People in North Carolina know the value of financial security. However, when it comes to divorce, retaining that security can sometimes be a balancing act. New tax laws may complicate this, especially for divorcing spouses with large amounts of assets. Therefore, it may be worth the time to look into restructuring spousal support. For those who are currently going through divorce, finding alimony alternatives that make more financial sense may be worth the effort.
After a divorce, one party is generally ordered to pay alimony to the other. The purpose is to allow a spouse who may not have equal earning power to continue to enjoy the standard of living he or she did while married. However, this may come at a price for the party receiving spousal support. Generally alimony is taxable like other forms of income. Therefore, a person who receives alimony is also paying off a sizeable chunk of the support in taxes. The highest earners in the country are now required to pay close to 40 percent of their income in federal taxes, so this can really be a significant amount.
Fortunately, there are ways to avoid paying tax on spousal support. For example, if a divorced couple has children, child support is generally not taxed to the recipient, nor deductible for the payer. So while a paying ex might gripe about losing this deduction, it makes sense to reevaluate the balance between alimony and child support.
Another option is to receive a large lump sum during property division, in lieu of periodic alimony moving forward. This method requires great financial discipline and planning. However, with the expertise of an experienced family law attorney, it may help a divorcing spouse enjoy a healthy financial future down the road.
Source: Forbes, "Divorcing Women: Will The New Tax Laws Impact Your Divorce Settlement?," Jeff Landers, Feb. 20, 2013