Articles Tagged with Alimony

What is Alimony?

Alimony is a system of ongoing payments made by one spouse to another after the divorce is complete.    It is a remedial remedy,  the purpose of which  is not to reward one party and to punish the other, but rather to ensure that the reasonable needs of the person who is unable to support himself or herself through appropriate employment, are met.  In a  case called Pullett v. Pullett, the  Pennsylvania Superior Court said that  “alimony is based upon the reasonable needs in accordance with the lifestyle and standard of living established by the parties during the marriage, as well as the payor’s ability to pay.”

What is Alimony Pendent Lite and how is it different from Alimony?

The Republican Tax Bill  brings sweeping changes to the nation’s tax code.  As the country adjusts to the revisions and comes to understand the implications, we take some time to highlight the immediate impact this law will have on  families –both intact and those who are facing divorce.     Follow this blog for more details later.

Revisions in the tax code will affect:

           EDUCATION:   529 accounts are expanded to include private school and home schooling.

Currently families can save for children’s college education with the use of tax protected 529 accounts.  In a 529 account your money grows free of any capital gains taxes and  currently it can be withdrawn without any penalty to pay for higher education expenses.   Under the new bill,  the use for money in 529 accounts is expanded.  You  now will be able to withdraw up to $10,000.00 per child, per year,  to pay for private school or for educational expenses that are used for home schooling.   Money that is in a 529 account also may be rolled over to ABLE accounts, which are used for people with disabilities.

            ALIMONY: Alimony is no longer deductible for the payor spouse and no longer taxed to the recipient spouse.  

This  change in  the tax provision regarding alimony does not go into effect until 2019; however, parties in the midst of divorce must be aware of it now as it may have a significant effect on negotiations in equitable distribution agreements.   Understanding the effect of this dramatic change in the tax implications of alimony is important.   If you currently are receiving or paying alimony your agreement may be modified with certain specific language to comply with the new tax rule.  Your attorney should have access to the modification language. Continue reading