unity_design, Author at Zashin Law

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So far unity_design has created 5 blog entries.

Tax considerations during, after divorce

Though the April 15 tax filing deadline is now behind us, we know that it will come again. With that in mind, and while the matter is still top of mind, let’s discuss important tax issues that may impact your filings next year. I have previously discussed child-related tax benefits available to divorcing parents and the importance of allocating which parent claims the children in a final divorce decree and the potential tax win-win of contributing to a donor advised fund. There are also a variety of other tax-related items that individuals should consider both during and after a divorce.

Many individuals ask about the tax impact of child support, spousal support and property transferred pursuant to a divorce. Payments of child support are non-taxable transfers: the payments are not deductible to the payor (the person paying support) and are not taxable to the payee (the person receiving support). Payments of spousal support under orders issued after 2019 are similarly nontaxable transfers. Likewise, there is usually no taxable impact on property transferred between spouses, or former spouses, pursuant to a divorce.

During the divorce process, couples must decide how they are going to file their tax returns. If a couple is divorced by Dec. 31 of any given year, they must file separate income tax returns as single or head of household filers. If a couple remains married on Dec. 31, however, they must file under married filing jointly or married filing separately status. While I encourage everyone going through a divorce to consult with their accountant or tax professional to identify the tax-filing status that is best for them, the “rule of thumb” is for divorcing couples to file in the manner that maximizes total refund or minimizes total liability. The IRS also recommends that individuals going through a divorce file new Form W-4s with their employer to update their withholding amounts to reflect their anticipated filing status and number of dependents that they intend to claim.

After a divorce, the Internal Revenue Service may contact individuals to collect taxes due from returns that parties jointly filed during the marriage. If one spouse did not know that the other spouse improperly reported income, claimed improper deductions, or otherwise misrepresented tax information without their knowledge or consent, however, they may qualify for innocent spouse relief and be shielded from liability regarding all or some of the amount due. To qualify for innocent spouse relief, the requesting spouse must meet certain criteria and must demonstrate that the: (1) tax understatement was due to the other spouse; and, (2) requesting spouse did not know, nor did they have reason to know, of the understatement. Additionally, the requesting spouse must show that it would be unfair to hold them responsible for the liability.

There are three types of innocent spouse relief available: traditional relief, which provides full relief from additional taxes owed; separation of liability, which allocates additional taxes owed between the spouses; and, equitable relief, which may apply when neither of the foregoing apply. Innocent spouse relief can be requested at any time after a joint return has been filed, however, there are specific time limits for each type of relief. To support an innocent spouse relief claim, the requesting spouse may need to provide documentation and evidence to demonstrate their lack of knowledge or involvement in the tax issue. This can include financial records, communications between spouses, and any other relevant information.

These are just a few of the tax-related items that individuals should consider when going through, or after, a divorce. As always, I encourage individuals to consult with an accountant or a tax professional to discuss the above and other tax considerations that may apply to their specific situation.

This article originally appeared as a column for the Cleveland Jewish News.

unity_design2024-04-19T11:15:50-04:00April 19th, 2024|Child-Related Tax Benefits, Divorce, Innocent Spouse Relief, Tax Breaks, Tax Planning, Taxes|

Importance of updating powers of attorney

By Andrew Zashin

A power of attorney is a legal document that allows an individual (the principal) to appoint someone else (the agent) to make decisions for, and take actions on behalf of, the individual.

There are several types of POAs, each serving different purposes and granting different levels of authority regarding financial, legal and health care matters. These important tools allow individuals to plan for the future and ensure their affairs are managed according to their wishes. Without POAs, it may be necessary for a court to appoint a guardian or conservator to make decisions on behalf of an individual who becomes unable to make decisions for themselves, which can be both costly and time consuming.

A general POA grants an agent broad authority to act on behalf of a principal in various matters, such as managing finances and signing legal documents. A limited POA, conversely, grants an agent specific powers for a limited time or purpose. For example, an individual might use a limited POA to authorize someone to sell a car or manage a specific financial transaction for the individual. A key aspect of a POA is its durability. A durable POA remains valid even if a principal becomes incapacitated, ensuring the individual’s affairs continue to be managed according to their wishes without the need for court intervention. This makes a durable POA an essential tool in estate planning.

A health care POA similarly authorizes an agent to make medical decisions for a principal. This includes decisions about medical treatments, procedures and end-of-life care. Individuals looking to ensure these medical decisions are made in accordance with their Jewish beliefs and values should consider a Jewish HCPOA, sometimes referred to as a “halachic health care proxy.”

This document allows an individual to designate a trusted agent to make critical medical decisions on the individual’s behalf while ensuring these decisions align with Jewish law, ethics and customs.

