Tax implications is one of the key element when working out divorce process between couples above 50 years.
If you are over 50 and heading for a divorce, you may be thankful you don’t have to worry about child support and parenting plans complicating your split. However, a diamond or “gray” divorce has its own complexities that you should consider.
Whereas emotions run high in many divorces that occur in a couple’s 20s or 30s, those that occur later in life take place more like a business deal.
According to Kiplinger, changes that happened due to the 2017 Tax Cuts and Jobs Act mean you have additional considerations when dealing with the financial implications of your split.
Spousal support is higher in many cases because the primary wage earner is in the advanced phase of their career. Ownership stakes in organizations, car allowances, stock options and executive compensation packages make defining an appropriate alimony payment a challenge.
Laws before TCJA taxed the receiver of alimony payments, and the payer got a tax deduction. Under the new regulations, recipients no longer pay taxes, and payers do not get the write-off.
Without it, the impact on individuals in a higher tax bracket is greater.
Estate Plan tax implications
If you have a significant pension, 401(k), or any IRA plan, your spouse is traditionally the beneficiary.
In some cases, you can change the beneficiary once you finalize the divorce; in others, your ex must approve the change. As a result, the divorce settlement often includes a portion of these accounts.
It is critical that you understand the ramifications of the TCJA so that you can navigate the divorce maintain a reasonable standard of living, regardless of who is the primary wage earner.