1.  Are you eligible to claim your children as dependents?  This is usually clarified in the divorce settlement agreement, but that’s not quite enough.  The IRS has a required form: Form 8332- Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.  The must be reviewed, signed and attached to both of your tax returns.  Go to www.irs.gov for a copy of the form and more information.
2. Did you remember that you can alternate who claims your children as dependents from year to year?  A child can be claimed as your dependent long as he/she is under age 19 (on Dec 31) and lives with you for more than half of the year, or is a full time student up to age 24.
3. What status will you use to file your taxes?  If you were divorced by 12/31, married filing jointly is no longer an option.  You can choose between single and head of household.  Check with your tax preparer to see which works better for you.
4. Are you receiving or paying alimony/spousal maintenance?

Remember that alimony is taxable to the recipient and a tax deduction to the person who’s paying.  If this is the first year you are receiving maintenance, and you haven’t been putting money aside for your tax bill, brace yourself for the shock, and start saving now.  You can open a savings account for taxes, and have money transferred monthly from your checking account, to minimize this problem going forward.  Discuss this with your tax preparer, to see if you need to make estimated payments during the year.

Child support is tax-neutral: it’s not taxable to the recipient, and it’s not tax deductible to the person who’s paying.

Your first tax return after your divorce, is just one more step on your journey to financial freedom.

Clients with ‘late blooming relationships’, whether following divorce or widowhood, have a new set of choices to make.  Should we marry, or continue our relationship less formally? I know, for many of you some less-than-wonderful terms from the past for these relationships come to mind- but let’s let them go.  Those were for different times, different people. This is about YOU.

You’ll need to talk with your families, and perhaps deal with religious issues, but let’s think about the financial impact of the decision.  There are multiple impacts, and you need the best financial and legal advice, to help you decide.

Talk to your honey about money.  If you are already living together, I hope you have had the ‘money talk’ before deciding whether to merge finances.  Who pays for what? And- of paramount importance to an older population, what happens if one of you can’t live independently any more? Issues of long term care- how would it be done? by whom? How is it paid for?  What is the impact on the independent partner? These are often concerns of When- not If. If you’re concerned about whether assets can be insulated from Medicaid spend down, the government does not recognize either prenup or post-nup agreements for this purpose.  There are some protections for spouses both in the Medicaid rules and in Medicaid planning, but you need to examine the pro’s and con’s and see how marriage may impact your responsibilities and the impact on your families before making a decision.  

Do you want to execute a Prenuptial or Post-nuptial Agreement?   If you have established a business or accumulated assets, prenups and post-nups are valid tools to clarify your wishes about how your business, money and property will be distributed.  It could state that each of you have certain assets that are not marital assets, and that you name your children, for example, as beneficiaries of those assets, rather than your new spouse.  Those assets would be disclosed, and listed, for clarity. You can make other decisions regarding assets gained during the marriage.

There are some advantages to being married. If you marry, and your new your spouse has healthcare insurance through work, you can likely be covered under his or her plan. This could save substantial money. There may be also be veteran’s benefits for a spouse.  

If your spouse dies, and you inherit IRA/401k funds, there is more flexibility in payout alternatives for spouses, than non-spouse beneficiaries. There are also potential Social Security spousal benefits, both at death and during your lifetime.

If you’ve been previously divorced, there may be some disadvantages to being married.  Some benefits you may have from your ex may be lost in remarriage.

 If you have been receiving Social Security under your deceased spouse’s benefit and you remarry before age 60 (before age 50 if you are disabled), you will likely lose the prior benefit.  When your new spouse passes away, you may be eligible for that benefit, or a new one based on your new spouse’s record. 

If it doesn’t work out.  It’s hard to ‘uncouple’.  You already know that. As far as relationships are concerned, it may not be any easier to separate regardless of your legal status.  Marriage can offer some asset protection that cohabitation might not.

Do you get my point that there is a lot to consider before making this decision?  

Consult an experienced  financial planner-(ME!)- for what you need to know about your money, how to structure it  and how to manage it, to make the most of whichever choice you make. Don’t forget to check with your attorney, as well, for critical legal documents to protect yourselves and your families, once you have your finances straightened out. 

Avoid the common mistakes most women make about money, especially when they are in crisis- divorce, widowed, etc. Schedule a free consultation with me at Calendly.com/contactagrace; or call me at 716-817-6425.

Securities and Advisory Services offered through Cadaret, Grant, Registered Investment Advisor and Member FINRA/SIPC., Transitioning Finances, Davis Financial Services and Cadaret, Grant & Co., Inc. are separate entities.

1. https://www.nerdwallet.com/blog/average-credit-card-debt-household/

Where do YOU stand in relation to the ‘average U.S. Household’?
Do you have one of these- or are you working under the trifecta of debt- with several or
perhaps all of these weighing you down?

How does this make you feel? Are you confident? Scared? Overwhelmed? Do
you need some help?

A financial plan can help you to structure your financial life, so that you can get a better
handle on your debts- and your goals! and move forward in a positive way to a secure
financial future.

As a Certified Financial Planner (CFP®), I help people manage their financial lives with
ease and confidence, and build toward the goals they want to achieve.
Call me for a free consultation about creating your financial plan.

