(by Charma Pipersky, Attorney)
When you decide it’s time to file for a divorce, tax consequences are probably the last thing on your mind. This makes it too easy for you to miss serving your Petition in time to get a final judgment of divorce entered by December 31. And for many couples, being able to file as “single” or “head of household” might save a bundle in federal and state taxes.
This is especially true since the 1993 tax laws. Before, it was mostly high earners who worried about tax strategies. Now, increases in earned-income credit can make it pay for low earners to be free to choose “head of household” as a filing status. For example, if you and your spouse each earn $10,000 per year and have two children, you could save over $3,000 if you each file as “head of household.”
But, because of the six-month waiting period for divorce, if the Petition isn’t served by June 30, you cannot be divorced by December 31. You won’t be free to choose options that can save you money. What to do? Simple: you can get a judgment of legal separation fairly quickly and that will give you wider tax options when next April rolls around.
Legal separation has no six-month waiting period; you can get a judgment as quickly as you can get your papers through the court (a bit sluggish in some counties). Later, you can file another action for divorce. The downside is that you have to pay a new filing fee and, possibly, the cost of having Divorce Helpline or a paralegal complete your divorce paperwork. But the tax savings may far outweigh these costs.
To find out if a legal separation will improve your bottom line, take a trip to your CPA before you take a trip to the courthouse and find out which filing status will work best for both of you. Then decide if it pays to file for separation or divorce.
More financial reasons to consider legal separation:
- If a non-employee spouse has a pre-existing condition or for some other reason will not be able to get medical insurance, some plans allow you to keep a separated spouse on the employee spouse’s health insurance.
- To remain legally married until the ten-year deadline for certain Social Security benefits.
- To remain legally married until the ten-year deadline for military pension enforcement advantages or a twenty-year deadline for PX and commissary benefits.
There is another strong reason to consider filing for legal separation rather than divorce, and it has nothing to do with money. If you or your spouse are unsure that you want a divorce, but feel that some legal space is required to gain time to think things through, filing for legal separation is a good option. It is a softer action, one that doesn’t close the door so loudly on reconciliation.
Talk to your Divorce Helpline attorney at 800-359-7004 to see if legal separation is the best choice for you.
Hello. I am considering Legal Separation from my husband. I attempted this option about 6 months ago but he would not agree to the terms. If he is amenable this time, my questions are these:
1) Can I receive child support during a Legal Separation.?
Currently our three minor children live with me and my husband is living in our second home. He pays the mortgage on both but I am pursuing refinancing both homes to remove his name from my current residence and my name from his.
2) If we can come to terms together it is my understanding that I can fill out the necessary paperwork and file in county court. Is this true?
3) Regarding our tax filing. He takes the entire tax refund and pays the taxes. He claims he feels entitled to this. Problem is we both are gainfully employed, make about the same amount of money and file jointly upon his insistence. Can I file as head of household for the 2009 tax year?
My husband and I have filed for divorce -back in Oct 08. He has procrastinated in finishing the MSA. Since I live in FL and he lives in CA, I am wondering if a better option is a legal separation. How much time would we have before we need to finish the divorce -reconciliation is not a possibility. I believe I will still be covered by his health insurance -which seems like a bigger issue every day with the new health care bill dilemmas. And would he still be required to pay the taxes on my spousal support? Thank you for answering these questions, your office has been helpful in this long and tedious process. Linda
Dear Linda,
Thank you for visiting our web site at DivorceHelp.com and taking the time to read some of our articles. I hope that they were informative and helpful.
In reply to your posted comments, please note that you raise some important questions that can be addressed best during a phone conversation with one of our attorneys. Your being in Florida and having a case in California is not that unusual and does not make a difference in your decision for a legal separation vs. a divorce. But some of the other issue you raise, such as the health insurance may be important in your decision.
Please contact us at 800-359-7004 and arrange a telephone appointment with one of our attorneys. I would be happy to consult with you personally if you wish.
Hello Susan,
During a Legal Separation, you basically deal with all of the same issues as you would during a Divorce (Asset & Debt division, Child Custody, Alimony/Spousal Support, AND Child Support).
Furthermore, if you and your husband come to terms and reach an “amenable” agreement, then yes, you can prepare the necessary documents and file them with the court.
As far as your tax filing question, it is more complicated and will require a consultation with an attorney and a tax adviser. Please contact our office at 800-359-7004 and we will be happy to schedule a time to speak with you.
Thank you,
Hamid
Hello,
I got a legal separation in California about a decade ago. Does a divorce become automatic at some point or do you need to file for divorce as if you had never gone through the legal separation?
Many thanks,
Donna
Hello Donna,
Nothings happens automatically with regard to a divorce after a legal separation. One of the parties will need to proceed with the filing of a divorce. Any issues that were not resolved and “reserved” at the time of the Legal Separation Judgment should be addressed in the divorce.
Please contact our office at 800-359-7004 to schedule a time to speak to me about this in more detail.
Hamid Naraghi
Attorney/Mediator/President
Divorce Helpline