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.

One concession for the paying spouse was the ability to deduct alimony payments from their federal income tax return. This concession will no longer be in place for any divorce that is finalized in 2019 or later. Instead, the person who must make spousal support payments will experience a double hit as they will now be responsible for paying income tax on the funds as well.

This shift may well lead to very different settlement agreements than what would be seen under the existing tax law. Exactly how this change will play out remains to be seen but overall property division agreements could be impacted as well.


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Robin Jill Schneider
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