President Biden signed the American Rescue Plan Act on March 11, 2021. In addition to the stimulus payment, this plan contains some tax credits that should be considered by parents divorcing this year.
The Child Tax Credit
• The plan increases the Child Tax Credit from $2,000 to $3,000 per child – $3,600 for any child under the age of 6 – for tax year 2021 only.
• The plan provides for children under the age of 18 at year-end – as opposed to 17 under the current plan – to qualify for the credit for tax year 2021.
• For 2021 only, the credit is fully refundable, even to those with no taxable income • The 2021 credit starts phasing out for single filers at $75,000, for head of household filers at $112,500, and for joint filers at $150,000.
• The American Rescue Plan Act requires that half of the Child Tax Credit be paid in advance, meaning that payments for 2021 should be paid between July and December 2021 with six monthly payments. Eligibility for the credit will, in the first instance, be based on 2020 tax returns.
• This credit can be taken by the parent … Keep reading
People typically have several goals in mind when they are looking to create or tweak an estate plan, and important to some may be the desire for privacy. Estate planning professionals are versed in the various estate planning vehicles that can effectively avoid scrutiny of one’s wealth and the nature of one’s estate plan, during life and after death. For example, while a simple will may require probate at death, with the filing of the will and disclosure of estate assets, trusts are private documents which avoid probate of trust assets at death. There are often work-arounds to disclosing the trust document itself in financial or real estate matters.
When it comes to privacy, individuals often do not want their children to learn the magnitude of their assets or the specifics of the child’s anticipated inheritance. In that case, they certainly would prefer to shield such information from their child’s would-be ex-spouse. However, despite the careful crafting of an estate plan to maintain one’s privacy, a person may be shocked to learn that they are expected to disclose details of their estate if their adult child gets divorced in Massachusetts.
Under Massachusetts law, a divorcing spouse has a right … Keep reading
The Massachusetts Appeals Court recently issued another decision interpreting the Alimony Reform Act, which went into effect in 2012. In the March 2, 2021 decision of Dolan v. Dolan, the Appeals Court provides guidance on the meaning of General Law Chapter 208, section 53(c)(1), which states:
(c) When issuing an order for alimony, the court shall exclude from its income calculation:
(1) capital gains income and dividend and interest income which derive from assets equitably divided between the parties under section 34.
In Dolan, the husband sought a downward modification of his obligation to pay alimony to the wife under a 2016 Judgment of Divorce after he sold his business, leaving him with lower earned income. The husband was continuing to receive payments from the sale of the business. He argued that capital gain income from the sale could not be considered when determining his ongoing alimony obligation because the business was an asset assigned to him at the time of the divorce. The wife argued that modification of alimony is a two-step process: the judge must first determine that there has been a material change in circumstances and only after that threshold is met can the … Keep reading
There are very few certainties in the divorce process. Even though you can draw generalizations from the law or experience, no two divorce matters will ever be exactly the same. For divorce practitioners, the variability from one case to the next is what makes matrimonial law a dynamic area of practice. One thing is for certain – eventually, the divorce process will end. It may not always be a happy ending, and there are numerous ways to arrive at the outcome. For example, the parties could reconcile and stay married, either side or both could die (it’s happened), the parties could go to trial or end up with a negotiated separation agreement. The vast majority of divorce matters – some estimate up to 95% of cases – end with the latter, though the journey to arrive at that final agreement can follow any number of paths with an incredible range in terms of time, money, and emotion expended along the way.
One approach to arriving at a negotiated separation agreement is through the parties’ participation in some form of alternative dispute resolution. Alternative dispute resolution (or “ADR”) is a broad term that encompasses options such as mediation, conciliation, and … Keep reading
On February 16, 2021, the IRS announced that all legally permitted first and second-round Economic Impact Payments (also known as “stimulus payments” or “stimulus checks”) have been issued. Beginning in April 2020, the IRS and Treasury Department began delivering the first round of Economic Impact Payments for qualifying individuals and families due to the economic crisis resulting from the coronavirus pandemic. According to the IRS, the second round of payments were to be made by January 15, 2021, although some second-round payments may still be in the mail. If individuals did not receive a payment, or receive the full amounts, they may still be eligible to claim the Recovery Rebate Credit (the first and second Economic Impact Payments are considered an advance of the credit), but must file a 2020 tax return in order to do so. While Economic Impact Payments were based on 2018 or 2019 tax year information, the Recovery Rebate Credit is based upon 2020 tax year information.
For married couples who are separated and no longer living together or who have initiated a divorce action since filing their 2019 income tax returns, a contested issue may be who is entitled to benefit from the Economic … Keep reading
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