Minimizing the financial impact of a divorce

Those who get divorced are 7 percent less likely to be able to maintain their lifestyle in retirement compared to those who don’t divorce, according to a new study. Getting a divorce at age 50 or older could make it even harder to maintain a sufficient lifestyle in retirement. Although the divorce rate is stabilizing for California residents and Americans as a whole, it is increasing for those who are 50 and older.

Changes to the tax code are also changing the way in which divorce settlements are structured. Traditionally, alimony payments were considered income to those who received them and a tax write-off to those who made them. However, this will no longer be true for divorces finalized after 2018.

For spouses who have fewer assets and less income, it may be better to receive a share of an investment account instead of alimony or a marital home. This is because their capital gains rate could be 0 percent depending on their income. Getting the family home may also be less attractive for those who live in areas where state and local property taxes exceed $10,000.

Another consequence of the recent tax code change is that the child tax credit will now give a dollar-for-dollar exemption. Therefore, parents will likely want to be able to claim the credit if possible.

A divorce can be a complicated matter to resolve. This is because an individual may need to navigate the law while also trying to navigate their emotions. By consulting with an attorney, one can learn more about their rights in a divorce proceeding. Legal counsel could also use the facts in the case to help obtain a favorable settlement.

2019-10-01T12:29:24+00:00Tuesday, June 26, 2018|Divorce|