Tag: florida alimony

The Alimony Race

Yet another news outlet is reporting on the 2018 Alimony Race. NPR weighs in on why people are rushing to finalize divorces this year: so they can deduct alimony payments before the new tax law kicks in.

alimony race

On Your Mark

As NPR reports, divorce lawyers and accountants have been advising many of their wealthier clients to hurry up and get divorced, like, now or at least before the end of the year because under the new tax law starting in 2019, a generous tax break for alimony payments will be gone.

The New York Times’, Jim Tankersley, who covers tax and economics stories, had a few things to say:

TANKERSLEY: So right now, if you get divorced – let’s say you’re a husband who is paying alimony to your ex-wife. You can deduct that, if you so agree with your spouse in the divorce settlement, from your taxes. But what’s going to happen is you won’t be able to anymore.

CHANG: OK, so spouses who will be on the hook for alimony payments will be eager to get their divorce settlements finalized this year but also, I can imagine, spouses who will be receiving the alimony payments because I would think that my soon-to-be ex would have more of a reason to give me more alimony if he or she gets a bigger deduction out of it this year.

TANKERSLEY: Yes, but it affects different couples differently. For couples who make essentially the same amount of money, if they’re in the same tax bracket, this is just an accounting shift. The same total amount of money changes hands.

TANKERSLEY: But for couples who make different amounts of money and are in different tax brackets, what they basically got before was a subsidy from the government for their divorce…

CHANG: What do you mean?

TANKERSLEY: …Because the higher-earning spouse was able to pass on income that would have been taxed at a really high rate but then instead was getting taxed at a low rate.

TANKERSLEY: So that difference between the tax rates was just free money from the government. Now that goes away. So, if you’re the husband, for example, who earned more and is paying that alimony to a wife, now you have to pay the taxes at the higher rate. That free money disappears, and so you are probably going to say to your ex-wife, sorry, there’s no more money; I’m not going to give you even more than I was originally thinking I was going to have to pay. And so, you the ex-wife end up with less money overall. And in between, the government gets more money.

CHANG: And I can imagine most couples that have severely disparate incomes – it’s usually the woman who earns less. So, this tax law change will probably have women bearing most of the cost.

TANKERSLEY: That’s what divorce lawyers and tax professionals and financial planners have been telling me – is that, yeah, it’s largely women who receive alimony. And particularly with wealthy couples, it’s largely women who leave the labor force to take care of kids or for whatever reason. And women earn less in the economy for the same work than men do. This is a potentially big loss for women…

Why it Matters

Spouses negotiating alimony payments may try to pay less when the change takes effect because there will be no tax savings.

The deduction is a big deal to couples negotiating their divorce because if someone who earns, say, $250,000 agrees to pay $4,000 per month in alimony, it really costs the person about $3,000 after taking the deduction into account.

Without the break, many people will agree to pay only what would have been their after-tax amount. It is feared that more couples will end up fighting in court because they won’t be able to agree on alimony.

2019 Deadline

The alimony deduction repeal doesn’t take effect immediately and won’t kick in until 2019. That is why lawyers are advising clients to file for divorce now.

However, meeting the 2019 deadline won’t be easy.

Some states have mandatory “cooling-off” periods, others states have residency requirements. So, you can’t just file for a divorce today, and expect that you’re going to be divorced tomorrow.

The NPR interview is here.

 

Fast Break Alimony

According to various reports, former NBA lottery pick, Shelden Williams, may get a massive, lump sum, $400,000 alimony check from his WNBA star wife, Candace Parker. This post is about lump sum alimony.

Slam Dunk

That is the reported marital settlement agreement between Williams, and his wife, WNBA Los Angeles Sparks star, Candace Parker. Parker, one of the biggest stars in WNBA history, married Williams two years after he was selected 5th overall in the 2006 NBA Draft.

Despite the fact that her husband reportedly made more than $12m during his 6-year NBA career, Parker has apparently done better, and agreed to shell out the $400,000 alimony payment. In exchange, she won’t have to pay ongoing spousal support.

Florida Lump Sum Alimony

Lump sum alimony is not a form of alimony, but really a method of payment of alimony or equitable distribution.

I’ve written about various types of alimony before. Any form of alimony, durational, bridge the gap, etc., may be paid as lump sum alimony. Lump sum alimony can also be paid in installments.

Lump sum alimony is available where special circumstances exist to pay other forms of alimony in a lump sum. It may be comprised of real property too. A lump sum payment establishes a fixed monetary obligation which vests immediately, is non-modifiable, and does not terminate upon death or remarriage.

So, if the need for alimony exists, there must be some special circumstances to explain why non-modifiable award is appropriate.

Special circumstances may include a payor who has a history of non-payments. It may also be appropriate if the parties are of advanced age and close to retirement.

Full Court Press

Drafted No. 1 overall by the Sparks in 2008, Parker led the franchise to a championship during the 2016 season and was named MVP of the WNBA Finals. She has also played overseas for professional teams in Europe and China.

Williams was the fifth overall pick in the 2006 NBA draft by the Atlanta Hawks. The former Duke star played six seasons in the NBA before playing in France and China until 2015.

Parker and Williams married in 2008. They also have an 8-year-old daughter. According to reports, the couple agreed to joint legal and physical custody over their daughter. Child support is also interesting. According to reports, neither party will pay child support to the other. Instead, they both agreed to equally fund her education and split any major costs associated with her care.

The Bleacher Report article is here.