Change in US Tax Rules for Alimony


Change in US Tax Rules for AlimonyA big change in US tax rules for alimony is coming up in December 2018.

Do you live in the UK and your ex in the US? Or do you live in the US and your ex in the UK?

This change might apply to you and you may need to take urgent action.

The Tax Cuts and Jobs Act 2017 applies after 31 December 2018. Currently, payment of alimony (as maintenance is known in the US) is tax deductible. And those who receive alimony (the lower earner, so generally the wife) pay tax on it.

The change will mean husbands (generally the higher earner) will get no tax advantage and wives will no longer pay tax.

Two Ways of Looking at Change in US Tax Rules for Alimony

International families are rushing to finalise their financial arrangements to preserve the tax position. But there are two ways of looking at it.

Some say it’s a bad thing. Husbands will lose the tax advantage and may want to pay less alimony. And as wives won’t have to pay tax why should husbands pay them so much anyway? If you look at it this way you can understand why some international couples are panicking.

The UK went through similar tax changes in 1989. Lawyers were initially nervous. Would husbands be less willing to pay? Would wives miss out?

But in the long run the change in UK tax law didn’t make too much difference. Maintenance is calculated in the UK on the basis of need. How much does the wife require to support herself and the children? And what is the shortfall between her requirement and her income? This figure generally indicates the sort of maintenance that is required. See my recent blog Maintenance and Clean Break on Divorce.

Since 1989 there hasn’t been the head scratching and the complicated calculations – if he pays this much, how much tax relief will he get? So shouldn’t he pay more and pass over some of the benefit? And what about the wife, will it push her into a tax paying bracket? How much tax exactly will she have to pay? None of this applies anymore. In the UK it’s now a simple case of “What You See Is What You Get“.

Change in US Tax Rules for Alimony – Long Term & Short Term

Short term, couples will want to take advantage of the existing tax system. But hopefully the impending change won’t tip wavering couples into divorce.

Long term, it’s possible the change won’t make a fundamental difference. And it might save on professional fees as it will be simpler to work out what is actually paid and received – because they will be one and the same.

Change in US Tax Rules for Alimony and International Tax Rules

If one of you is US or UK based, and the other in a country where tax remains relevant, such as Belgium, Ireland, Italy, Netherlands or Portugal, make sure you take advice from an expert international family lawyer.

Prenuptial Agreements

If you are in an international family and you have an existing prenuptial agreement you should seek advice on the impact of the change in US tax rules for alimony.

Don’t Delay!

Anyone wanting to take advantage of the existing system should make sure they take advice now. There may still be time to secure a maintenance or alimony order – whether by consent or in Court – prior to 31 December 2018. And please note that the detail of the changes coming up in the US tax rules are complex and far reaching, and go well beyond the scope of this article. So please don’t delay taking expert advice.

Contact  Joanne Houston on 01962 217640 for free advice on the forthcoming change in US tax rules for alimony. In this 20 minute session we will review your situation and how you can achieve your objectives.

JUST FAMILY LAW are specialist divorce and family law solicitors offering personalised legal solutions. We offer collaborative law which is especially relevant in providing solutions tailored to your family’s needs. This includes same sex couples and their families. Visit our website just-family-law.com The topics covered in this blog post are complex and are provided for general guidance only. Therefore if any of the circumstances mentioned in this blog have application to you, seek expert legal advice.

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Do I Need A Will? Here’s One Very Good Reason …

Do I Need A Will“Do I need a Will?” Yes, you do, you need to make sure you benefit the right people: your family, your best mate, your dog. Because if you forget to make a Will all your property and savings could end up going to a distant relation you don’t like or have never even met.

People leave everything to their pets?

Yes they do. In 2004 Leona Helmsley famously left billions to her dog, Trouble, an appropriate name as this unusual Will ended up being disputed in Court. And that’s what we all want to avoid isn’t it, the money going to the lawyers. This can happen if you mess up when it comes to making, or not making, a Will.

But seriously, what could a Will mean for you? Read on for answers to the following questions:

  • Writing your own Will, what could possibly go wrong?
  • Do I need a Will? “Intestacy” and why it’s a bad thing
  • Good things a Will could do for you
  • Wills for the young and the young at heart – online accounts and social media
  • Owning a property or planning to buy – Inheritance Tax!
  • Special rules for Wills if you are getting divorced

Writing your own Will, what could possibly go wrong? 

Without expert legal advice you risk paying Inheritance Tax at 40 percent on anything over £325,000. And you will need legal advice if you have complicated family arrangements or are financially supporting someone, or if you estate includes:

  • foreign property, bank accounts, investments
  • a business
  • finances which are anything other than straightforward 

And did you know if you leave your home to your children your tax-free threshold can increase to £450,000? Make sure you check out the rules with an expert.

Writing your own Will? The resulting legal dispute could end up in Court and cost a fortune.

Do I need a Will? “Intestacy” and why it’s a bad thing 

Intestacy is when someone dies and there’s no Will. The intestacy rules set out a list of family members who benefit in strict order. But if you haven’t got any close relations your estate could end up going to someone you’ve never met.

And if you don’t have any relations, worse case scenario, everything could go to the Crown – no, not the TV series but the state, Parliament, our nation. Do you want your few pennies worth to drop into the bottomless pit of the UK balance of payments deficit? 

Good things a Will could do for you 

Put your mind at rest. Make sure your family and friends know you thought about them. Save them the agony (and huge expense) of going to Court if there’s a dispute about who should get what. Save inheritance tax.

Or perhaps you want to benefit charity? Doing something good in the world after you die might be a top priority (it’ll also save inheritance tax). Or donate your body to science.

