The Hill reports that a Texas couple may divorce to save money in order to pay for their daughter’s rising health-care costs. There are times when people have divorced “on paper” to save money, but is this a good reason and does it work?
Health Care Scare
Can you divorce to save money? Jake and Maria Grey may try. They told NBC’s “Today” that Brighton, the older of their two daughters, has Wolf-Hirschhorn syndrome, a developmental disability that requires 24/7 care.
“We shouldn’t have to make that sacrifice to get our child Medicaid!”
They said they spend thousands of dollars annually out of pocket, even though Jake Grey has private health insurance. The couple added that they are considering divorcing to save money so that Maria Grey can qualify for Medicaid as a single, unemployed mother.
Divorce to Avoid Penalties
I’ve actually written about a similar issue, namely: divorcing to save money on taxes by avoiding the marriage penalty tax. Back when the 2012 American Taxpayer Relief Act was passed, it raised taxes on couples making more than $450,000, and individuals making more than $400,000. As it turns out, some couples found out they could save over $25,000 a year if they divorced.
Think about that for a second. If you could save over $25,000 a year in taxes, you could take a couple’s trip to Italy, ski Deer Valley, put a little cash away for college, and still have some mad money to spend just by divorcing and turning your marriage into a long-term relationship.
Divorcing on Paper
There are a lot of risks though, known and unknown to divorcing on paper but staying together. I would encourage anyone considering a “divorce on paper” to think about a few things:
- The impact on your relationship. I don’t know of a good way to ask for a divorce: “Honey, I want a divorce. No, no wait, come back, it’s to save big bucks . . . really!”
- There is no fake divorce. Once the court signs the final judgment of divorce, you are divorced. Once you’re divorced, your Ex may find someone who thinks marriage is more valuable than 5% adjusted gross income.
- IRS rules regarding your filing status have something to say. IRS publication 504 warns that if you obtain a divorce just to file as unmarried with the intent to remarry the next tax year, you have to file as married individuals.
- State law. All no-fault states have minimum requirements for getting a divorce. Florida, for instance, requires at a minimum that your marriage be irretrievably broken before you can get a divorce.
- In addition, there are estate planning issues, retirement and social security complications, and many other issues besides the mere tax savings.
Most people who marry do so forever, and with the sincere intention of honoring their vows. Is the money worth it?
Jake Grey’s $40,000 salary is too much for the family to receive Medicaid, and Maria Grey said they are No. 60,000 on the list to receive state assistance.
It’s drowning us to try to keep up with her medical expenses. We’ve done everything we can do to try to keep her afloat, and we’re going to reach a point where we can’t do it and we won’t have another option. We don’t know what to do.
The Hill article is here.