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Matawan Divorce Law Blog

How do new tax laws impact my divorce?

If you are starting off the new year facing a divorce in New Jersey, you will no doubt have a lot of questions. A divorce is a legal event and therefore, there are many laws that will influence the decisions you and your spouse will make as you work through the details of your divorce agreement. This year, some of these laws have changed thanks to the Tax Cuts and Jobs Act.

As explained by CNBC, no longer will the person paying spousal support deduct this money from their tax return. They will now be the one responsible for paying income tax on the money instead of the person who receives the funds. For the receipient spouse, this change may impact them in a few ways. First, they may end up with less money in alimony than they would have previously as the paying spouse will end up with less money to pay out at alimony once they factor in the tax liability.

Freshen your estate plan when getting divorced

If you are like most married people in New Jersey, you have named your spouse as the person who would be responsible for making financial or medical decisions on your behalf if you would ever be rendered unable to do so. Your spouse is also likely the executor of your will and the beneficiary of any retirement account or life insurance policy. That fact means that these things should all be reviewed and updated when you get divorced.

As explained by Forbes, some parts of your estate plan may be able to be changed once you separate from your spouse but other parts might need to stay in place until your final divorce decree has been signed. Some of the things you will want to check into include your financial power of attorney and your advance health care directive. You will also want to reconsider who you would like to inherit your belongings and assets after you die.

The realities of gray divorce

Most people in New Jersey know someone who has gotten divorced at least once in their life. A good number of these people have been divorced at a later stage in life, passed the age of 50. In fact, according to The Pew Research Center, the number of people divorcing at this point in life has doubled since 1990. The impact of a divorce at this age may well be different than the impact of a divorce at a younger age.

As explained by MarketWatch, people in their 50s or 60s have far less time left to work and to make up the financial losses they experience when getting divorced. In addition to losing assets in a property division settlement, spouses of this age may also have just paid or are still paying for their kids' college educations. Providing care for aging parents may also be a financial burden for people in their 50s and 60s.

College financial aid and divorced parents

Residents in New Jersey who have children that are seniors in high school now may well be looking ahead to sending their kids off to college next fall. That may also mean that they are trying to figure out how to pay for that college education. For many people, financial aid becomes an essential part of funding higher education for kids and a primary step in receiving such aid is the completion of the Free Application for Federal Student Aid, also referred to as FAFSA. 

The FAFSA requires that parents provide their financial information so that the government and schools can identify what aid their child might qualify for. When a couple is divorced or even separated, it may not be clear which person's information should be reported on the form.

Uncertainty surrounds future divorce settlements

When a couple in New Jersey makes the difficult choice to end their marriage, they can face an uncertain future as many decisions must be made through the divorce settlement process. These decisions may well include how to split time with joint children, who might keep what assets, if a house will be sold and more. When negotiating any of the aspects of a divorce, concessions may be made along the way and these concessions often facilitate agreements in other areas.

When the New Year begins on January 1, the nature of some of these concessions and agreements may be dramatically changed. Bloomberg recently reported on how changes to the tax code are expected to have significant implications for divorcing couples. For many decades now, when one spouse is ordered to pay alimony to the other, the tax responsibility for the money paid was put on the person who received the money.

Focused financial planning can help you prepare for alimony

As your divorce is underway in New Jersey, you face the need to make many important decisions regarding your future as an independent person. For example, you may need to negotiate a child custody agreement, participate in mediation for the separation of any assets you shared with your spouse and prepare to pay alimony if it is required. At Robin Jill Schneider, we have helped many people to organize their affairs in preparation for getting divorced.

As you prepare to separate from your spouse, one of the most critical steps you will need to take involves organizing your finances and reassessing your budget to plan for alimony and child support. According to Entrepreneur, you should begin budgeting for alimony as soon as divorce discussions begin. Before thinking worst-case scenario, remember that you may be able to negotiate a temporary plan where your obligation to pay alimony will expire once certain conditions are met. Often, you may be required to pay alimony if your spouse stayed at home with your children during the marriage or is disabled and unable to maintain employment. 

Why are high asset divorces considered complex?

When New Jersey residents like you go through divorce, you also have to deal with matters related to your assets. The primary focus will be on how you and your ex-partner wish to split said assets. How exactly does your net worth weigh into this, though? Why do they make divorce cases more complex?

FindLaw takes a look at high asset divorce cases, also known as complex divorce cases. For your case to be considered high asset, you must hold significantly greater assets than the average couple. For example, if you have large properties, an extensive amount of money in savings or retirement, or large stocks, you may qualify.

Trends in divorce and marriage in America

People in New Jersey may well have heard for several years about how many marriages tend to end in divorce. In fact, most people likely have friends, neighbors, co-workers or family members who have been divorced even if they themselves have not experienced a divorce. Some new research conducted by a professor at the University of Maryland may indicate that the rate of divorce in America has actually dropped.

As explained by The Atlantic, the decline in the nation's divorce rate may not necessarily be the good news that some would like it to be. This drop in divorces appears at least in part to be related to a drop in marriages. When first looking at the data, a decline in divorces by as much as 18 percent appears to have happened between 2008 and 2016. Upon further look, however, that decline is actually closer to eight percent when accounting for the relative number of marriages.

When will alimony end?

If you are paying alimony to an ex-spouse in New Jersey, you may wonder when you will be allowed to stop paying. In some cases, the court order for payment may stipulate the ending date. However, sometimes it may not. There are specific circumstances under the law that stipulate how long you must pay alimony and what circumstances could lead to an order to stop alimony.

The Official Website for the State of New Jersey explains courts can only order that you pay alimony for as long as the number of years you were married. For example, if you were married for 17 years, then you will only pay alimony for up to 17 years. Of course, there are exceptions to this rule. The court may order a longer period of payment based on factors such as how evenly the estate was split, the health of your spouse, the ages you were when you got married and tax considerations.

What if my child wants a new custody plan?

Once a New Jersey judge signs off on your custody arrangements, you may breathe a sigh of relief that such a painful and messy affair is over and done. Enjoy the relief while it lasts, because custody is likely to be an ongoing issue in the aftermath of a divorce, according to Psychology Today.

Many parents—and judges too—feel children should be heard in custody decisions if they are old enough to understand. Certainly, one of the benefits of shared custody is that children receive much-needed reassurance that both parents continue to love them. However, whether or not your children have input into the initial arrangement, you can expect their feelings to change as they grow older.