Should you file for divorce or wait?
That seems sort of self-serving because I’m a divorce attorney, but I’m the first person to tell somebody that I don’t know if you should file. It’s certainly a personal decision, and it’s a very difficult one for most to make.
If you know that you are going to be filing for divorce in the future, then you should do it now. I’m sharing this information in March of 2018. The tax code laws that are changing will go into effect in 2019, and that will greatly affect divorces going forward.
One of the main issues that is going to be affected is alimony. As you may know, the new tax revisions are going to eliminate the deductibility for alimony. It’s going to make a serious impact in the negotiations and judgements concerning alimony. Essentially, you’re going to be losing the tax deduction, which means alimony’s going to be set on the net income available to the paying person.
Historically, the paying spouse was typically a higher income tax bracket, so they got a greater tax advantage by paying alimony. Paying alimony, while not an advantage, at least saved the payer more than the receiving spouse was paying by receipt of the alimony. There was more money to go around, more benefits to be used.
Now, using the net income is going to mean there’s less alimony to pay, but the receiving spouse is going to have the same needs as they have had in the past. Also, alimony has been calculated one way for decades upon decades. I don’t think a lot of lawyers and judges are gonna be accustomed to the new analysis to do it as easily and as quickly as they have in the past.
The new tax changes are eliminating a lot, if not all, of the personal deductions. It’s supposed to be doubling the standard deduction as a way to eliminate the impact of that, but nobody really knows what the effect of that is going to be. A lot of child support agreements, parenting time agreements, and college contribution cases include a utilization of the dependent deduction as a way of offsetting some of the costs or sharing some of the tax benefits. That’s going to be eliminated and nobody’s going to really know what the impact of that is in the actual tax savings or tax burdens.
Another significant issue that customarily is put into a settlement agreement, or even a divorce judgment, is now going to be eliminated. We’re, once again, going to be unaware of how to negotiate and utilize these issues going forward, because it’s a brand new issue.
Prenuptial agreements that had been entered in the past may now become issue in a divorce context with many more challenges. Many of the prenuptial agreements may actually fail because all of them that include alimony that would have been negotiated with the understanding that they were receiving the tax deduction for the alimony payment. Now, if you file afterwards, you’re not going to receive that.
The current law says that the agreement is going to be determined, whether it’s fair or not, based at the time that it was entered, which is likely to mean that a prenup that was entered before the tax code change is still going to be deemed fair, because it’s not a question of unfairness because the law changes. That’s an issue that should have been contemplated. The people who negotiated these amounts, or negotiated even a way different amount anticipating the tax savings, will not get that. However, the prenup itself may be valid. I also think there’s a lot of prenups that are going to be invalidated because of the tax code changes. This wasn’t contemplated by either party.
Consider Filing Now
If you have either an alimony issue, a dependent deduction, child support matter, or a prenuptial agreement, it would behoove you to consider filing now as opposed to waiting for not only 2019, but even later in this year, because the average divorce is going to take at least about six months. I usually tell clients to figure between six and 18 months for an average divorce with complex issues.
Being that this is March, if you were to file now or soon, there’s a greater chance that you’ll be able to get in before the December deadline. Everybody understands that these changes are taking effect and most people want to finish their agreement just so that they can rely on the certainty that they know. Whether or not it’s necessarily advantageous, it’s still better to know exactly what you’re getting into and operating under the code and the laws that we’re all familiar with.