If you are planning to get a divorce, and you are worried about your spousal support you may want to consider racing to the courthouse.  It is likely that among friendly discussions at the neighbors’ backyard BBQ, you have swapped stories about someone who is paying spousal support and deducting it at the end of the year; however, Trump’s new tax plan will drastically transform the divorce process and the concept of spousal support.

California divorce cases are primarily governed by the California Family Code; however, there are some occasions where federal law applies. Under current federal law, your divorce counsel can construct a Stipulated Judgment or Marital Settlement Agreement which can benefit both parties.  The agreement can be drafted to allow the payee spouse to receive higher support payments, while affording a lower post-tax cost to the payor spouse.  It is somewhat of a win-win.

Spousal support is a heavily weighted, and abundantly negotiated issue in divorce cases, and the taxability issue is a major factor in such negotiations. The new plan arguably creates a lose-lose.  Under the new tax plan, Spousal Support Orders entered into after December 31, 2018 will no longer be tax deductible for the payor.  The payor spouse no longer receives a tax deduction, and the payee receives less money.  Feel free to make your “impact to the economy” arguments here.

If you are contemplating a dissolution, regardless of which side of the spousal support issue you fall on, you may want to hustle, as a delay could seriously impact your bottom line.  It is also important to note that the court system is not as quick as those you may have seen on shows like The Good Wife or Law and Order.  It can often take months to get a court hearing, depending on how impacted your county is.

Plan accordingly, and contact Mendes Weed, LLP for the help you need.

 

The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

Christina Weed  CBLS Tax Law

 

PHONE: 925.390.3222

FAX: 925.301.8667

 

Mendes Weed, LLP offices are located in Walnut Creek and our skilled attorneys provide family, tax, business and trust law assistance for clients. For your convenience, we also have attorneys' offices in San Francisco and Sacramento by appointment only.

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