Premarital Residence Divided Equally Between Spouses in Divorce

Posted on April 15, 2011 by Bryan Howard

In the Liner divorce case, the court awarded 1/2 of the equity in the husband’s premarital residence to the wife. As a general rule, assets owned by one spouse prior to the marriage are treated as separate property and are not divided in the divorce. There are some exceptions, including the division of appreciation of the property if the non-owner contributes to the appreciation. This case did not involve appreciation. Rather, the wife was awarded 1/2 of the house primarily because she made non-financial contributions to the ongoing maintenance and management of the residence.

This case demonstrates the importance of entering into a prenuptial agreement or an asset protection trust prior to marriage. Assets that you transfer into an asset protection trust prior to the marriage will belong to the trust and will not be subject to division in the event of a divorce.


 

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Tennessee Second Fastest to Tax Freedom Day

Posted on April 13, 2011 by Bryan Howard

As April 15th draws near, a lot of us are thinking about income taxes. The Tax Foundation has concluded that the average American had to work from January 1st to April 12th to pay federal and state income taxes that will be owed in 2011.

The average Tennessean reached tax freedom day on March 27th, 2011. Only Mississippi reached tax freedom day before Tennessee. I am somewhat surprised that Mississippi beat us since Mississippi has a state income tax that applies to all types of income. Tennessee’s income tax only applies to dividends and interest. Our favorable income tax laws have been an important factor for a lot of high income individuals who have migrated to Tennessee.  

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Trustees Must Report 2010 Distributions to Grandchildren to Avoid Penalties and Possible Jail Time

Posted on April 1, 2011 by Bryan Howard

Even though the GST rate for trust distributions to grandchildren in 2010 was 0%, these distributions are required to be reported on a Form 706-GS(D-1) or 706-GS(T). No tax will be due. However, a trustee who fails to file a return will be guilty of a misdemeanor and can be fined up to $25,000 (or $100,000 if it is a corporate trustee) and imprisoned for up to 1 year.

This reporting requirement applies even if the trust was entirely exempt from GST tax due to the allocation of GST exemption. No return needs to be filed for distributions from trusts that are “grandfathered” from GST tax due to having been established prior to 1985.

The only good news is that the deadline to report distributions made on or before December 16, 2010 has been extended until September 19, 2011. Distributions made in the last 2 weeks of December, 2010 must be reported by April 18, 2011.

The bottom line is that the IRS is requiring the filing of hundreds of thousands of tax returns that cannot possibly owe any tax. Furthermore, there is no information reported on the return that can ever lead to the collection of tax in the future. You’ve got to love our government.
 

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