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Going through a divorce is never easy, and it can be especially stressful when significant assets are at stake. In high-asset divorces, there is the additional issue of spousal maintenance payments.
Determining who pays and how much can be complex, overwhelming many undergoing divorces. Let's take a closer look at navigating the financial implications of alimony in a high-asset case.
Calculating Alimony Payments
When determining alimony payments in a high-asset divorce, the court will consider several factors—including each party's income and assets, marital standard of living, age, health, education level, and employment history. While certain guidelines must be followed in calculating alimony payments (e.g., what percentage of their income each spouse should receive or pay), the judge has some leeway to craft an agreement that best suits both parties' needs.
Generally speaking, the length and amount of alimony payments will depend on whether you have a long-term or short-term marriage; marriages that last less than 20 years are typically considered short-term marriages. That said, determining an exact figure for how much one spouse should pay another can prove challenging, given all these factors need to be considered.
Tax Implications
Alimony payments are generally tax deductible for the person paying them, while they are taxed as ordinary income for the person receiving them. It's important to note that this isn't always true — if you're not legally divorced by December 31st of any given year, then your alimony won't qualify as a tax deduction for that year — so it's essential to understand how taxes come into play during your divorce proceedings before signing off on any paperwork or agreeing to any terms.
Additionally, if you do not correctly classify your alimony payments as such (i.e., by checking off boxes on your tax forms), then you may find yourself facing serious consequences from the IRS down the line.
In Life, There Are Options. In Divorce, There Should Be Options Too.
When it comes to navigating the financial implications of alimony in a high-asset divorce case, it is essential to understand all aspects at play—from calculating final figures to considering tax implications—so that both parties involved can make informed decisions about their future finances and rights within their marriage settlement agreement or court order.
Working with an experienced attorney throughout this process can help you prepare your expectations for alimony post-divorce. Call our firm at (212) 466-6015 to request a consultation with a member of our Berkman Bottger Newman & Schein team.