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TX high asset divorce lawyerPaying alimony or maintenance after a Texas high asset divorce can cost tens of thousands of dollars for high earners. Yet there may be options available to parties in a high net worth divorce to limit the amount of taxes paid on alimony. Once you know that your spouse is entitled to receive maintenance under Texas law, you will likely be wondering whether there are ways to limit the amount of taxes that you will pay on those alimony payments. Indeed, since the payor spouse is responsible for taxes on the maintenance payments, those taxes can be significant.

While a court order for maintenance does not provide options for minimizing maintenance taxes in a high net worth divorce in Texas, entering into a marital settlement agreement with your spouse in which you provide an alternate form of compensation in lieu of maintenance payments could allow you to minimize taxes substantially. There are certain methods for reducing or minimizing alimony taxes for the wealthy, discussed below.

Minimizing Taxes on Maintenance in Austin, TX

Texas law caps maintenance payments at $5,000 per month, Yet even taxes on payments of $5,000 are probably more than you would like to pay. As we said above, there may be options to reduce the total amount of taxes you will pay. Options that may be available include but are not limited to the following:

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TX divorce lawyerAlthough some couples quickly follow up the decision to end their marriage with a divorce filing, it is also not uncommon for couples to carefully consider this option over a period of weeks or months before officially filing for divorce. Those who take the latter route have the benefit of extra time in which to plan for the termination of their marriage, which can make all the difference in how smoothly the later divorce actually proceeds. This is especially true for couples who have unique or particularly valuable assets, as accounting for, appraising, and ultimately dividing these assets can take a significant amount of time. To learn more about how an experienced high asset divorce attorney can help you plan for your own pending divorce, please contact our legal team today.

Planning for Alimony

As a result of changes made to the tax code last year, divorced spouses who pay alimony are no longer permitted to deduct those payments come tax season, while spouses who receive these payments can no longer count those payments as income. Knowing how, and planning for, these changes will affect a couple’s own financial situation after divorce is important to the success of the negotiation process. For instance, divorcing couples who properly plan before litigating a divorce could redistribute their assets in such a way that they are able to regain some of what they will lose as a result of the new alimony legislation. The spouse, for example, who is the higher earner could retain the couple’s taxable assets, such as cash, stocks, and bonds, while the lesser earning spouse could retain the tax-deferred accounts like 401(ks) and IRAs.

Accounting for and Appraising Assets

Couples who own extensive, unique or especially valuable assets usually have a more difficult time accounting for, characterizing, and appraising all of those assets. Beginning this process ahead of time can help couples avoid some of the stress that goes along with dividing up a marital estate. Hiring a forensic accountant and other financial specialists can also play a crucial role in ensuring that no assets are improperly appraised or are unaccounted for during the property division process. Compiling documentation related to ownership and value can also be accomplished in the planning stage, which can save time later on in the proceedings.

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Texas family lawyerAlthough spousal support is usually described merely as alimony, there are actually three types of spousal support recognized under Texas law. Each type comes with its own set of conditions and requirements, which determines who is eligible to receive support and for how long they can continue receiving it. If you are going through a divorce and have concerns about your financial future, you should consider consulting with an experienced high asset divorce lawyer who can help you determine whether you qualify for spousal support.

Temporary Spousal Support

Temporary spousal support is usually granted by the court when one party is unable to financially support him or herself while the divorce is still pending. Temporary alimony payments can be made every month or in a lump-sum payment. Which type of payment, how much the recipient is eligible to collect, and for how long he or she can continue receiving payments depends on a number of factors, including each party’s ability to support him or herself, each spouse’s employment skills, and both party’s earning ability.

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Texas divorce attorney, Texas family law attorneyIn Texas, courts can order spousal maintenance if a party can establish that he or she lacks the ability to provide for his or her reasonable needs because of an incapacitating physical or mental disability. Demonstrating a disability for the purposes of receiving maintenance can be difficult, so if you are considering a divorce and have questions about your eligibility to receive alimony, it is critical to contact an experienced complex divorce attorney who can explain your rights and legal responsibilities.

Establishing Disability

Before a court will award spousal maintenance based on disability, the party seeking alimony must first provide evidence of a physical or mental disability. This does not necessarily require the submission of medical evidence. Instead, a party can demonstrate his or her condition through circumstantial evidence and the testimony of witnesses. For instance, when attempting to establish disability, courts will take into consideration a series of factors that can be deduced through testimony, including whether the party seeking maintenance has attempted to secure employment in the past or is currently receiving any form of income. Providing this type of evidence is often necessary to demonstrating a link between the party’s disability and his or her inability to sustain employment. Without this link, courts are often reluctant to order payment of spousal maintenance based on disability.

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Posted on in Spousal Support

Texas high asset attorney, Texas alimony lawyerAside from custody issues, one of the most contested matters in a divorce proceeding is property division. As part of determining which party will be granted ownership of certain assets, courts often take into account whether one spouse will be required to provide the other spouse with periodic maintenance payments. Determining whether a spousal support award is appropriate can be a difficult matter to resolve and can also have serious financial repercussions for all parties, so if you are considering filing for divorce and have questions about how your marital property will be divided or whether you will be eligible to receive spousal support, please contact an experienced high asset divorce attorney who can help explain your legal options.

Establishing Eligibility

A party can only obtain spousal support if he or she can satisfy specific eligibility requirements. For instance, a party requesting support must provide evidence that he or she lacks sufficient assets to provide for his or her reasonable minimum needs and:

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Texas alimony attorney, Texas high asset divorce lawyer, Texas complex litigation attorney, When it first took effect in very limited form in 1997, conventional wisdom held that the spousal support law would be gradually expanded until Texas joined the majority of the other states which, at the time, routinely included alimony payments in their high-asset divorce decrees. In many cases, these payments were designed to permanently equalize the standard of living between the ex-spouses, meaning that regular monthly payments continued for many years after the divorce was final, or perhaps even permanently.

But, in the past 20 years, Section 8 of the Family Code has only been broadened once. And, given the alimony rollbacks taking place in various states, the law may not be expanded again anytime soon. So, although some spouses are entitled to some additional support in some circumstances, the scope of Section 8 has probably not fulfilled the vision of its original drafters, and given the current political and economic climate, the law may never reach that level.

Eligibility

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Texas high asset divorce lawyer, Texas alimony attorney, Texas family law attorney,While many states are restricting their alimony laws under tremendous pressure from advocacy groups, Texas has expanded its spousal support laws in recent years, albeit not by much. As a result, spousal support is still rather difficult to obtain. In other states, alimony is an important element of almost every property settlement in a high-asset divorce, but that is simply not the case in the Lone Star State.

Needs Presumption

To receive any long-term support ("long term" being more than a few months), the requesting spouse must overcome two hurdles in Section 8 of the Family Code.

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Posted on in Spousal Support

spousal maintenance, Texas high asset divorce attorney, Texas complex litigation lawyer,The Internal Revenue Service recently released supplemental guidelines regarding spousal support payments and income tax consequences.

These payments are tax-deductible, but the IRS will scrutinize the deduction to ensure that the tax return meets certain qualifications. An obligor spouse must make payments in cash or cash equivalent directly to the obligee spouse; these payments are specifically designated as "maintenance" in the temporary or final order; the spouses are physically living in separate households; and the obligation ends upon the payor spouse's death.

"Alimony" does not include voluntary payments or use of property, and the obligor spouse does not have to itemize to claim a deduction.

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