• Super Lawyers(R) 2019
  • AAML | American Academy of Matrimonial Lawyers
  • Avvo Rating 10.0 Superb Top Attorney Divorce
  • Peer Reviewed. Leading Lawyers Network - Find a better lawyer, faster
  • Best Lawyers - Listed in The World's Premier Guide

This tax planning strategy could help with spousal support

You likely noticed how difficult tax season was this year. News update after update discussed unforeseen problems and unexpected tax obligations. The reason for the surprises: a new tax law.

The Tax Cuts and Jobs Act (TCJA) went into effect on the 2018 tax returns. As a result, many taxpayers were scrambling to make sure their tax returns were in line with the new law.

We will learn from this first tax season under the new law. We will make changes so we do not make the same mistakes and figure out how to make the tax law work in our favor. One specific area that can benefit from this knowledge is divorce.

Divorce involves a transfer of assets. The couple will now split assets once deemed marital. This process can result in tax consequences.

Arguably, the biggest impact of the TCJA when it comes to divorce were the changes made to alimony. As discussed in more detail here, the law basically took away the paying party’s tax advantages when paying spousal support. One potential option to still get some tax advantages while paying spousal support involves use of a trust. A trust is a legal tool funded by the creator that would then make payments to a listed beneficiary. This document could be drafted to pay the recipient without the tax burden.

A word of caution: as noted in a recent report by the New York Times the Internal Revenue Service (IRS) may frown upon the use of a trust in this manner. There is concern the agency will deem the trust as “disguised alimony.” As such, it is wise to discuss this and other options with an experienced attorney before finalizing your divorce.

No Comments

Leave a comment
Comment Information
EMAIL US FOR A RESPONSE

6905 Telegraph Road
Suite 350
Bloomfield Hills, MI 48301

Phone: 248-258-0800
Fax: 248-258-2750
Map & Directions

Contact Our Firm

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy