Are separations financially smart?

The recent death of Anthony Bourdain was a tragedy for his many fans. While many were aware that he had started dating Italian actress Asia Argeto, they didn’t realize that he was amicably separated to his second wife and mother of their daughter.

Different family units work in different ways, but there has recently been a decided rise in couples not rushing to divorce even though they separate. The reasons for this are as unique as the couples themselves, but a common theme is that it enables them to save money. This may be the case, but this approach can also lead to problems.

Issues that could complicate finances

According to one report, long-term separations can lead to major headaches:

  • Taxes: Filing a joint return can be problematic for you if your spouse does not accurately report their income.
  • Estate planning: New York’s Exemption for benefit of family (EPTL 5-3.1) means that a deceased’s spouse has rights to certain assets even if the spouse is written out of the will. If there is no will, an intestacy share goes to the spouse.
  • Inheritance: Your separated spouse may have rights to any assets you inherit from your parents or others.

The Tax Cuts and Jobs Act eliminates alimony deductions

Some financial experts and attorneys are telling clients to file for divorce before the end of 2018 when the new tax laws go into effect. The main reason for this is that the new law eliminates the tax deductions of paying alimony. In the past, the couples would arrive at an amount knowing that the money would be taxed if it didn’t go to the ex-spouse. Now some are concerned that taxing that money will translate into lower payments because the payor will now need to pay more in taxes.

Protecting your rights and finances arekey

If you have been separated for a while, it may be time to reconsider the benefits of your current arrangement. The needs of individuals and families change, and perhaps it makes more sense now to file for divorce than it did initially. A family law attorney can help move this process forward while helping protect your rights and financial interests.

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