Starting in 2019, the way high net worth couples get divorced will change. The tax law changes make the way people in this income group settled divorces in the past look very different. Instead of getting the divorce subsidy, North Carolina couples that finalize their divorces on or after Jan. 1, 2019 may have to rely on other methods to save money. Although the new tax code may make it simpler for the average person to file returns at the end of the year, it doesn't offer many benefits to divorcing couples.
Couples that hope to save money by including alimony in their divorce settlements have to finalize their agreements prior to the end of 2018. Depending on the language in the settlement, the old law may apply to amendments to spousal support as well. Over the next 10 years, this one change to the tax code is expected to bring in almost $7 billion in tax revenue. That means a couple that waits to get divorced could lose a substantial amount of money.
Capital gains changes could also impact high-earning couples when they get divorced. Instead of the spouse who gets custody of the children keeping the family home, it might be more cost-efficient to sell the house prior to the divorce. By downsizing, people may keep more of their net worth and thus have a better chance of recovering financially after getting divorced.
The 2019 tax code changes may have a significant effect on high net worth taxpayers, especially if they plan to get divorced. Settling in 2018 may offer some advantages so it's important to consult with an experienced family law attorney who can help assess a client's financial situation and provide personalized advice.