Watch For Tax Angles In A Divorce Agreement

This week’s post is by Wendy Knutson, CPA.

If you’re getting a divorce, you’ll have to work through a variety of financial issues governed by prevailing state law. But don’t overlook the federal income tax implications. Advance planning can be critical in the following areas:

Alimony vs. child support. Generally, payments designated as alimony in a divorce decree are deductible by the payer and taxable to the recipient. But the opposite is true for child support; the payments can’t be deducted by the payer and are tax-free to the recipient. Make sure that the decree accurately reflects your intentions.

Filing status. If you divorce before year-end, you must file your 2012 federal income tax return as an unmarried individual. Depending on your situation, you may fare better or worse as an unmarried filer. For instance, joint filers could be hurt by the “marriage penalty” if the income of the spouses are relatively equal. In that case, it may be advantageous to finalize the divorce before year-end.

Dependency exemptions. Generally, the parent who has custody of young children for most of the year is the one entitled to dependency exemptions for the children. However, a noncustodial parent may claim the exemptions if the custodial parent signs a formal waiver.

Division of property. Property transferred incident to a divorce is tax-free to the recipient. The recipient’s basis and holding period are the same as they were for the ex-spouse. If you receive property in a divorce and then sell it, you must report the realized gain or loss on your tax return.

Other special tax rules may apply to the sale of a principal residence, IRA and retirement plan benefits, and life insurance policies. In summary: Seek expert tax guidance throughout the divorce proceedings to protect your financial welfare.

Your Functional Divorce Assignment:

If you’ve got questions about taxes, give a CPA a call.

21 Tips For Surviving The Holidays

The holiday season is typically a time for celebration with friends and family. Yet, when you’re divorcing, the holiday season can feel anything but merry. To help you enjoy this holiday season instead of dreading it, here are 21 tips you can use today.

1. Be patient

Even in the best of times, the holidays are usually a bit hectic. However, when you’re celebrating the holidays for the first time on your own, they can feel more than hectic. They can feel overwhelming! You’ve got so much going on emotionally with the divorce that the added tasks, events and scheduling of the holidays can all be just a bit too much. Be patient with yourself and your kids as you navigate the holidays. This is new and different for everyone and a little patience will go a long way toward making your first holidays post-separation/divorce enjoyable.

2. Be flexible

The holidays are about celebrating with family and friends and don’t HAVE to occur on only one specific day. I find that people with children who are celebrating the holidays for the first time as a single parent often get tied up in the idea that holidays can only happen on the official day marked on the calendar. For example, it’s not unusual for them to think that Thanksgiving Day can ONLY happen on the fourth Thursday of November. However, with a bit of advanced planning (See hint 16.), you may decide that Thanksgiving will actually happen the Saturday before the fourth Thursday of November so you can celebrate it with your kids. Having Thanksgiving early even has the added benefit of allowing you to avoid the crowd buying their last-minute turkey and fixings on the Saturday before the fourth Thursday of November.

3. Focus on others

Another way to enjoy the holiday season is to focus on those less fortunate than you. Consider volunteering at a soup kitchen or at a center that provides holiday “shopping” for needy families. I can guarantee that when you focus on providing joy for those less fortunate than you, an amazing thing happens; you forget about your troubles and appreciate what you do have even more.

4. It’s not about the stuff!

Gift giving is often a big part of the holiday season and with separation and divorce, the funds available for gift giving are usually less. However, gifts don’t need to be purchased to be appreciated. Sometimes the gift of time and attention means more than any store-bought gift ever could.

5. Let happiness happen

For a lot of people going through divorce, it can seem strange to experience any emotion other than some form of upset. Divorce is an upsetting event that can be almost all consuming. However, if you start to feel happy as a result of the holiday events, ENJOY the feeling! You deserve to be happy.

6. Reach out to family and friends

Almost everyone I know wishes someone could read their mind and offer help when it’s needed. On the other hand, I don’t know anyone who can read minds with any real reliability. The message here is if you need a little extra help to get your holidays merrier, be sure and ask for it. Don’t wait for someone to guess what you need.

7. Make new family traditions

With divorce so many things change. Some of these changes are not so comfortable, but some of these changes are good and might even be fun. What new family tradition can you introduce this holiday season to keep things fun?

8. Nix the guilt

So many divorced parents feel guilty about how the kids’ holidays will be different. The thing is different doesn’t mean bad or wrong. Different is just different. If you nix the guilt and embrace the new way your holidays will be, then your kids will enjoy the holidays too.

9. Work with your ex in a cooperative manner for kids sake

One of the things I always tell my clients is that their divorce is between them and their former spouse. The holidays can be a wonderful experience for the kids provided that’s the shared goal you and your former spouse have for them.

