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Prenuptial Agreements and the New Tax Law - Why a Review of Your Documents May Be Necessary in 2019

Wheaton alimony lawyersData suggests that more couples are signing prenuptial agreements before getting married, which could be a good thing, as data suggests that couples are less likely to divorce when they have one in place. However, those that have one already may need to review their documents, come 2019. 

How the New Tax Law is Expected to Impact Existing Prenuptial Agreements 

The new tax law, set to go into effect on January 1, 2019, is expected to impact both married and divorcing couples in a significant way. For those going through a divorce, it may affect alimony payments—both in amount and how willing a party is to make them. It is this aspect of the new law that also affects prenuptial agreements. 

For the past 70 years, alimony payments have been tax-deductible for the payor and taxed as income for receivers. The new tax law eliminates this element of divorce law. Sadly, this change is expected to leave less money for the family, as a whole. Without the tax benefit, payers may have less discretionary spending money than their spouses. The courts have to balance this out by reducing the alimony payment amount, so even though the receiving party may not have to report the payments as taxable income, they may ultimately receive less money. Neither party benefits from this, unfortunately, but the change is inevitable. 

Existing prenuptial agreements, which were calculated under the old law, may need to be reviewed to ensure they take the new law into consideration. Alimony payments may need to be renegotiated, preferably at a time when the marriage is still strong and healthy. Bringing it up could create waves within the marriage, however, especially if the couple struggled to reach an agreement before the start of their marriage. As such, parties may want to speak to their attorney about their prenuptial agreement before bringing the matter up to their spouse. Doing things this way allows parties to determine whether a modification to the agreement may be warranted. If not, there is no need involve the spouse and risk their feelings getting hurt. 

Contact Our DuPage County Family Law Attorneys 

If you need an attorney to examine your prenuptial agreement for any potential issues, moving forward under the new tax law, contact Davi Law Group, LLC. Compassionate and caring, our DuPage County family law attorneys realize that you may feel a need to protect your finances in the event of a divorce, but that it can be a sensitive matter. Get a personalized, no-obligation consultation by calling 630-580-6373 today.

Sources:

https://www.dailyherald.com/business/20180603/prenups-under-attack-as-tax-law-boosts-cost-of-alimony-payments

https://www.forbes.com/sites/heatherlocus/2018/09/23/why-prenuptial-and-postnuptial-agreements-lead-to-stronger-marriages-and-prevent-disastrous-divorces/#1c8d93176488

https://www.bloomberg.com/news/articles/2018-05-23/prenups-under-attack-as-tax-law-boosts-cost-of-alimony-payments

https://www.cnbc.com/2018/11/29/new-divorce-tax-rules-could-result-in-a-big-financial-disadvantage.html

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