The passage of the Tax Cuts and Jobs Act means that there will be changes ahead for couples in Kentucky who are planning to divorce. One of the major changes will be in alimony payments for divorces finalized after the end of 2018.
For decades, people who received alimony have paid taxes on it while those who owe support have been able to deduct the payments from their taxes. One expert says that it's unclear how courts will handle prenuptial agreements that address alimony with this assumption. It might be necessary to seek guidance from the IRS.
How a business can be valued during the property division process is another change. People may want to make sure business assets are valued in a way that is to their benefit. The spouse with less money should be particularly aware of when taxes or other elements may make an asset worth less than it initially appears. For example, a couple might own a house that is fully paid off and worth $500,000 as well as a brokerage account that is worth $1 million. While it might initially look like the brokerage account is the more valuable asset, if there is an embedded capital gain, this may not be the case. Finally, spouses should be aware that some retirement accounts require a document called a qualified domestic relations order to avoid penalties and taxes.
Preparing financially for a divorce may be challenging for a person who has not been very involved in the family finances. The soon-to-be ex may want to gather as many financial documents as possible and consult an attorney about the potential issues around property division.