Media Contact: MaryConnell Linton, Woll & Woll, 248.354.6070; firstname.lastname@example.org
Birmingham, Mich. – June 7, 2018 –Jessica Woll, managing partner of Woll & Woll, P.C., a Michigan-based divorce and family law firm specializing in child-centric divorce℠ matters and complex family law issues, is generally an advocate of pre-nuptial agreements. However, Woll says that as analysis and understanding of the Tax Cuts and Jobs Act of 2017 continues, the additional financial costs of existing pre-nups are coming to light.
Under the previous law, alimony payments were a deductible expense and included in the recipient’s income; under the new tax law, the payor no longer gets a deduction and the recipient no longer counts the payment as income. The new law applies to agreements entered into after December 31, 2018 or earlier agreements that are amended after December 31, 2018.
“The way the prior law treated alimony payments was a useful tool in settlement negotiations because the recipient is usually in a lower tax bracket than the payor, and the tax deduction gave the payor a break,” Woll said. “The new law eliminated that bargaining chip. Now we are seeing a related impact on pre-nuptial agreements because they were written when alimony was tax deductible. For same payors, the tax implications could mean almost double alimony payments to what the couples initially agreed to.”
It’s an awkward situation, Woll says, because pre-nuptial agreements tend to be written before the couple has been married and when the admittedly touchy topics of such agreements seem most appropriate.
“I don’t want to be in the position of approaching happily married couples for whom I’ve arranged a pre-nup with a cautionary message that they may want to update them now or end up paying out more in alimony than intended should marital bliss cease and the pre-nup be enforced,” Woll said.
Woll suspects the courts will weigh in on the situation when the issue is addressed after December 31, 2018.
“The renegotiation of the pre-nuptial agreement will definitely be a valid discussion for high-net worth individuals in particular,” Woll said.
In the meantime, Woll revisits the reasons couples, especially over the age of 50, should consider a pre-nup.
“Couples remarrying after the age of 50 each bring their own financial assets to the relationship; as a result, there are different factors to consider than with a younger couple approaching their first marriage,” Woll said. “Further, there is often an issue of adult children on both sides of the equation who may get involved when a second marriage is dissolved. I’ve seen step-children try to lay claim to financial assets of the non-parent when the spouse in the second marriage dies or the couple divorces.”
According to Woll, a well-crafted contract can legally manage the special challenges presented to couples who are re-marrying later in life.
“Matters such as retirement benefits, pensions, collection of social security, valuation of properties, insurance policies, wills, inheritance and alimony are very legitimate concerns. Protecting yourself is still important.”
Before wedding bells ring—again—couples should consider the benefits of a prenuptial agreement:
“Longer life expectancies have given couples more options on how they want to spend their golden years, including a fresh start with a new spouse,” Woll said. “A prenuptial agreement can remove future ambiguity and uncertainty in the marriage contract and actually get the marriage off to an honest and open start. ”
About Woll & Woll, P.C.
Committed to excellence in child-centric divorce℠ matters and complex family law issues since 1994, Woll & Woll specializes in divorce and family law, including legal separation, post-judgment of divorce matters, removal of domicile actions, stepparent adoption, custody, child support, paternity and other family issues. Learn more at https://www.wollandwollpc.com.