Get The Prosecutor On Your Side
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Get The Prosecutor On Your Side

My name is Danielle Diaz. One of the things I've learned in life, both inside and outside the courtroom, is that it is important to not see others as your enemy. Even though you may see the prosecutor as your enemy, he or she is just trying to do a job. It may be possible that you can get a prosecutor or the judge to be sympathetic and get him or her on your side. In order to accomplish this, you need to understand the law. I feel that most individuals do not understand the law, which is why I was motivated to create this blog.

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How The Tax Cuts And Jobs Act Will Affect Your Divorce In 2019

Douglas Thompson

How does the Tax Cuts and Jobs Act affect your future? Whether you're already divorced and still paying support, just now in the process of getting a divorce or contemplating a divorce in the near future, there are important things that you need to keep in mind about the way support obligations now work.

What The Tax Cuts And Jobs Act Did

Essentially the Tax Cuts and Jobs Act turned the way that spousal support payments have been taxed upside down. For years, the person paying support to a divorced spouse got to take those payments off his or her taxes. The person receiving the payments then paid taxes on them (usually at a much lower rate).

Mostly, this was a win-win situation, because the couple usually got to keep more money between them that way. The tax break was also worth the payments, so that tended to encourage spouses with significant means to be more generous with the spouses of lesser means. 

That's all changed. Now, the person paying support is fully responsible for the taxes. The payment itself to the ex-spouse is considered a transfer of assets. This is likely to make it harder for the lower-earning spouse to negotiate a comfortable amount of support in the way that was once common -- and could lead to a lot more bitterly-fought divorces than before.

How The Act Affects Those With Current Agreements

If you have a current divorce agreement or are separated from your spouse with an existing support agreement, you can breathe a sigh of relief. Your tax situation remains unchanged by the Tax Cuts and Jobs Act. Essentially, you're "grandfathered" in under the old rules.

However, just remember to follow the rules in order to avoid a problem:

  • Keep track of your written agreement. (An informal agreement doesn't qualify you to use the old rules, so make sure your support agreement is dated Dec. 31, 2018, or earlier.)
  • Make sure you don't cohabitate with your spouse. If you live together, those support payments aren't deductible from your taxes anymore.

Don't do anything that could jeopardize the validity of the agreement (like move back in together) unless you're prepared to make a new one under the new rules.

How The Act Affects Those Still Planning or Processing Their Divorce

If you're not yet separated from your spouse or your divorce still isn't finalized, you fall subject to the new tax implications of the Tax Cuts and Jobs Act. To minimize its effect, you can:

  • Try to work out a settlement with your spouse that involves more immediate payments or a bigger transfer of hard assets, like property, cars, and other valuables, instead of support payments.
  • Talk to your attorney about the possibility of a lump-sum spousal support payment, which will minimize your tax liability. This may be possible if you have assets in a retirement plan, for example, that can be converted to cash. 

Whatever you do, don't lose sight of the fact that your bargaining position has changed significantly now that the laws have changed. For more information, talk to your family lawyer today.


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