Tax Strategies for Divorce

Tax Strategies for Divorce

A number of people are concerned about the loss of the alimony deduction next year and whether they will be able to finalize their divorce by December 31, 2018 so that they can still take advantage of it. If this is something that keeps you up at night, we have provided some suggested options below that may ease your mind:

Make the Deadline

If your hope is to make the deadline and file or settle by December 31, one way that you can speed things along is by sitting down with your attorney and discussing what is most important to you in terms of what you really want, and why. The more that you and your attorney can nail down, the easier your negotiations will be. In addition, keep in mind that, even though you have to have a written agreement in place before January 1, 2019, you can modify your agreement in the future while still holding onto your tax benefits. Discuss what absolutely needs to happen right away with your attorney in order to get it through the courts.

… But First and Foremost, Ensure You Sign the Right Agreement

Also keep in mind that, while the alimony deduction is important, it is not worth rushing through and signing a deal that is bad for you just to take advantage of it. It is imperative that you work with your attorney to understand the long-term implications of your proposed settlement, as ensuring that you are on track with enough assets to meet your goals is imperative.

Strategic Alternatives: Property Tax Settlement

If the alimony deduction is a sticking point, consider strategic alternatives by structuring the property settlement tax efficiently. For example, if the spouse in the higher income bracket retains taxable assets with a high basis (such as bonds, cash, or stock), and transfers tax-deferred retirement assets (such as IRAs or 401ks) to the lower income spouse, as a couple, you will likely regain some of the tax benefits lost with the alimony change. Other strategic choices—such as the use of charitable remainder trusts—can also reduce some of the pain of losing the alimony deduction. The bottom line is that there are a number of ways to take advantage of certain tax strategies during divorce.

Contact Our Experienced Arlington Heights Divorce Lawyer Today to Find Out More

If you have questions about the timeline for finalizing your divorce, please contact one of our experienced Arlington Heights divorce lawyers today for a free consultation. We are here to help.