Avoid the common mistakes most women make about money, especially when they are in crisis- divorce, widowed, etc.  Schedule a free consultation with me at Calendly.com/contactagrace; or call me at 716-817-6425.

Adrienne Rothstein Grace, CFP®, CDFA
Certified Divorce Financial Analyst
1404 Sweet Home Rd, Suite 9 Amherst, NY 14228
716-817-6425/fax 716-313-1754
adrienne@adriennegrace.com
www.TransitioningFinances.com
Member, NYS Council on Divorce Mediation.
Empowering You. Financially.
Securities and Advisory Services offered through Cadaret, Grant & Co., Inc., a Registered Investment Advisor and Member FINRA/SIPC. Davis Financial Service and Cadaret, Grant & Co., Inc. are separate entities.

During this time period, you can ‘true up’ your full contribution for 2018, as well as make your 2019 deposit.

Brace yourself for a lot of numbers —I’m sorry! — but that’s what taxes are all about! If you have questions, or this makes your stomach hurt, just call me and I’ll help explain further (716-817-6425).

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000.

The limit on annual contributions to an Individual Retirement Arrangement (IRA) which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50
and over is not subject to an annual cost-of-living adjustment and remains $1,000, for a total of $7,000 for 2019.

If you’re under 50, this means $115.38 per week; if you’re 50+, you can save $134.61 per week for 52 weeks to reach the total.

The income ranges for making deductible contributions to traditional IRAs to contribute to Roth IRAs and to claim the saver’s credit all increased for 2019.

You can deduct contributions to a traditional IRA if you meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced (phased out), until it is eliminated, depending on filing status ( single, head of household, married filing jointly, and married filing separately) and your income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply, and you can save the full amount.

Call me for the ranges, if you wish, and I’ll pass them along.

If you are negotiating your divorce settlement, please don’t forget to include which filing status you will use for 2018, 2019 and on. It may make a substantial difference in the amount of tax due.

Don’t let this opportunity to save for your future, using either Traditional or Roth IRA options, pass you by. You can gain either tax advantages for your current filing year or enrich your future. Contact me at 716-817-6425 for further information.

Don’t wait too long!

Avoid the common mistakes most women make about money, especially when they are in crisis- divorce, widowed, etc.  Schedule a free consultation with me at Calendly.com/contactagrace; or call me at 716-817-6425.

Taxes – you can’t avoid them, but you can make the annual ritual a little less, well, “taxing” with proper planning and preparation. And you may be able to reduce this year’s burden, as well as become better prepared for any upcoming negotiations. I’ll offer more details next month.

Let’s get started today with an overview.

1. Record keeping. Come January, you’ll be receiving your W-2s, 1099s, form 1098 (mortgage interest), itemized lists of donations to charities, and more.
   Decide now where you would like to store your records, as they start arriving. Do you do your own taxes every year or does a tax professional prepare your return? Have you always filed jointly- with your part limited to signing on the dotted line? Put the necessary records in an easily accessible location. If you are concerned that the documents may disappear, make copies and store them separately.
2. Changes in marital status and withholdings. Whether you are getting married or are going through a divorce, a change in marital status can have a significant impact on your tax liability.
   When these changes take place, you may need to complete a new W-4 form with your employer. If you are self-employed, an adjustment in quarterly payments may be in order.
   Discuss this with your CDFA, for more detailed and personalized recommendations.
   If possible, it’s best to avoid the need to write a big check to the IRS that triggers an
   underpayment penalty. While some folks enjoy getting a big refund each year, the April windfall comes in the cost of an interest-free loan to the government.
3. Maximize retirement contributions. If you participate in an employer-sponsored plan, let’s see if you can contribute the maximum amount. If there is an employer match- make the minimum contribution, at least! By not participating in any portion of the employer match, you are passing up a free gift–a gift that will pay dividends via long-term appreciation.
4. Charitable donations. The standard deduction has been raised and fewer folks will benefit from itemizing. Still, many find satisfaction in donating cash to their favorite causes even if a tax benefit is not forthcoming.
   Many charities gladly take non-cash donations. It’s a great way to clean out the closet and have someone less fortunate benefit from those things you don’t want to see ever again. If the value of all non-cash donations exceeds $500, you need to complete Form 8283 (IRS: About Form 8283, Non-cash Charitable Contributions), so get the receipts from your charity (Good Will, Salvation Army, your religious organization, etc.).
5. Health care coverage. Tax reform eliminated the penalty for failing to have health
   insurance, but the individual shared responsibility provision was eliminated for tax year 2019- not 2018. If you or family members do not have the minimum essential coverage, you may be subject to a penalty when you file for 2018. Health care coverage is an essential issue to discuss in any negotiations.
6. Health savings accounts. If you or your spouse have a Health Savings Account (HSA) eligible plan, up to $6,900 can be contributed for your family; self-only coverage is $3,450 (IRS: 2018 HSA contribution limit for individuals with family HDHP coverage).
   Contributions can help lower taxable income, and it’s a savings account that’s available to assist for qualified medical expenses. Any balance in this account can be saved from year-to-year- and is also considered ‘marital property’ subject to division.

This is not an all-inclusive list, and you may not have had any significant changes in your
financial situation this year. Getting an early start can prevent the troubles that always seem to surface in April. Having this information at hand can also help you negotiate more confidently.

As with any tax situation, feel free to contact your tax advisor.