Family Issues

An Alimony trust is a formal trust arrangement where the beneficiary of the trust is the ex-spouse entitled to alimony payments. The settler or person who contributes property to the trust is the ex-spouse obligated to make the alimony payments.
The taxpayer may establish a post death "testamentary" trust or a living "inter vivos" trust to provide for the alimony payments required by a divorce decree or an agreement between the parties.

The deductible alimony payments made in the first year or second year may have to be recaptured as income in the third year where the alimony payments within the first 3 years decrease by more than $15,000.
Payments made in the second after the separation year are recaptured if the payments exceed the payments in the third post separation year by more than $15,000.
Payments made in the first after the separation year are recaptured as income if they exceed the "average" payments made in the second post separation year and the third post separation year by more than $15,000.
The recaptured amount is reported on IRS Form 1040 on the line Alimony received with a notation Alimony recapture with the payee spouses social security number.

Generally, the wording in the divorce or separation decree identifies the payments as Alimony or something other than Alimony, such as child support.
Alimony is income to the recipient and an adjustment to income for the payer.
Generally, for payments to be considered alimony, seven characteristics should be present. The payments are in cash or check. The payment must be paid under a divorce decree or separation instrument. The divorce decree or separation agreement cannot designate the payment as a payment which is not deductible by the payer or includable in gross income by the recipient. The recipient and the payer must not be members of the same household. The payments must not be treated as child support. The taxpayer and spouse may not file a joint return with each other. There must not be a liability to make any payment for any period after the death of the spouse.

A noncustodial parent does not lose the right to claim the child's medical expenses (health insurance, drs, dentists prescription drugs etc) as a itemized deduction on IRS Schedule A (subject to the 7.5% AGI limitation) if both the custodial and noncustodial parent together provide more than half of the support of the child and either had custody for at least six months during the year.

A noncustodial parent may claim his or her child(ren) on his or her tax return if the custodial spouse signs IRS Form 8332.
It is the Release of Claim to Exemption for Child of Divorced or Separated Parents. The signed Form 8332 must be attached to the noncustodial tax return each year.
A noncustodial parent can ask the custodial parent to sign Form 8332 Part I which is a release of Claim to Exemption for future years.
If this part is signed then the noncustodial parent may photocopy this form each year and attach it to the tax return.

There is no tax consequence on the transfer of any assets to a spouse related to a divorce, including real estate.

An agreement between yourself and your husband to separate debts is not binding on creditors unless the creditors also agree to it. If you are going through a divorce your debts will be dealt with in your Marital Settlement Agreement and or judgment. This is not binding on creditors.
Creditors can look for payment to either debtor on a joint debt. If the debt is in the name of only one spouse, state law will govern whether the creditor can sue the other spouse for payment.

Children have the legal right to make their own choices at age 18.

If the noncustodial is paying more than 50% of the child's support, there is no court order regarding the dependency exemption. The noncustodial parent gets the exemption if the parents were never married based on the dependency support test. You will probably need to fill out a multiple support form from the IRS to determine which parent actually pays more than 50%. If the parents are divorced or separated the dependency custody test applies. The parent who has custody more than 50 percent of the time is entitled to claim the exemption. The noncustodial spouse who claims the exemption will have to get Form 8332 (release of exemption) signed by the custodial spouse.