Or give a couple of thousand to a group of friends to celebrate your life with a weekend away in Amsterdam.

A woodland burial might be just right for you – mention it in your Will.

But the most important thing is the right people (or pets!) will benefit from your estate.

Wills for the young and the young at heart – online accounts and social media 

Wills aren’t just for rich old people, they’re for everyone. You’re never too young to make a Will. Everyone has something to pass on even if it’s just social media and other online accounts. Otherwise bank accounts could be overlooked and your social media memories and photographs lost forever.

Own a property or planning to buy? – Inheritance Tax!

You can easily become liable to Inheritance Tax (40 percent on anything over £325,000) but with a solicitor’s help you can reduce it or avoid it altogether. With house prices in the UK shooting up more and more of us will be caught. Look at these stats about average property values (from Zoopla):

  • Hampshire £360,532
  • Winchester £553,508
  • Dorset £332,138
  • UK £235,021 

Special rules for Wills if you are getting divorced 

Did you know? Getting divorced will revoke your Will. So this could mean your new partner losing not only you but your home.

Can it get any worse? Not having a Will, or a Will written by an expert, can leave your loved ones with a mess to sort out and solicitors’ bills to pay

Did you know you can protect joint property whilst you are divorcing? If you die before you have a financial Order your ex could inherit your jointly owned property. This is a complicated subject and you should speak to an expert family law solicitor about taking a simple step called “Severing the Joint Tenancy” and making a Will.

See my blog about how to protect your financial settlement with an Order Quick Divorce or Safe Divorce? How To Protect Your Financial Settlement 

Do I need a Will?

Contact expert Wills solicitor, Karen Layland, on 01202 798199 or by email karenlayland@just-family-law.com  for free advice on the topics raised in “Do I Need A Will”. In this 20 minute session we will review your situation and how you can achieve your objectives.


JUST FAMILY LAW are specialist divorce and family law solicitors offering personalised legal solutions. We offer collaborative law which is especially relevant in providing solutions tailored to your family’s needs. This includes same sex couples and their families. Visit our website just-family-law.com The topics covered in this blog post are complex and are provided for general guidance only. Therefore if any of the circumstances mentioned in this blog have application to you, seek expert legal advice. 

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No Fault Divorce – Your Questions Answered

No Fault DivorceWhy is no fault divorce in the news?

The Government is considering no fault divorce because our current system isn’t working well. If you want to divorce you have to rely on a reason:

  • Adultery
  • Unreasonable behaviour
  • Two years separation with consent
  • Desertion
  • Five years separation without consent

Unsure which reason to rely on? See my blog Grounds for divorce – 5 things you need to know

Why has the Government decided to look at no fault divorce?

Resolution (an organisation committed to the constructive resolution of family disputes) has been lobbying for no fault divorce for years. And the case of Owens v Owens has been in the news.

What is Owens v Owens about?

Mrs Owens wants to divorce her husband. She gave twenty seven examples of his unreasonable behaviour: he is moody, argumentative and disparaging. But he defended the divorce saying the marriage wasn’t over, and he disputed the behaviour his wife had mentioned.

The Judge disagreed with Mr Owens – the marriage was clearly over – but he said the examples of behaviour were flimsy and exaggerated and Mrs Owens could not have her divorce. This meant she would have to stay married to Mr Owens. She appealed.

What happened when Mrs Owens appealed?

On 25 July 2018 the Supreme Court said the Judge was right when he said her reasons weren’t good enough. But the Supreme Court also said it felt “uneasy” and that “Parliament may wish to consider whether to replace a law which denies to Mrs Owens … a divorce”.

What’s the solution for Mrs Owens?

She will have to stay married to Mr Owens until they have lived apart for five years.

What is the Government doing? 

The Ministry of Justice has published a consultation paper, Reform of the legal requirements for divorce. They are asking whether divorce should simply be on the ground of irretrievable breakdown with no need to mention reasons. And whether the ability to ‘defend’ a divorce should end. The consultation closes 10 December.

Why is no fault divorce a good idea?

  • Angry spouses won’t be able to block divorces
  • People won’t have to stay married when they don’t want to
  • There will be less conflict
  • Couples will be able to concentrate on what is best for the children
  • They will be more likely to reach an amicable agreement about the finances, by negotiation, mediation or collaborative law
  • Our current divorce system dates to 1969. We live in a very different society and women are seen as equal partners in a marriage
  • Legal bills will be lower
  • There will be fewer contested divorces. Our Courts are stretched and so this might make everything a bit better for all of us

Is no fault divorce going to make more people divorce?

The breakdown of a relationship is hard enough as it is without the Court procedure adding to the difficulties. And in reality couples often agree how to word their divorces. “I’ll admit to adultery,” or “You can mention that unreasonable behaviour.”

Why is divorce an important stage in agreeing the finances? 

A Court order finalising the finances is only available once the first divorce decree has been granted (the “decree nisi”). Hence it’s a good idea to sort out the divorce and the finances at the same time. See my blog What Comes First Divorce Or Settlement

Can I do the divorce myself? 

Yes. But if you are struggling read my blog 10 reasons why you need a family law solicitor to check your DIY divorce petition

No Fault Divorce

Contact  Joanne Houston on 01962 217640 for free advice on any of the issues raised in this blog. In this 20 minute session we will review your situation and how you can achieve your objectives.

JUST FAMILY LAW are specialist divorce and family law solicitors offering personalised legal solutions. We offer collaborative law which is especially relevant in providing solutions tailored to your family’s needs. This includes same sex couples and their families. Visit our website just-family-law.com The topics covered in this blog post are complex and are provided for general guidance only. Therefore if any of the circumstances mentioned in this blog have application to you, seek expert legal advice.

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