Tax Indemnification Agreement Divorce Sample

4. Deductible interest: The Internal Revenue Service generally takes the position that interest paid on divorce obligations is personal and therefore not deductible under the Internal Income Code § 163 (h) (which does not deductible personal interest expenses). However, in this section, other types of interest are deductible, including those relating to a commercial or commercial interest and investment. In a recent case, the husband managed to deduct interest on a $250,000 voucher to his ex-wife, payable at 10% interest for more than 20 years. Although the IRS did not allow the deduction, the Finanzgericht then upheld the husband`s argument that the interest paid on the note was deductible, given that it was used to acquire the wife`s marital share in the real estate held by the parties as an investment (Armacost v. Commissioner (No. 19616-96, T.C Memo 1998-150). 11. Individual pension accounts: It is common knowledge that early withdrawals (before 591/2) are subject to an early repayment indemnity of 10%. However, what is less known is that advance payments can be made at any time without taking into account the 10% penalty. This involves the “annuity” of the IRA, the calculation of the current age of the annuity, a projected life expectancy and an actuarial calculation of an annual distribution. These “annuity” payments are then made over the life of the participant, free of the 10% penalty otherwise in force.

While divorce lawyers may or may not use this option, it is another source of funding available when liquidity is an issue. There are many situations where the risk of bankruptcy of a debtor spouse is real or expected. In these situations, it is necessary to establish a language that expresses the intention of the parties to guard against the performance of obligations in the event of bankruptcy after the performance of an MSA. An example of a clause follows: there are various provisions necessary under the Tax Reform Act 1984 and other applicable laws to properly allocate the old-age balance. Such provisions refer to defined benefit plans, defined contribution plans, government plans, etc. Entire books have been written on such clauses and many planning administrators have a privileged form of Domestic Relations Order. Therefore, it is not possible to provide any clause to be included in an MSA and/or QDRO, but basic model clauses should be used as a starting point and modified to address specific plans The parties agree to settle their ongoing marriage case, regardless of whether they disagree on this issue. The parties recognise that in the future it may be necessary for them to participate in a plenary hearing in which an issue may be the determination of the marital standard of living if one of the parties applied for assistance. Both parties acknowledge that they have been warned by a lawyer that it may be difficult or impossible to define their respective positions with respect to the marital lifestyle at a future hearing due to scheduling, the unavailability of witnesses and/or recordings and other circumstances that may arise. The parties acknowledge that they were informed by their lawyers of their right to be heard at that time on the issue of the determination of the marital lifestyle and have decided to voluntarily waive this right in order to promote their desire to resolve this matter promptly and without additional costs and attorneys` fees. [7] See Judith K.

Fitzgerald & Ramona M. Arena, Bankruptcy and Divorce 1 (2d ed. 1994) (“When bankruptcy laws and divorce settlements and orders meet, they frequently clash.”) . . . .