MIAMI, Florida. If you are getting divorced this year, have a prenuptial agreement, or if you are planning to draft a prenuptial agreement take note. Starting this year, payers of alimony after a divorce can no longer deduct these payments for tax purposes. While alimony payers who were grandfathered into the old law won’t see changes, new divorces will be impacted by the law. Under Trump’s new tax law, the spouse receiving alimony will no longer be responsible for paying taxes on the amount, while the paying spouse will be responsible for paying taxes. Ultimately, the law will increase the tax burden that divorcing couples will face. While the tax law will certainly have an impact on couples who choose to get divorced in the new year, happily married couples might also want to consider the impact that the tax law might have on their existing prenuptial agreements.
According to Bloomberg, the highest earning spouses are likely to see the greatest increases to their tax and alimony burden under the law tax law should they get divorced. Bloomberg notes that the effective change could be as high as double the amount the spouse paying alimony expected his or her burden to be. If alimony is discussed in your prenuptial agreement, now might be the time to take another look at how the changed tax laws might affect your agreement. Bloomberg suggests that, because the tax law has changed, this might be one area of a prenuptial agreement that could potentially be challenged in court. So, it is possible that you might not need to adjust your agreement at all. Divorce lawyers, understand that if you are happily married you might not want to have another discussion about your prenuptial agreement.
If your prenuptial agreement stipulates that you should pay alimony, you and your divorce lawyer may be able to make a case to the court that the prenuptial agreement should not stand. It is possible that divorce courts will review prenuptial agreements in light of the changes to the law. However, if you are receiving alimony, the new tax law can impact how much money you will get, especially if your partner is able to ask the judge to throw out provisions of your prenuptial agreement.
It might be wise to wait and see how courts treat prenuptial agreements that were drafted before the tax law went into effect. Ultimately, both parties in a divorce will end up with less money, because under the new tax law, couples divorcing will have a higher tax burden combined. Some couples might choose to work out the agreement so that they split the difference, while others will choose other arrangements.
So, for couples who are concerned about how the tax law might change their agreement, you might want to start discussing how to amend your prenuptial agreement with your lawyer so that it takes the law’s changes into account.
If you are in the process of drafting a prenuptial agreement with your lawyer, be sure to consider how the new tax law will impact your financial future. According to Patch, any prenuptial agreements that discuss alimony that don’t take into consideration the new tax law could potentially have the alimony provisions challenged in court going forward. To be certain everyone is on the same page, you may want to ask your lawyer to include language that clarifies that the alimony agreement in your prenuptial agreement takes the new tax law into account.