Tax Reform Could Screw Up Your Prenup

Tax Reform Could Screw Up Your Prenup

Late last year, President Donald Trump signed a sweeping, $1.5 trillion tax overhaul into law, the largest in decades. While the bill slashes the corporate rate from 35% to 21% and temporarily reduces the tax burden for most individuals, it could also wreak havoc on prenuptial agreements across the country.

A prenup usually contains provisions about how much a partner would pay in alimony, also known as spousal support, in the case of divorce. Unfortunately for some, starting in 2009, the bill would eliminate the tax deduction that divorcees receive on their alimony payments to ex-spouses. For those in the top tax bracket, this change could mean that they could potentially pay double in post-tax costs compared to what they had agreed on in their prenups.

Some prenups may specify that in the event of divorce, one spouse is owed, $8,000 a month for half the length of time the couple was married. Other agreements set alimony based on a formula, such as a percentage of income. If agreements aren’t amended to factor in the tax changes, it could be left for the judges to decide whether the amounts or formulas still stand for couples who divorce next year.

Ultimately, the change could hurt those who receive alimony the most. Payers could plead with judges to revise their obligations given the new law, resulting in reduced payments.

If you believe your prenuptial agreement may be affected, please contact the Westlake Village family law attorney at the Law Offices of Jeffrey S. Graff today to learn more. Although it may seem ugly to amend your agreement, I can help you and your spouse come to an agreement that’s more advantageous to the both of you in the long run. I have helped thousands of families navigate through difficult family law matters, and I’m ready to assist you.

If you want the personalized legal solutions that you need, call me at (805) 633-4999 or contact me online to schedule a free consultation.

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