10. Continue your traditions, but simplify them

You may have holiday traditions that are important to you, but they just are not possible now that you’re divorced. What can you do to tweak these traditions so that you can still have them?

For example, maybe you had a holiday tradition of going skiing. If that kind of a trip isn’t possible this year, you may choose to do something else that captures the essence of the traditional ski trip. You may decide to play ski jumping on the Wii, have a marshmallow fight instead of a snowball fight and drink hot chocolate afterwards. Let your creativity flow and I know you’ll be able to create a modified tradition this year that you’ll still enjoy.

11. Don’t spend the holidays alone

It can be tempting to crawl into a cave and hibernate during our first holidays alone – especially if your ex has the kids. However, I urge you to resist the temptation. There’s no reason to punish yourself, for that’s what hiding in a cave during the holidays is. I’m not saying that you don’t need time alone. You absolutely do. I’m just suggesting that instead of spending all of the holiday season alone, make an effort to go out and spend some time with others. I promise that you’ll get a different perspective of your first holidays alone if you open yourself up to even a little fun celebrating the holidays with others.

12. Take care of your health

The funny thing about the holiday season is that it coincides with the cold and flu season. This, along with the stress that usually accompanies divorce, makes you a bit more susceptible to catching a bug. So, take good care of yourself by getting plenty of rest, exercise and good nutrition.

13. Give yourself a gift

This being the first holiday season post separation/divorce, you probably won’t be receiving a gift from your ex. The thing is, you probably won’t be buying them a gift either. Since your gift giving list has decreased by at least one, why not add yourself to your list? Go ahead and buy yourself something that you’ll truly enjoy this holiday season. (You may also want to make sure it’s not something that you’ll regret purchasing in the New Year when the payments for it start.)

14. Count your blessings

It’s easy to get caught up in what’s different this holiday season – in the negative sense. Flip that upside down and count what’s different AND positive this holiday season.

15. Lean on your faith

Whatever your beliefs are, you just might be able to find solace in your faith when you’re not feeling the “Ho Ho Ho!” in the holidays.

16. Plan ahead

The most important thing to have when you want something to happen at a certain time is a plan. Wanting to have happy holidays requires a plan too. Plan ahead to make it more likely you’ll have a happy holiday season.

17. Cultivate gratitude

Developing an attitude of gratitude does wonders for the way you view the world. This was one of the most important skills I developed when I got divorced. It helped me to be more positive and proactive about changing the things that needed to be changed not just at the holidays, but year-round.

What are you thankful for this holiday season?

18. What do you love most about holiday season?

People like the cooler weather, giving and receiving gifts, decorations. Whatever it is that you love most about the holiday season, figure out a way to get more of it. Once you do that, you’ll definitely have happier holidays.

19. What activities put you in a holiday mood?

When I ask clients this question I hear answers like shopping, parties, decorating, watching football, Christmas lights, and caroling. The next question I ask them is “How can you do more of these and get even more enjoyment out of the holiday season?” What are you answers to these two questions?

20. Be realistic

Your life is in the midst of a major change. For most people, separation and divorce brings increased responsibilities along with decreased financial means and free-time. Be sure and factor these facts in this holiday season. If you do, I’ll bet you’ll find it easier to be realistic with the expectations you have of yourself, your family and the holidays this year.

21. One holiday at a time

The holiday season can easily be a blur of activities that pretty much start as soon as the jack-o-lantern is off the front porch on the morning of November 1st. Prevent the blur by focusing on just one holiday at a time. Avoid multi-tasking and the potential for overwhelm by taking the holidays just as they come, one… at… a… time.

Your Functional Divorce Assignment:

Choose one of the tips to implement immediately. Sometimes seeing a long list of tips can cause us to start to gloss over them. I know these tips work, so take a moment now and choose one of them that you can implement right now and then do it!

Choose a tip that addresses your biggest concern about the holidays and put it to use. It’s pretty normal for the tip that can be most helpful to not necessarily be the easiest to implement. If that’s the case for you, take a moment now and select the tip that would address your biggest concern. And, when you’re ready, take a deep breath and figure out how you can implement that tip to help you enjoy your holidays just a bit more.

Come back to the tips frequently throughout the holiday season. Just because you’ve tried a tip out once doesn’t mean that you’re done with it. Keep these tips handy and visit them throughout the holidays anytime you could use a little bit of help. And, of course, if you’d like to schedule a Complimentary Consultation with me to discuss your particular situation, just send me an email or give me a call.

I’m Dr. Karen Finn, a divorce coach and advisor helping people just like you who are dealing with the stress and pain of divorce. You can join my newsletter list for free weekly advice. If you’re interested in taking the first step toward working with me, you can schedule an introductory private coaching session.

© 2012 Karen Finn. All rights reserved under all copyright conventions.

