Why You Need to Settle Your Divorce Now - Reape-Rickett
Why You Need to Settle Your Divorce Now

Why You Need to Settle Your Divorce Now

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The massive overhaul of the US Tax Code passed earlier this year included a very significant change that will take effect in 2019 and will impact every pending divorce case in the United States where alimony or spousal support is an issue.

 

Under the old code, spousal support or alimony was tax deductible by the payor spouse and tax includable by the recipient spouse.  However, under the new tax code spousal supports payments are not deductible by the payor and are tax-free to the payee for all orders made on or after January 1, 2019.

 

So what’s the big deal?  This change will no longer allow you to shift income from a higher tax bracket to a lower tax bracket.  Thus, the transitioned family will pay more tax.  The loss of the tax savings generated from shifting income from a high tax bracket to a lower tax bracket will be born by both payor and payee.  Most attorneys expect the amount payable for support in the future will be less than a deductible support order and will also be less than the after-tax amount the payee would otherwise receive to support household and lifestyle expenses.  Thus, for divorcing couples it is clearly a lose-lose piece of legislation.

 

If you have a pending case that involves spousal support you need to get it settled or resolved right away!  The presiding Judge for the Los Angeles County Family Court system has pledged that all judgments submitted by September 1, 2018, will be processed before the deadline.  It normally takes time for judgments to be processed by the courts and the end of the year always experiences an increase in judgment submissions.  This year the “bump” in submissions is expected to be extraordinary, and the Court’s ability to honor the processing deadline will be limited by resources.

 

Another caution, submitting a judgment is complicated, if a mistake is made the entire judgment is returned unentered. Therefore, it makes the most sense to have a qualified professional handle and oversee the preparation of your judgment and associated papers necessary to be certain the judgment is entered the first time it’s submitted!

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