Georgia residents who are going through the divorce process might want to consider the long-ranging financial impacts of separating from a spouse. According to a report from the Center of Retirement Research, about half of American retirees find it hard to maintain the standard of life they were accustomed to when they were working. However, households that have experienced a divorce are at a 7 percent higher risk of facing a lower standard of living.
This higher risk is further complicated by the changing tax law affecting alimony, which goes into effect in 2019. With the change eliminating the payer’s ability to claim the payments as a deduction and the receiver’s ability to claim it as income, both payers and receivers can be negatively impacted.
Some planning, particularly for older divorcing couples, can help offset the effects of divorce on retirement. For example, since people who receive alimony might fall into a very low tax bracket, they might benefit from receiving investment property as part of the divorce decree instead of the family home. This way, they might be able to qualify for a 0 percent tax rate on capital gains. They might also do better financially by renting a home rather than owning one. Another way to plan for the future is to determine which ex gets to claim the children on their taxes after a divorce. This child credit can be quite valuable when it comes time to collect a tax return.
There are many things to consider when planning for life after divorce. A lawyer with family law experience might provide valuable information about the law and advice about the best way to prepare for the changes that come with divorce.