While ending a marriage should not be taken lightly, certain circumstances might make it more urgent to move forward with a case than at other times. This is especially true when it is a high asset divorce. Since those in Colorado with significant assets will want to ensure their property interests are protected, it is imperative for those who are thinking about a divorce to understand how the new tax plan might spur them to move forward with it more quickly.
The tax law will end a tax break for those paying spousal maintenance if the divorce is finalized after the end of the year. After 2018, those payments are not deductible. If the agreement is signed prior to year’s end, the annual deduction will still be in place. This is critical for couples in which one person earns a great deal more than the other. In the past, people who paid maintenance could deduct it and get a tax break. As of now, those paying can make that deduction regardless of what they are paying. This is a boon to wealthy people.
There is a concern that the elimination of this deduction will negatively impact women, since they are commonly the recipients of maintenance from a wealthier spouse. Although people who earn more money have lower divorce rates than people who earn less, this issue could spur those who are thinking about divorcing but are not yet certain to move more quickly so they can take advantage of the current tax law. Should there be a true level of uncertainty that a divorce is what the person wants, there are methods to avoid the penalty by changing the way property is allocated and give more to the former spouse in the form of real estate, retirement accounts and other assets when the decision to divorce is made.
Those who have major assets and are considering divorce must consider the tax implications that accompany a decision to end the marriage and that they will likely need to pay maintenance. The spouse who has less in terms of assets should also think about this issue as it affects them. Discussing a divorce does not necessarily mean that it must be completed. Understanding tax implications and other aspects of a divorce can help people make informed decisions, which is imperative for people with substantial assets.