Don't Mess With Taxes

So that's why former California Gov. Arnold Schwarzenegger and Maria Shriver have separated after 25 years of marriage and are likely headed to divorce court.

Right now Shriver is probably trying to decide which is worse, that her philandering husband fathered a child with another woman or the fact that he kept it secret for a decade.

In case you just now logged on and came straight to the ol' blog, here's what you missed.

The Los Angeles Times broke the news that Schwarzenegger fathered a child more than 10 years ago with a member of his household staff. The child's mother had worked for the family for 20 years before retiring in January.

The Governator's admission is what prompted Shriver to move out of the couple's home last week.

Inquiring financial minds want to know: Two things popped into my head after I heard about the child.

First, did Arnold man up to his parental fiscal responsibilities for this child? Apparently so.

The LA Times quoted a source, who declined to be identified because of the former governor's request for privacy, as saying that Schwarzenegger took financial responsibility for the child from the start and continued to provide support.

That led to my second question: Which was more difficult, keeping the child's existence secret or hiding the youngster's support payments from Maria?

Truth be told, the quote about the rich being different applies here. Neither Arnold nor Maria probably mess with balancing a check book.

They no doubt have lots of accounts, jointly and separately, but which they don't deal with themselves. I wouldn't be surprised is they had no idea of all their accounts' balances.

Plus, it's likely that the illegitimate child's support payments came out of a special account that Maria didn't have access to even if she knew about it.

Husband and wife financial sharing: And that's one of the reasons I'm all for financial sharing in a marriage.

Let's say Maria and Arnold had a hybrid marital money management arrangement. She might not know exactly what Arnold was spending his money on, but she would have known he was regularly sending a chunk of it out to someone or something.

And she might have asked about the expenditure, just out of loving wifely curiosity. And they might have talked sooner. And things might now be different.

Personally, I like the way the hubby and I run our marital finances. We share and share alike.

We put our money into a joint checking account. We share joint access of most of our other financial accounts. We are the beneficiaries on necessarily individual accounts and investments, such as IRAs. We each see our joint credit card statements, which can be a challenge at holiday gift giving time.

And when one of us sees a large or unusual charge or check, we talk about it. Actually, we usually talk about it before the payment stage.

I understand that everyone's marriage and monetary philosophy is personal. And other couples get by fine with a bit more fiscal privacy.

But our open money policy works for us, from both fiscal and emotional perspectives, and makes up be more immediately responsible to each other and our bank accounts.

About that child support: As promised in the headline, here's the tax reference.

In divorce situations, ex-spouses and their attorneys are careful to make it clear in the legal documents what payments are child support and what are spousal support. That's because that although child support usually is paid to the parent who has physical custody of the child, that child support money is never taxable income.

Alimony or spousal support, however, is generally taxable.

Could the mother of Schwarzenegger's illegitimate child be liable for taxes on the money she received over years to care for their child?

Probably not. I suspect that the Governator's attorneys drew up papers that carefully delineated the situation as child support.

But I also wouldn't be surprised if some California and U.S. tax officials also are a bit curious as to how much she got in what form (checks, cash) and how she accounted for it.

Remember, there's no federal statute of limitations on tax audits where fraudulent returns are filed.

Related posts:

• Jon and Kate plus 8 divorce tax tips
• Divorce tax tips from Tiger Woods
• Tiger, taxes and divorce (again)
• Tiger tales, taxes and divorce

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