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Getting a “gray” divorce, or a divorce when you’re in your 50s or older, comes with challenges that younger couples may not face. It may be best for you to make sure your retirement plans are intact and to make any changes to your estate before your divorce so that you can keep your finances protected during this new phase of your life. If you’re a New York resident, here are some important things to keep in mind about gray divorces.
The Tax Cuts and Jobs Act (TCJA) passed in 2017 brought about some significant changes in terms of alimony taxation. Under the laws that were previously in place, alimony payments were tax-deductible for the person paying taxes. However, the receiver of the payments was taxed. However, the TCJA has changed these regulations. If you’re getting a gray divorce after December 31, 2018, you won’t receive a deduction if you’re paying alimony, and you won’t have to pay taxes on the money if you’re receiving it.
It is also important to make changes to your estate plan if you’re getting a gray divorce. You should make these changes at the right time to make sure that your assets go to the beneficiaries that you’ve designated.
If you’re currently married, have a large pension, and have decided to get a divorce, you’ll need to change the beneficiary list on your estate plan. For instance, you may want your pension and other financial assets to go to your children instead of your soon-to-be-ex. However, state laws may prevent you from making this change until your divorce is final since your spouse automatically serves as the beneficiary for a pension if you’re married when the pension is put in place. However, your children can be the beneficiaries of your life insurance or other investment accounts before the divorce is finalized.
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