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alimony Archives

Alimony and Tax Implications

Alimony is support paid after a divorce has finalized. Alimony is deductible from the party paying alimony and taxed as income to the party receiving it if it meets certain requirements established by the Internal Revenue Service. For starters, you need to make sure the specific terms of your alimony award are spelled out in a settlement agreement or court order. Second, alimony is intended to be a cash payment. There is some flexibility here however in that payments of bills on behalf of the recipient are still treated as "cash" payments to the recipient. For example, alimony can consist of payments to upkeep a property such as mortgage payments, taxes and insurance though only half of the payments would be deductible.

Proving Cohabitation

Alimony is support paid to an ex-spouse following the divorce decree. The amount of alimony is largely based on the incomes of the parties but may also be affected by the distribution of the other assets, if any. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. Generally, the length of alimony is directly attributable to the length of the marriage such that the longer the marriage, the longer the term of alimony one may expect.

Lump Sum Alimony

Alimony is support paid to an ex-spouse following the divorce decree. The amount of alimony is largely based on the incomes of the parties but may also be affected by the distribution of the other assets, if any. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. As previously alluded to, an alimony provision within an agreement between the parties may not be modified in the absence of a specific provision allowing such a modification within the agreement. Generally, the length of alimony is directly attributable to the length of the marriage. For example, a party may expect approximately 1 year of alimony for every 3 years married. For marriages of over 25 years, an indefinite term of alimony may be appropriate.

What Makes a Prenuptial Agreement Valid in Pennsylvania?

Gone are the days when prenuptial agreements are viewed as contracts on a marriage or a guarantee on divorce. While some religions and cultures still do frown upon them, they can be a great way to talk about finances and strengthen your marriage with clear expectations. If you have children from a previous relationship and significant assets to protect, a prenup can also make everyone feel more comfortable.

Alimony in a Divorce

If you expect to receive alimony in a divorce, you will want to make sure that any agreement specifies the terms on which it is modifiable. Alimony is normally modifiable in amount provided you state that in your agreement, but not modifiable in duration. In Pennsylvania, however, if your spouse dies or you remarry or you live with another person unrelated of the opposite sex, alimony terminates at that time, unless you specify otherwise in an agreement. Since alimony does terminate in death, it is important to consider life insurance in your divorce plan or agreement. Many agreements will provide that until your alimony terminates that it is secured by a life insurance policy equal to or more than the remaining amount of money that you anticipate that you will receive over the course of the alimony term. In some instances, you may want to consider a buyout of alimony if you are paying alimony. This means that instead of making monthly payments on alimony, you lump sum the payment upfront and usually ask for a reduced amount since the money is being paid immediately. In this case, however, you may lose the deduction on your tax return depending on how the agreement is drafted since normally alimony is deductable by the payor and taxable to the payee. In addition, you will not be entitled to any of the payment back should your spouse remarry or cohabitate, but you will not be subject to an increase if your income goes up. There are many options to consider when paying or receiving alimony that should be considered in any divorce settlement. You should consult both an attorney and a certified public accountant. 

Alimony Modification

Alimony is support paid to an ex-spouse following the divorce decree. Unless otherwise stated by agreement, alimony may be subsequently modified due the changed circumstances of either party. The changes must be substantial and of a continuing nature. For example, if a party loses their employment or becomes disabled modification could be sought. An alimony provision within an agreement between the parties may not be modified in the absence of a specific provision allowing such a modification within the agreement.

New Jersey Alimony Reform

New Jersey is waiting to hear whether the long sought-after changes to their alimony laws will be adopted. Many view NJ's alimony laws as unfair and inconsistent. The proposed changes to the law would seek to fortify a more uniform and rational framework for determining what amount and duration of alimony is appropriate as well as circumstances that would warrant a change or termination of the alimony award. One of the key provisions of the proposed new law is the "elimination" of permanent alimony which would be replaced with open durational alimony. Additionally, the court would be required to consider all the relevant factors for an alimony award and provide specific written findings of fact and conclusions of law in support of their decision. The factors would be expanded to include a consideration of support that has already been paid prior to finalization of the divorce as well as the standard of living of both parties such that neither would be entitled to a greater standard of living than the other post-divorce. 

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