The truth is, most family law lawyers don't have a firm grasp on the tax consequences of divorce. One reason we went to law school instead of to medical school was because we didn't want to take the extra math classes. Instead, hoping to leverage our talents for writing, negotiating and public speaking we decided to enter into one of the most litigation intensive specialties within the law.

Still, these lawyers can provide effective representation for their clients. The reason is that most opposing attorneys are of the same mindset. This mindset is; "I am a family law attorney and if my client needs tax advice they should seek the advice of a tax professional." This is good advice, but seldom clients actually abide by it.

The tax consequences of a divorce can have a tremendous impact on the actual (as opposed to stated) value each side receives in a property division or support order. This leaves those lawyers with an understanding of tax law in a superior bargaining position. The following article will discuss a couple areas where family law and tax law intersect.

Support Orders

The bargaining chips here are the exemptions and filing status. Exemptions are a tax deduction so they are a benefit for the spouse receiving them. Two ground rules to keep in mind is that a custody split should never be 50/50, (because neither party will get the exemption) and the court can't order parties to take a particular filing status.

The advantages of taking certain tax positions can be analyzed by the DissoMaster software. Once the exact benefits to both sides are calculated, the negotiating begins. Generally, the tax deductions should be negotiated towards allocating them to the higher earning spouse. In that way both spouses collectively pay fewer taxes. Another result is that the higher wage earning spouse has a higher net income which will result in a larger order of support to the receiving spouse. All of this is, of course, is negotiable and can even be conditioned on certain events. For example, an agreement might have a provision that Wife sign the IRS form allocating the exemption to husband by January 15th each year, provided that she receive increased spousal support of a certain amount. These tax aspects can have a major impact on a client's future finances and should be a point of negotiation.

Property Division

This is an area where a basic understanding of tax law is crucial to obtaining a fair result for the client. Family law courts have two fundamental rules here:

1)The court does not take tax consequences into account when determining value

a.Example: If you are awarded the family residence and plan on selling it after the divorce, the court will not reduce the value it puts on the house just because you will have to pay taxes on the gain from the residence

2)Pursuant to IRC 1041, property transfers subject to a divorce are not taxed

a.Example: If you sell your interest in the family home to your spouse, you will not be taxed

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