Individuals should carefully consider both who they appoint as their agent and the powers they grant to the agent. Individuals should also review and update their POAs regularly to ensure the documents still reflect their wishes and circumstances, particularly after a divorce. Prior to a divorce, an individual’s POA might have named their former spouse as their agent. While in many jurisdictions divorce automatically revokes any provisions in a POA that name a former spouse as an agent, updating a POA after divorce can help clarify an individual’s intentions and prevent any ambiguity in case of incapacity or other emergency.

A power of attorney is a valuable legal tool that allows individuals to appoint someone to make decisions on their behalf. By choosing a trustworthy agent and carefully considering the type of POA that best suits their needs, individuals can ensure their affairs are managed according to their wishes, even if they are unable to make decisions for themselves. I encourage anyone considering a POA to consult with an attorney to make sure they are selecting the POAs or other advance directives that best suit their individual needs and wishes.

This article originally appeared as a column for the Cleveland Jewish News.

unity_design2024-03-18T14:30:44-04:00March 18th, 2024|Power of Attorney|

Documentation key for tracing separate property interests

By Andrew Zashin

While uncertainty continues to plague the real estate market, historically, the spring and summer months have been the best times to sell a home. As we approach these warmer months, experts are optimistic that, despite housing inventory remaining at a near all-time low, mortgage rates will continue to decrease in 2024. For individuals looking to buy or sell real estate this year, there are a variety of things that you can do to seek to protect your separate property interests in this real estate in the event of divorce.

When parties divorce in Ohio, the courts must equitably divide the marital estate. This means that the court must first determine what is marital property and what is the separate property of either spouse. Any property acquired from the date of marriage to the date of a final hearing terminating the marriage is presumed to be marital property. Separate property, conversely, includes any assets owned by either party prior to the marriage, inheritances, gifts or assets explicitly designated as separate through legal agreements. The party asserting a separate property interest must prove that they own this interest.

There are a variety of ways that individuals can acquire separate property interests in real estate. One party may own a home prior to the marriage that the parties then live in during the marriage. One party may sell a home owned prior to the marriage and then use the proceeds for the down payment on a residence purchased by the parties during the marriage. One party may use funds received from an inheritance to pay for an addition to a residence. Regardless of how a party acquires a separate property interest in a residence, however, there are a variety of things that they can do to prove this interest more easily in the event of divorce.

First, couples may consider entering into a prenuptial or post-nuptial agreement that identifies the separate property interests that either has as of the date of the agreement and how the parties intend to distribute property owned by either or both of them in the event of divorce. Even without such an agreement, however, individuals can take important steps to demonstrate or “trace” their separate property interests. The easiest way to do so is by maintaining thorough records regarding the purchase of the property, any separate funds contributed to the purchase, and any separate funds used toward improvements to the property.

Because banks and other businesses are only required to keep records for a certain number of years, it is important for individuals with separate property interests to maintain these records themselves. Individuals should begin by gathering all relevant documents that establish their ownership interest in the property, including deeds, purchase agreements and mortgage documents. Next, individuals should gather and maintain records showing their use of separate funds for the purchase of, or improvements to, the property, including bank statements and receipts. If an individual has a premarital interest in a residence that the parties then live in during the marriage, the party should obtain a mortgage statement as of the date of marriage. To further simplify tracing of their separate property interests, individuals should also consider opening new accounts solely for the purpose of housing funds they receive by way of inheritance, gift or separate proceeds received from the sale of real estate or other assets.

Ultimately, I encourage anyone looking to protect their separate property interests in real estate to maintain careful records and to consult with an experienced family law attorney about the best ways to protect their interests in the event of divorce.

This article originally appeared as a column for the Cleveland Jewish News.

unity_design2024-02-23T14:48:46-05:00February 23rd, 2024|Divorce, Property Division, Real Estate|

Dig into holiday spirit to help on-the-ground organizations

By Andrew Zashin

Year-end giving is a philanthropic tradition that holds special significance as the calendar draws to a close. As the final months of the year unfold, individuals, corporations and foundations often reflect on their achievements, growth and the impact they can make on the world. This introspection often culminates in a surge of generosity and charitable donations, collectively known as year-end giving.

Aside from altruistic reasons for giving, there are also other more practical considerations as well.

One of the primary reasons for the increase in charitable contributions toward the end of the year is the holiday season, and with it, the holiday spirit. Tax planning is another great motivator for year-end giving. Specific advantages vary depending on a particular individual’s circumstances, but charitable giving can create a win-win for both the giver and recipient. Some individuals may also benefit from giving for estate planning objectives. Whatever the reasons, giving might create opportunities for the giver.

