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Feb 1, 201811:44 AMOpen Mic

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An awkward, but important conversation about divorce for middle to high-income earners

There’s an under-the-radar provision in the new tax bill passed by Congress and signed into law by the president that has a major impact on the financial outcome for families going through a divorce. The new tax bill eliminates the tax deductibility for alimony, which in Wisconsin is called maintenance, for any parties whose divorce is not completed by Dec. 31, 2018.

This law is going to create two classes of people: those who are divorced by Dec. 31, 2018 will be able to utilize the tax law to potentially save tens of thousands of dollars in taxes per year — leaving more money for both households, post-divorce — and those who are not divorced in 2018, who will no longer be able to structure support payments to maximize household income. As long as parties are divorced in 2018 (or earlier), their future payments can remain tax deductible. Waiting just one day too long to file for divorce can make a substantial financial difference.

The change in the law has led to some awkward conversations with clients and potential clients. Despite what some might think, family lawyers typically urge clients to make every attempt to reconcile their relationship prior to filing for a divorce or legal separation. Now, however, we have to alert clients that it may well be in everyone’s best interests to file for divorce sooner rather than later to ensure that the divorce can be completed in time to take advantage of the tax law before it changes. That is particularly true in Wisconsin, due to a 120-day waiting period from filing to the first date that parties can be legally divorced.

If someone is strongly considering filing for divorce in 2018, to have a more realistic chance of it being completed by the end of the year, we are advising people that they should file no later than mid-June for a realistic chance of getting the divorce negotiated and resolved before the end of the year. For those people with more complex financial circumstances, the sooner they file the better.

Skilled family lawyers can advise clients and potential clients whether this change in tax law will likely have a substantial impact in individual situations before a client decides whether to make the decision to file or not. This is not a situation where lawyers are “pushing divorce” on those who are on the fence, but it is important that people make informed decisions about their future with as much information as possible.

Michele L. Perreault is a divorce attorney and chair of the Family Law Practice Group for the law firm of DeWitt Ross & Stevens S.C.

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Feb 2, 2018 09:28 am
 Posted by  Anonymous

Informative article. However, 3rd paragraph, 2nd sentence is Far from true in my experience! After going thru a horrible D, I'm a firm believer in EVERY couple having a Pre-Marital Agreement (PMA) to minimize attys & BIG FEES! Having a PMA BEFORE you get married is smart so in the unlikely event of a divorce each party knows exactly how the division of property will be handled, financial responsibility for kids, etc. PMA is a MUST! If you don't have one & a divorce occurs, most attorney's smell blood in the water, amplify the emotions to run up billable time to capitalize financially on your pain. I know there are good attorney's because I fortunately had one. However, he was up against the worst of the worst attorney's, let's call her Ruthless. My attorney said she is known as a flogger because she flogs her clients with fees. Her rep was so bad that when I spoke to other attorney's and they asked me who my x-wife's attorney was, they said OH NO! She continually created problems, objected to the simplest of requests (for instance, it took me 4 months to get my personal/work items from my house)! Our case was quite simple, yet she took it to the moon with problem after problem because she knew more problems = more billable time! In the required mediation, she was so unreasonable & outside the law with her demands, she forced us into trial! In the end, the Judge ruled on the side of WI law (shocker) & Ruthless and her client lost virtually every point they were after! Yet she knew, trial = billable time = $$! She defined unprofessional, disorganized & poor character - even lied directly to the Commissioner & the Judge! She dragged our simple case into a multi-day trial! The absolute worst part was Ruthless played a huge role in bullying her client which caused tremendous strife between a mom & her kids which exists to this day! Young couples, PMA = less attorney's = BIG $$$ & stress saved!

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