Reader Question – Divorce, Disability, and Quilts

A Reader Writes

 Linda,  I recently retired and went through a divorce after 38 years of marriage. During my pre-retirement years, I was out on SSI for ten years. My ex and I had a small business-I made handmade quilts. The business was in his name as I could only make a certain amount of money or lose my disability. When we divorced, the business was dissolved and the assets were split. As the inventory -quilts-have been essentially written off, would I be better off trying to sell my share of the quilts, piece by piece on Ebay-my research tells me that handmade quilts don’t bring much as the competition with the overseas market is cheap labor.  Would I be better off donating my quilts to a charity ?  If so how much could I reasonable write off as a donation without raising a red flag?  Another alternative would be to try  and sell the whole lot to a third party broker?  Obviously the broker takes a healthy chunk. What impact does my tax bracket have on this decision?Thanks 

You’re to be praised for the fact that you’ve obviously taken control of your life and responsibility for your future after the end of a long-term marriage!  That isn’t always easy, especially when you haven’t been able to work for a while. 

In regard to the disability, Social Security disability payments and most privately paid disability policies only look at earned income as potentially disqualifying someone for payments.  So investment income or money from sale of assets should be a problem for whether you can still get payments. 

If you are getting your regular Social Security retirement benefit now, that’s not going to be impacted income other that earned income either.  If you are at full Social Security Retirement Age, which currently ranges from 65 to 67 depending on the year you were born, you can also have earned income without losing any Social Security benefits.

In regard to the quilts, your next step depends on what you want or need to get from them.  You’re right that certain items do well in online sales and others don’t.  So if you have to get a certain amount from the quilts, only list them with minimum sale prices.  You may or may not have actually written them off, depending on how the business was last reflected on a tax return, so that probably needs to be reviewed with your tax professional.  In terms of charity, you need a receipt from the charity and a listing of what you gave and the value.  The value is the sticky piece.  You can support that with copies of what comparable items sell for online or in a thrift shop.  Or you could actually have them appraised.  The appraisal might give you the biggest number, but will also cost you a fee for the appraiser.  If you just want to get rid of the quilts, thrift shops, homeless shelters, and domestic violence safehouses will probably be most likely to want them.  Since they are so nice and personally made, it’s probably a painful thought to give them away, but some of these charities could probably really use them. 

It’s always a good idea if alimony (a/k/a spousal maintenance) is part of your divorce decree to look at whether or not it’s effected by other sources of income.  If you don’t feel comfortable reviewing the document without professional help, your financial planner or tax professional might be able to help.  If they aren’t comfortable with it, it’s worth hiring an attorney to look it over.