The festive season, marked by holidays like Thanksgiving, Chanukah and Christmas, fosters a sense of compassion and goodwill. Many people are inspired to share their blessings with those who are less fortunate, making it a time when charitable organizations experience heightened support. The act of giving during the year-end becomes a way for individuals to spread joy, hope, and make a positive difference in the lives of others. Now, especially, during this time of crisis and conflict, it is more imperative than ever for individuals and entities to tap into this holiday spirit and support those in need.

Donations to on-the-ground organizations in Israel and Gaza play a vital role in providing immediate relief and assistance to those innocent victims affected by the conflict. These organizations depend on financial contributions to deliver essential services, medical assistance and humanitarian assistance.

By donating to these organizations, you can give children, families and soldiers hope in the face of uncertainty regarding their loved ones, livelihood and safety. Your donations enable organizations to respond swiftly and effectively to the urgent needs of these communities, providing a lifeline to individuals who may be struggling to meet their basic needs.

Consider the following organizations when making donations this holiday season:

Magen David Adom: A donation to MDA, Israel’s national emergency service, helps purchase equipment for the rescue teams on the front lines and on the battlefields, directly in the face of danger. Donations are used to purchase ambulances, medical equipment, protective equipment, bandages and other equipment that helps save lives.
Israel Emergency Aid: Israel Emergency Aid is an Israeli organization committed to ensuring that every fighter has the necessary combat and defense gear they need to triumph over terrorism.
Friends of the Israel Defense Forces: Friends of the IDF is an organization authorized to provide for the welfare of soldiers in the IDF.
Jewish Federation of Cleveland: The Federation has launched its Israel Emergency Campaign to help provide immediate assistance to victims of Hamas’ terrorism and their families.

This article originally appeared as a column for the Cleveland Jewish News.

unity_design2024-01-02T10:39:45-05:00January 2nd, 2024|Charitable Donations, Deductions, Estate Planning, Tax Planning|

Charitable contributions in divorce: not just for rich and famous

By Andrew Zashin*

Navigating the divorce process is often both emotionally and financially challenging. As part of the process, couples must divide their assets. While this often involves extensive legal and financial negotiations, and potentially even court involvement, there exists one option in structuring a property division that can yield positive results that benefit both the parties and their communities: charitable contributions.

The media often portrays charitable contributions made in connection with a divorce as an avenue only available to the rich and famous. I previously discussed how, as part of their 2021 divorce settlement, Bill and Melinda Gates pledged to continue working together on their philanthropic foundation, the Bill and Melinda Gates Foundation, which focuses on global health and development. The Gateses, who have donated more than $59.1 billion to their foundation since its creation, stated that they would continue to work together “to shape and approve foundation strategies, advocate for the foundation’s issues, and set the organization’s overall direction.”

Similarly, following her divorce from Amazon founder Jeff Bezos in 2019, MacKenzie Scott has made headlines for her philanthropic giving, donating more than $14 billion to over 1,600 charities and organizations. She works with a team of advisers to identify and vet community-focused organizations that work to reduce disparities in health, education, economic outcomes, and other critical issues.

But incorporating charitable contributions into a divorce settlement is not just for the rich and famous. In fact, charitable giving serves as a viable option for divorcing couples of all income levels. As charitable giving can take many forms, including donations of money or assets, one or both parties may choose to donate a portion of their property division to a charitable organization as part of their divorce settlement. This provides the parties with a way to support causes that are important to them, while potentially receiving tax benefits that can help offset some of the financial costs of the divorce.

There exist several types of vehicles that can help facilitate these charitable contributions. I have previously discussed the tax “win-win” associated with donor advised funds – accounts that parties can use to deposit assets for charitable donations over time. Divorcing couples who cannot agree on how to divide an asset may consider donating that asset directly or putting that asset into a donor advised funds.

Parties may further agree that one or both parties will contribute a certain number of dollars to a donor advised fund annually. Similarly, charitable remainder trusts are another vehicle available to divorcing couples. If a party plans to donate assets to charity, he or she could establish an irrevocable charitable remainder trusts that provides the income generated from the trust’s assets to their former spouse for a set period of time, after which the trust assets transfer to the designated charity. The spouse who donates the assets to the CRT may also enjoy the tax benefits associated with the charitable donation.

Overall, divorcing couples should consider incorporating charitable contributions into their final agreement. By working with qualified financial advisors and family law attorneys, divorcing couples can explore the best ways to incorporate charitable giving into their property division and create a positive legacy that will endure beyond their marriage.

This article originally appeared as a column for the Cleveland Jewish News.

unity_design2023-11-16T15:23:17-05:00October 20th, 2023|Charitable Donations, Divorce, Philanthropy, Property Division|