New Tax Laws Call for New Spousal Support Strategies

The Tax Cuts and Jobs Act goes into effect on December 31, 2018; as a result, people who used to pay alimony will no longer get a tax break for doing so. This is changing the face of divorce negotiations. What are your options if you are the spouse in the higher income bracket?

Most of these options will work better if you negotiate your divorce settlement, rather than dragging the matter all the way to court.

Offer up your IRA

Some experts are recommending this strategy as the most tax-advantageous. You can’t withdraw out of the IRA early without suffering tax consequences, but the money accumulated there tax free, which means you essentially work your way back around to a deduction of sorts. Your ex can make use of the account in time.

It won’t be a good deal for your ex if he or she is not very close to retirement, however, as that money will come with tax penalties if he or she withdraws from the account, too.

Create some other lump sum payment arrangement. 

You can simply write a large check and then ask your ex to sign an agreement waiving his or her rights to future spousal support.

Just make sure you get the help of a qualified family law attorney before drawing up the agreement. The language used to make this work can have tax consequences for one or both parties. The right language can free both parties from tax consequences.

Negotiate a shorter duration for your alimony payments.

Spousal support isn’t always for life. Sometimes it’s just meant to help your ex transition to standing on his or her own two feet.

As an example, you’ve been married 10 years and your ex was the house spouse. You reaped benefits from this, whether the house spouse brought a paycheck to the table or not. This is one of the core principles underlying spousal support. Both parties contributed to the accumulation of marital property, either directly or indirectly.

Your spouse may only need support long enough to go back to school and train for a new career. Much depends on how old your spouse is. It’s probably not reasonable to ask your 65-year old spouse to go get a BA.

But if your ex can identify some educational plans that might position him or her into the work force you might offer to use spousal support to put him or her through school and a few years past it while he or she looks for a job. This is a nice alternative to winding up with a lifetime spousal support payment.

Of course, if you don’t want to support your ex even that long you may be able to work out an even better arrangement by pointing out that, on average, people receive 1 year of spousal support for every two years of marriage. It works out about the same in our 10-year marriage example. The picture looks a little different if you’ve only been together 4 years.

Your other option? Fight alimony tooth and nail.

Nobody loves the prospect of paying alimony. In some instances, a good case may be made for why you shouldn’t have to. Keep in mind that predicting alimony payments in Pennsylvania is almost impossible. It’s not like child support, where there is a tried-and-true formula.

Served with divorce papers recently? Worried about alimony? Wondering if you can alter your alimony payments? Thinking about a divorce, and trying to factor in spousal support? Give us a call for your free consultation. We’ll be happy to help.


Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest

Free Case Evaluation