Plumides, Romano, and Johnson, PC

Plumides, Romano, and Johnson, PC

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Planning for alimony using investments

June 6, 2018

Some big changes are coming to the way spousal support is taxed thanks to the Tax Cuts and Jobs Act. For divorce and separation agreements executed in 2019 and beyond, North Carolina recipients will receive alimony tax free while payers will no longer be allowed to deduct payments. This reverses the current taxation standard for alimony that’s been in place for more than 70 years. Divorces completed before 2019 will not be affected.

While the change in the law will lower the amount of alimony paid to recipients in some scenarios, it does provide some advantages to couples who plan ahead using tax-deferred IRAs and 401(k)s. Alimony recipients may have less ability to create tax-sheltered savings themselves, but they can receive account balances through settlements. By circumventing traditional cash payments, a lot of tax saving opportunities can be realized.

This type of arrangement is designed to benefit both parties. The payer of alimony is able to transfer assets to the recipient pre-tax and will never have to pay taxes on the withdrawal. The recipient can then withdrawal from this account at a lower tax rate, effectively reversing the change that was made to the tax code. Recipients who need to take out money from an account too early may be subject to penalties.

Both parties in a divorce case are advised to get representation from an attorney regardless of any alimony planning that took place in the past. In many divorces, previous financial arrangements get ignored for various reasons. It’s the responsibility of an attorney to protect the financial interests of their client whether they are the giver or receiver of alimony.

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What our clients are saying

Mr. Romano is an amazing family law attorney.  He has been my attorney for over 5 years and I have never been disappointed.  His experience and expertise in Family law, in my opinion, supersedes all others in the field.  Mr. Romano and his team are very knowledgeable, thorough, professional, and personable. I highly recommend Mr. Romano and his team without reservations. If you're in need of a Family law attorney, Mr. Romano is your guy!
-Ivette C
You never know all the questions you should ask so it was a blessing that they listened and provided plenty of recommendations as well as assisted with claim, deeds etc. They know what to expect and provided a service without being pushy and will go at a pace you want and explain the laws so that you can understand all the legal speak.
-Paul S

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You deserve to have a skilled legal advocate on your side who will protect your best interests. We will do just that.

To schedule a consultation, please call our office in Charlotte at 704-333-9900, or contact us online. Plumides, Romano & Johnson

2115 Rexford Road, Suite 320 Charlotte NC 28211
704-333-9900
704-358-0536

 

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