marriage lasted more than 10 years and one spouse will find it tough to support himself or herself, alimony might be awarded, but perhaps only for a limited time.

Child support. Unlike alimony, which is hard to predict, child-support payments are typically driven by state formula, so there’s little room for contention. State formulas are based on the notion that one parent is the custodial parent, which can seem unfair when the parents have joint custody and want an equal say in how to spend money earmarked for the children’s benefit. While alimony is tax-deductible for the payer and taxable to the recipient, child support is neither tax-deductible nor taxable.

If you have a child, negotiate who gets to claim the kid as a dependent for tax purposes. If you have two children, you might each claim one as a dependent. That will allow both of you to file as head of household, which will trigger a smaller tax bill than filing as a single individual.

Next: Jonathan’s Story: Divorce

Previous: Splitting Assets

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