The Times: Tax reform triggers rush for divorces

In Alimony/Spousal Support, Divorce & Separation, Family Law

By Will Pavia
First published on The Times

Estranged couples all over the United States were reconciled this Christmas over one thing: they must get divorced before New Year’s Day.

Family lawyers are reporting a sudden rush for the divorce courts before a law comes into effect that could make separations considerably more expensive.

Under tax reforms signed off by President Trump last year, alimony payments will no longer be tax deductible for those who reach divorce agreements after today. “We have been working morning, noon and nights, and weekends too. Ordinarily, this would be a slower time for us,” Lisa Zeiderman, managing partner of a family law firm in the suburbs north of New York, said.

The new rules will mean that the ex-spouse receiving alimony payments will no longer have to pay taxes on them but divorce lawyers say that overall the divided household will be left poorer. The change is expected to raise $6.7 billion for the Treasury.

The fact that the wealthier partner could claim a tax deduction was often deployed as a sweetener during negotiations over the settlement, Michael Stuttman, a Manhattan-based divorce lawyer, said. “Supposing he’s in the 50 per cent tax bracket. A payment of $100, as long as it’s tax deductible, costs him $50. But she’s in the 30 per cent tax bracket, so now she has $70. It cost him $50, but she’s got $70. That’s one of the little benefits that we divorce lawyers use to try to make this a little easier. These little increments make a huge difference when you’ve got a family that’s struggling,” Mr Stuttman said.

The American Academy of Matrimonial Lawyers opposed the tax change before it was agreed last year, warning that it would lead to harder-fought divorce battles. Mr Stuttman, a former head of the New York chapter of the academy, said that it would not affect the wealthiest divorcing couples, who tend to be his clients in Manhattan. Where both partners were in the same tax bracket, the change would make little difference, he said.

However, “for the wage earners, the people who maybe have one and a half incomes coming into their home and are literally getting by with that, who now have to support two homes — it’s a real problem,” he said.

“For people in the middle, I would say particularly a lot of the base for our president, they are getting screwed.”

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