What’s the valuation of a divorce?

When one year ends and another begins many are hoping for a fresh start. New Year’s resolutions are made with the best of intentions. And while none of us can predict the future, there’s always a chance the year ahead will not go as you intended. While no one “plans” for a divorce, it is important to be aware of all the circumstances around your potential divorce proceedings.

How do tax laws treat alimony payments?

You may have heard others say, “get married before the end of the year so you can get a tax break!” In 2018, the United States passed a new law called the “Tax Cuts and Jobs Act.” Following the passage of this law, the deduction for alimony payments won’t apply to any divorce finalized after December 31st, 2018. In essence, at the end of 2018, there was a rush of divorce proceedings and many saw the law’s passage as something that would cost the couples more money.

For divorces that were completed before January 1st, 2019, the higher income divorcee was able to deduct their alimony payments on their taxes and the lower-income divorcee was required to pay income taxes on the payment. This new law flipped the script.

In today’s society, the higher-income divorcee is no longer allowed to deduct their alimony payments and the lower-income divorcee receives those payments tax-free.

The intent behind this law was to remove alimony payments as bargaining chips in divorce proceedings leading to much more hostile proceedings.

What other money matters should you remember?

Another often overlooked money matter for separating couples is the issue of life insurance. Many divorce decrees can mandate maintaining or buying life insurance with an ex-spouse. The reasoning behind these mandates is that so you, and your children, are protected from a loss of income in a worst-case scenario.

What to remember in your divorce proceedings?

Money will always become an issue in divorce proceedings. It’s very important to budget before your proceedings are underway to ensure that you can afford any assets you are fighting for. Do your research before deciding to file. Hire a well-versed family attorney who can assist in your proceedings. Educate yourself, become an empowered decision-maker.