The right software creates tax-optimized divorce settlements and helps family lawyers understand how alimony and child support will affect a client’s taxes.
By Dr. Rick Kabra
As with any contract, a marriage contract can be dissolved either by amicable agreement or in court. Divorces add the complications of child custody, child support, spousal support as well as the tax implications of the latter two agreements. Family law attorneys historically have hired CPAs to wade through complex tax codes to create a reasonable estimate of a fair settlement.
Modern divorce attorneys can use specialized software to win new clients, provide ongoing counsel, negotiate equitable settlements and understand how alimony and child support will affect a client’s taxes.
The Right Software Creates Tax-Optimized Divorce Settlements: Key Benefits
Winning New Clients
When a prospective client walks in, a family law attorney must analyze complex information in order to give clients an idea about how the divorce will affect them. Family law software streamlines this intake interview. A centralized database means information is entered only one time. Secure web portals allow clients to provide the information to software, reducing the time the attorney has to be directly involved. An attorney can quickly give a solid estimate of the financial impact this divorce will have on the client. Providing hard facts quickly instills the kind of confidence that turns a prospect into a loyal client.
The landscape of divorce can change quickly and family law attorneys must be able to react just as quickly. A law firm must be able to provide detailed studies of potential property division, alimony payments, and child support agreements. The ability to provide an analysis-supported counteroffer to the opposing attorney’s settlement can speed up negotiations dramatically and avoid standoffs that will end up in court.
Most divorces involve a complex web of assets and liabilities, and determining a property split that is equitable and fair is not simple. Individual assets may have to be treated differently, and possessions such as houses can’t simply be split in two.
Many states reduce court backlog by creating non-binding arbitration venues. Attorneys using specialized software can prepare an objective and court-ready analysis that are more than simple numbers on a sheet. They can present multiple offers in an effort to speed settlement, and yet preparing those additional offers takes very little time. Reducing the argument to a financial exercise diffuses the strong emotions and speeds resolution.
If the case goes to a court, those same tools will impress a judge, giving the technologically-aware attorney a big advantage over the lawyer who still depends on clumsy paper-bound analyses. Easier case preparation means less time spent, lower fees (making the client happy) and bigger caseloads (making the law firm happy).
Alimony and Child Support
In the eyes of the IRS, alimony is income. That means it is deductible for the payor and taxable for the recipient. However, child support is not considered income. It is an obligation from the non-custodial parent and is, therefore, neither taxable nor deductible. Attorneys can negotiate that one party pay, for example, less alimony and more child support. The total amount is the same but the tax implications are very different. Finding the optimal balance that creates the best tax environment for both parties is complicated by multiple tax codes and in some cases the Alternate Minimum Tax. Only software that considers all of these factors will be able to provide a truly optimized solution.
There is Help
Software exists to help today’s family law attorney find ideal settlements with minimal time and effort. With these products, attorneys are allowed to create tax-optimized settlements and simplify the process of property division.
Nowadays technology is not an option; it is a necessity. Family law attorneys who use all the tools at their disposal will provide the best divorce settlements and run the most efficient law practices.
The CEO of Easy Soft, Inc., Dr. Rick Kabra has years of experience in the legal software industry, catering to the specialized technology needs of small to mid-sized law firms. A leading legal software provider since 1986, Easy Soft offers specialized software (available as desktop and cloud versions) for real estate, family law and divorce settlements. www.easysoft-usa.com
Family law professionals answer questions about the impact technology has had on their practices, and share their predictions for the future.