4 Steps To Overcoming Overwhelm

Overwhelm is an expected consequence of divorce. I say that because WITHOUT EXCEPTION it’s something I work on with every single one of my clients. It’s also something I had to learn how to overcome when I went through my own divorce. What I’m going to share with you today is EXACTLY what I share with my clients as we pick through the pieces of what makes up their overwhelm. The result? They ALWAYS feel calmer and more in control of their situation. You will too, if you follow these 4 steps.

Step 1: Get really clear and specific about what you’re feeling overwhelmed by. It’s not unusual for this step to be difficult. Many of the people I work with have a general idea of what’s going on with them, but to be specific can take some digging. Be willing to dig! What you find during your excavation process might be thoughts, tasks, beliefs, or even more feelings.

What’s surprising to most people is that simply by getting clear about what’s going on they can start to alleviate some of their overwhelm. In fact, one of my clients recently told me at the end of our session that simply by specifically identifying all that was contributing to his sense of overwhelm, he was already beginning to feel a sense of relief.

Step 2: Put each of these things into one of 3 buckets. Anything that’s contributing to your sense of overwhelm can be placed into one of 3 categories:

  1. I am the only one who can do anything about it
  2. I can delegate it
  3. I can drop it

What’s interesting to me is how often people will incorrectly categorize the things that are contributing to their sense of overwhelm into the first category. They decide that they are the only one who can do anything about it. What my clients and I usually find when we work through Step 2 together is they have been assuming incorrectly that they are the only one who can do anything about every single one of the things contributing to their overwhelm. To be fair, this assumption is partially true; you do need to decide what to do about each item. However, most people make this assumption because it’s either what they’ve always done or because they don’t feel comfortable asking for help. The truth is that even if you truly are the only one who can do anything about any particular item, you can almost always find someone who can help.

Look at all the items in each of the buckets. Ideally, the list in each category will be shorter than the list you identified in Step 1. If you’ve got one bucket holding all of the items from Step 1, take a deep breath and go through your items one more time. See if you can move any of the items to another bucket.

Step 3: Prioritize. Prioritizing is vital to overcoming overwhelm. The highest priority items are those you identified as needing to be dropped. Place a #1 next to the items in the “I can drop it” bucket.

Next look are your “I can delegate it” bucket and identify which item will take you the least amount of effort and provide you the most relief. Place a #2 next to this item. Identify the next item which will take you the least amount of effort and provide you the most relief. Place a #3 next to this item. Continue this process with all the items in your “I can delegate it” bucket.

Finally, move on to your “I am the only one who can do anything about it” bucket. Figure out which of these items will take you the least amount of effort and provide you the greatest sense of accomplishment. Place an A next to this item. Figure out which of the remaining items will take you the least amount of effort and provide you the greatest sense of accomplishment. Place a B next to this item. Continue this process for each of the items remaining.

Step 4: JDI This is where the Nike spirit comes into action. It’s time to Just Do It.

Start with all the #1′s and drop every single one of those things contributing to your overwhelm. Take a deep breath and notice how much easier you feel now that you know you no longer need to worry about any of them.

Next, take care of #2. Do what needs to be done to delegate this item to the appropriate person. When you’ve completed this delegation, take a deep breath and notice that you’re feeling more in control.

Next, take care of A. Remember this should be the easiest thing that only you can take care of. Go ahead and just get it done! When you do, I hope you’ll take at least a few moments to bask in a sense of accomplishment and increased ease because there are even fewer things in your “I am the only one who can do anything about it” bucket.

Your Functional Divorce Assignment:

Step 1: Get really clear and specific about what you’re feeling overwhelmed by. Be sure and list everything. If something comes up after you’ve started one of the other steps, loop back here to Step 1 and continue back through all 4 steps.

Step 2: Put each of these things into one of 3 buckets. The 3 buckets are “I am the only one who can do anything about it”, “I can delegate it” and “I can drop it”.

Step 3: Prioritize. Remember that everything in the “I can drop it” bucket gets a #1. The items in the “I can delegate it” and the “I am the only one who can do anything about it” buckets get prioritized by asking yourself, “Which of these items will be easiest to get done and provide me with the greatest sense of relief?”. Everything in the “I can delegate bucket get a number starting with #2. Everything in the “I am the only one who can do anything about it” bucket gets a letter starting with A.

Step 4: JDI. Start with all the #1′s and drop them. Let them all go. Then go back and forth between the numbers and letters to get things done. For example, if you have 3 items in your “I can delegate it” bucket and 5 items in your “I am the only one who can do anything about it” bucket, you’d tackle the items in this order: #2, A, #3, B, #4, C, D, E.

I’m Dr. Karen Finn, a divorce and persona life coach. I help people just like you who are dealing with the stress and pain of divorce. You can join my newsletter list for free weekly advice.