So I asked my wife of 20 years if she enjoyed my chasing her before we were married.
She said she always enjoys it when I think I’m in control.
Scary.
Today is the third in a four part series on federal tax issues that may arise in a marriage or a divorce. We have previously addressed the high rate of divorce in our society, the need to set aside emotional hostility and focus on resolving issues to minimize damage to the family. We also addressed community property and child support issues, and the possibility of tax relief in the divorce decree.
Here are some additional issues to consider:
- Carryover Tax Liabilities
A spouse in a new marriage may very well bring a known federal tax liability from a prior marriage ( or perhaps one that arose while single). Also, after the divorce is finalized the IRS may audit the prior spouse and a new tax liability arise as to both of them. These tax liabilities can follow the parties and affect the new spouse in the new marriage.
This risk is very significant if the new spouse has assets or income that may become subject to the tax liabilities of the other new spouse. Folks, these are complex issues and very much depend on the facts and circumstances of each case. However, the good news is they can be handled if properly planned for.
Also, they can be handled if the marriage has not yet occurred and they can even be handled if the new marriage has already taken placve. However it is essential that planning be done before the Internal Revenue Service becomes involved.
- Innocent Spouse
People unfamiliar with federal tax law know the term “innocent spouse” means someone who may benefit from an equitable division of the tax liability. But the reality is the term innocent spouse encompasses a variety of statutes that are very complicated and should only be handled by tax lawyers. If your spouse is a high income earner or if a significant tax liability arose during the marriage, or if you’re uncertain as to the accuracy of the tax returns, consider having a federal tax lawyer advise you as to obtaining this relief, and also to review the proposed divorce decree for possible treatment as an innocent spouse. Items in the divorce decree, while not determinative of federal tax liability, can be significant factors in determining whether innocent spouse relief should be allowed.
- Financial issues
We are all aware that money is a significant factor in marital discord and subsequent divorce. Many of my clients have divorced and then declared bankruptcy, leaving the other spouse with the debts. Many others were saddled with all of the tax debts that arose during the marriage. These and other financial risks are of special concern if you are bringing assets of your own to a new marriage, especially if you have children and yourself to protect in the event of financial difficulties.
While all new marriages are rosy in anticipation, prepare for the harsh realities if things fail. It is essential that you consult with an attorney and accountant before remarrying and make sure that your assets are protected and if the marriage fails, that the divorce decree protects whatever rights you may have.
Folks, whether you are doing the chasing or just think you are, lots of future problems can be avoided with some clear thinking now and a good advisor.