Culp, Doran & Genest, P.L.C
Contact Us Today
Phone: 515-288-3333
Toll Free: 877-515-6615

New tax law may provide benefit to couples getting a divorce

Much has been reported about the new Tax Cuts and Jobs Act, and its implications on alimony. Iowa couples who finalize a divorce in 2019 will experience some changes to the current structure. Alimony paid can no longer be deducted on an ex-spouse's tax return; however, those receiving it will not have to pay taxes on it. While this new scenario will not likely benefit either party in a divorce, there is a potential bright spot with the new law that has not been widely discussed.

The potential positive outcome involves how tax-deferred retirement savings in a divorce are valued. Property, shares of stock and retirement funds may be used to pay alimony. A QDRO, or qualified domestic relations order, is necessary if funding retirement accounts are involved.

Financial planning experts can provide guidance to couples to establish how best to handle division of assets in the divorce. It is possible for both parties to come out ahead financially with more money to divide in the settlement if the transfer of assets is handled properly. However, using retirement accounts for alimony may not be the best solution in every situation. For example, if one party is under 59 ½ years old, he or she would be subject to penalties for withdrawing funds from the accounts early.

Anyone going through a divorce should seek the guidance of an experienced attorney. A trusted Iowa divorce lawyer can guide clients through every step of the legal process and advise them on how any new laws may affect their proceedings. A competent legal team will work to protect someone's best interests during this potentially traumatic time.

Source: investmentnews.com, "Divorce 2019: How to use IRAs and 401(k)s to ease future alimony planning", Ed Slott, May 11, 2018

No Comments

Leave a comment
Comment Information