How tax reform has changed divorce planning

For divorcing couples in Texas, financial planning for divorce has become more complicated since the passage of the tax reform law. Some changes could impact divorces that are finalized after 2019, making planning crucial.

According to Accounting Today, people who pay spousal support will no longer be able to deduct their payments on their taxes. People who receive spousal support will no longer have to report it as income. This change is important since the paying spouses will lose a benefit. They might want to negotiate with their spouses to secure an agreement to a lump-sum payment of alimony that occurs in 2018 rather than agreeing to ongoing monthly payments that they won't be able to deduct.

Another change that occurred is how businesses are valued. Businesses that are flow-through entities will have an increased cash flow, meaning that they will be valued higher. This is important for people who are getting divorced so that they understand what their spouses' businesses are worth and can make certain that they receive their fair portion. Finally, it is important to ensure that the assets that people receive in their divorces do not have encumbrances like liens or capital gains taxes.

People who plan to divorce might want to talk to certified public accountants and family law attorneys. The lawyers may work closely together with the accountants to help their clients understand the potential financial impacts of different types of property and asset divisions. This may help people to evaluate different proposed divisions of the property and secure agreements that are the most financially advantageous. The attorneys may negotiate with their clients' spouses in an effort to help their clients enjoy qualities of life that are similar to when they were married.

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