Texas Divorce and Prenuptial Agreement BLOG

In addition to their other benefits, prenuptial agreements can help couples decide how to deal with their taxes. Here are two areas that couples often put into prenups regarding their taxes. Income and Deductions Spouses can specify to whom income and wages go. This is particularly useful when one spouse brings a business to the marriage and the other spouse will not be taking part in running the business. In a community property state like Texas, a family law court will generally assume that income acquired during the marriage belongs to the couple’s marital or community property. A prenup can specify that this is not the case and that certain income belongs only to one spouse. Likewise, there may be particular deductions that are available to the couple. The prenup can specify who will make use of the deduction if the couple files separately. Property Transfers and Tax Consequences Couples often want to include a property transfer in their prenup. The transfer can take place either before they marry or after they divorce. The timing of the transfer will have tax consequences for the couple. Suppose a wife transfers property to her husband before marriage, and, in exchange, the husband…
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For the purposes of their taxes, spouses are single for the entire year during which their divorce becomes final (this means that if your divorce became final on December 31, 2011, for tax purposes, you and your spouse were not married for all of 2011). Divorced spouses have two options when it comes to taxes for their divorce year – file as “single” or as “head of household.” While the most tax benefits are generally available for married couples filing jointly, the next best option for a spouse would be to file as “head of household.” In order to qualify as the “head of household,” a spouse (and the couple in general) does have to meet certain conditions: The two spouses must have lived separately for the past six months The spouse requesting “head of household” status must use his or her home as the main residence for dependents like children or elderly parents (note, though, that the rules for this requirement are complex and filed with exceptions, as, for example, dependent blood relatives do not have to live with you for the entire year for you to qualify as “head of household”) The requesting spouse must have paid more…
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Like most years, 2011 saw its fair share of celebrity divorces – Russell Brand and Katy Perry (Brand filed just before the end of the year on December 30), Jennifer Lopez and Marc Anthony, Arnold Schwarzenegger and Maria Shriver, and Demi Moore and Ashton Kutcher, to name a handful. What all of these divorces have in common is that the Internal Revenue Service (“IRS”) will consider each couple married for all of 2011. When it comes to federal taxes, the IRS determines your single or married status by looking at your status on the last day of the year, December 31. If your divorce was final on or before December 31, the IRS considers you and your spouse single for the entire year. If you separated from your spouse or filed from divorce, but the divorce was not final on or before December 31 (the situation that all of these celebrity couples find themselves in), the IRS considers you and your spouse married for the entire year. The waiting period plays an important role, thus, in when your divorce counts for tax purposes. Celebrity couples often divorce in California, which, like many states, has a waiting period between when a…
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Chief Executive magazine and many American businesses list Texas as the best state in the union for business, and a big reason for our high ranking is recent tort reforms and other changes to lawsuits that put businesses on the defensive. In his over 11 years as leader of the state, Governor Rick Perry has signed medical malpractice reform, class action lawsuit reform, product liability reform and, this past summer, another part of tort reform. Several months ago, Perry and the Texas Senate in a unanimous vote adopted a “loser pays” system that is a common element of tort reform. In this system, plaintiffs who bring lawsuits that are judged frivolous must pay the legal fees of the other side. This discourages frivolous lawsuits, tort reform supporters argue. In Texas, there is also a $250,000 cap on non-economic damages like pain and suffering in medical malpractice lawsuits. The cap does not apply to economic damages (medical bills, for example), but as we discussed with the Gourley family on Wednesday, the economic damages may not adequately cover a family with special needs children. Additionally, lower punitive awards are not as much of a threat to wrongdoers. In a medical malpractice case,…
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