The Tax Cuts and Jobs Act of 2017 (TCJA) has eliminated the deductibility of alimony after December 31, 2018. It is expected that the loss of the payer’s tax benefit may have the effect of reducing alimony payment to the payee. This article proposes some options and drawbacks to consider relating to the TCJA, prenuptial agreements and estate planning.
Tag Archives: Samalin Divorce Finance
Trusts, Buy-Sells, Prenups: A Rubik’s Cube Of Traps And Worries
Counting the Miles (And Other Hidden Assets in Divorce)
The divorce process requires taking stock of your finances. You will be expected to provide a detailed accounting of your assets and debts, as well as your income and expenses. If you and your spouse use credit cards and earn rewards or airline miles on trips and purchases (including work-related transactions), these rewards and miles are considered marital assets and are subject to equitable distribution. Read more in this article.
Want a Divorce? Then Do It Right Now or Pay Much Bigger Tax Bill
If you are in the process of finalizing your divorce, then you may very well pay less in taxes for many years to come if you can complete it by December 31, 2018. The high-earning spouse typically pays spousal support to the non-working or low-earning spouse for a number of years. Spousal support payments have been tax-deductible to the paying spouse and taxable to the receiving spouse until the Tax Cuts and Jobs Act of 2017 changed this tax treatment making spousal support non-deductible to the paying spouse and non-taxable to the receiving spouse as explained in this article. However, wealthy couples may be unable to complete their divorce agreements in time simply because they have more valuable and complex assets and rushing to complete the divorce by year end may not be the optimal solution.
Retirement Assets Not Separated by QDRO Not Protected in Bankruptcy
Your retirement accounts, such as 401ks, are typically safe in bankruptcy and cannot be used to pay creditors. Traditional IRAs and Roth IRAs are protected up to a limit (currently more than $1 million). However, a U.S. Circuit Bankruptcy Court of Appeals recently ruled that when retirement assets are divided in a property settlement in a divorce, these assets are not protected from creditors. The Court’s opinion stated that the exemption from bankruptcy is limited to the individuals who create and contribute funds to the retirement accounts. This article summarizes the Court’s ruling.
Alimony: What Should I Expect to Pay After a Divorce?
Alimony or spousal support is common in divorces where the payee spouse may have lower or no earnings than the payor spouse. States use their own formulas for calculating the statutory spousal support. Additional facts and circumstances may affect the final amount, such as payee’s prospects for getting employed, variability of the payor’s income, etc.
This article provides additional considerations that affect alimony.