There are a lot of big changes with the new tax law, and divorcing couples are not insulated from them. For couples entering into agreements that include maintenance payments as of January 1, 2019 or later, the tax treatment of maintenance (formerly known as alimony) changes significantly. If you are facing divorce, it is important you understand these changes - particularly if you may be the one paying maintenance.
Historically, maintenance payments have been tax deductible to the payor and taxed as income to the payee. This helped equalize the incomes and make paying maintenance a little easier to swallow, and afford. However, with the new tax laws, maintenance agreements entered as of January 1, 2019 will no longer be entitled to that benefit. Instead, for new agreements, maintenance is neither deductible nor taxable. Maintenance will remain taxable and deductible for those agreements entered into prior to 2019 and up until December 31, 2018.
What does this mean for divorcing couples? We have yet to see; however, most family law attorneys anticipate that negotiating the issue of maintenance will be much harder. This is particularly true because the state laws regarding maintenance have not caught up. For instance, in 2014, the Colorado Legislature implemented a new guideline for determining and calculating maintenance to help level the maintenance awards across jurisdictions and individual court rooms. See our discussion of those changes here. Those changes, and calculations, contemplated the existing tax laws. Now, an award of maintenance will have a much different financial impact. The paying spouse will take a much bigger tax hit, while the receiving spouse will reap a larger, tax free, reward.
How individual couples and attorneys will handle this new reality remains to be seen. Here at Snodgrass Law, LLC, we've got some creative ideas. Contact us to learn more and get help managing the financial impact of your divorce.
On January 1, 2014, Colorado instituted a new guideline formula for determining maintenance (spousal support/alimony). Behind the maintenance guideline was the Legislatures' realization that, a person's maintenance award could suffer great variance based solely on what county they were in, what judge they had, or what lawyer they had. The maintenance guideline was intended to create a baseline for judges and create a greater level of predictability in maintenance awards. While judges still have the discretion to deviate from the maintenance guideline amount, they now have a starting point.
Per the maintenance guideline, and in general:
If you have questions about maintenance or other family law matters, please contact us. We are here to help protect you, your assets, and your family.
Many People going through divorce in their 30s, 40s, and even 50s, do not consider what their access to social security benefits may be later in life due to the divorce. The good news is, if you were married for ten years or longer, you may be entitled to benefits based on your ex-spouse's social security retirement benefit. This is an often missed, but often very important, income source, particularly for those with limited income and assets.
Social Security Spousal Benefits
Whether both you and your spouse are income earners, or if your spouse earns income and you do not, you are both entitled to social security benefits. If you are married at the time you become eligible to receive social security retirement benefits, and both earned income, you can each elect to receive your individual social security benefits. As an alternative, one of you can instead choose to receive the spousal benefit and delay the receipt of your own benefit. Electing such delay may increase your own social security benefit due to the delayed retirement credits. Spousal benefits are equal to a percentage of the social security full retirement benefit your spouse is eligible to receive. Receipt of a portion of your spouse's benefit does not decrease the amount your spouse receives.
Divorced Spouse Benefits
If you are divorced, you may still be entitled to a portion of your ex-spouse's social security retirement benefit. If you were married for 10 years or more, you reach age 62, your ex-spouse is eligible to receive benefits, and the benefit you could receive on your own is less than the benefit you would receive based on the divorced spouse benefits, you can elect to receive the divorced spouse social security benefit. The divorced spouse social security benefit is currently equal to one-half of your ex-spouse's full retirement benefit.
If you are also entitled to receive your own social security retirement benefits, you can choose to delay receipt of your social security retirement benefits while you collect the divorced spouse benefit. This option may allow your retirement benefit to grow due to the delayed retirement credits. Your ex-spouse need not have actually elected to begin receiving benefits for you to receive the spousal benefit. He/she need only be eligible, that is, age 62 or older. Additionally, and importantly, the amount of the divorced spouse social security benefit received does not affect the ex-spouse, or their current spouse's, retirement benefit.
For more information, visit www.socialsecurity.gov/planners/retire/divspouse.html
Often times, I come across parties who have relationships that are not entirely contained within Colorado. It may be that they own property out of state or that spouses live out of state, either partially or full-time. There are important jurisdictional implications when dealing with people and property that is not located within Colorado.
The most difficult issue is when one party lives in Colorado and the other lives elsewhere, particularly if they have lived separately, although married, for some time. In that case, parties may wonder - in which state is it proper to file the divorce? The answer is likely that either state is proper.
In Colorado, for the court to have proper subject matter jurisdiction over your divorce, at least one of the parties must have been domiciled within Colorado for 91 days preceding the filing of the Petition for Dissolution. Other states' jurisdictional requirements may vary. Therefore, if you have lived in Colorado for at least 91 days and wish to obtain a divorce, you may file in Colorado to obtain jurisdiction in Colorado. This may be preferable because it is more convenient for you, you have property in Colorado, or your children are in Colorado. This does not, however, mean that the other party may not challenge jurisdiction. Indeed, it may be that two states simultaneously have proper jurisdiction to enter a Decree of Dissolution of Marriage. The question then becomes, which venue is more proper. This article does not delve into venue discussions. We will save that for another day.
Once it is determined that Colorado has proper jurisdiction to dissolve the marriage, the next question is, does Colorado have personal jurisdiction over your out-of-state spouse? Jurisdiction may be obtained via a number of avenues, including consent, activities within Colorado, or the maintenance of a marital home in Colorado. Absent personal jurisdiction over the out-of-state spouse, the Colorado court may not divide marital property or enter orders against that spouse - including orders regarding maintenance and child support. Indeed, unless personal jurisdiction can be obtained, via legal means, consent, or otherwise, the court may be limited to dissolving your marriage.
Jurisdictional issues in divorce are challenging and complicated. Snodgrass Law, LLC can help you navigate this complex issue and help you obtain the resolution you seek. Contact us to find out how we can help.