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Tax issues with alimony

Alimony is taxable to the person who receives it and tax-deductible by the person who pays it. Some creativity can be used to offset the higher tax bracket of the paying spouse with the lower tax bracket of the recipient to end up with more dollars in the pockets of both spouses.

Alimony: modifiable and non-modifiable

It is common to see a final divorce order that specifies how much alimony is to be paid. It may not specify now long it is to be paid. In this case, either spouse can come back at any time and ask that the alimony be modified - either up or down. A wife may need more or continued alimony and the husband may wish to have it lowered or stopped completely.

Non-modifiable alimony means just that. The divorce decree will state how much and how long and nobody may change it later. This may create a hardship on either party in the case of a disabiltiy. It also means that the alimony has to continue even if the receiving spouse gets married before the end of the agreed upon term.

Make a detailed list of assets and debts

When you have your first appointment with an attorney, be prepared with detailed lists. Don't guess. That wastes your time and theirs, and costs you extra money. It is also important to list debts. Be sure to list the loans from Mom and Dad.

Prepare detailed expenses

The one area that may be argued about the most is the expenses for each spouse. (This may be one of the reasons you are getting divorced in the first place!) Show your actual expenses as you confirm them through check registers and credit card statements. This is to support why your expenses are so high in certain areas.

Accumulate cash

Once you think a divorce is looming, start putting away bits of cash. You may need to hire an attorney and/or other experts and you will need the money to pay them.

Preparing for your divorce

Gather information
Many times one spouse doesn't know what the other spouse is doing - concerning income, expenses, investments, insurance, loan applications, the family business - you get the picture. Gather as much information as possible. Every piece of the puzzle helps put togther the comlete picture.

Get copies of everything
It's amazing how documents seem to disappear once divorce is being discussed. If you have to get these documents later through your attorney, it can be very costly. Get them up front. Copy bank and credit card statements, loan applications, financial reports, check registers, investment reports, - in other words, everything that can have a bearing on your financial situation.