Divorce among seniors (also known as “gray divorce”) has become common in Ohio and in other states. Tax law changes that were enacted in 2017 which will go into effect at the end of 2019 could change the way gray divorces are litigated. Older adults who are considering divorce will want to consider how these changes could affect them.
When dividing assets in a divorce, taking into account their respective value is important. The recent tax law changes gave businesses tax breaks which could make small businesses more valuable. However, the value of a small business can be difficult to calculate since the income can vary from year to year.
Retirement accounts like 401ks and IRAs differ from Roth accounts because the taxes have already been paid on Roth accounts, so Roth accounts are worth more if they hold the same amount as a 401k. A person who is facing a divorce later in life may want to consider hiring a forensic accountant to help them evaluate their assets so that they can make good financial decisions during the settlement negotiation process.
There have been huge changes made to the way alimony (also known as spousal support) is treated. Spouses who are receiving alimony will no longer be allowed to claim it as earned income, so they will not be able to add it to retirement accounts like IRAs. This will make it difficult for some divorcees to retire, especially if they do not yet qualify for Social Security.
An attorney may be able to assist anyone who is facing a divorce later in life who has questions about how the recent tax changes could affect their retirement. The tax treatment of different types of assets can affect the settlement negotiation process. An attorney may be able to assist clients make important decisions about their divorce by explaining how different assets will be affected by tax law changes.