- New and unified estate tax, gift tax and generation-skipping transfer tax exemptions and rates.For 2011 and 2012, the federal estate tax exemption will be $5 million and the estate tax rate for estates valued over this amount will be 35%. The estate tax has also become unified with federal gift and generation-skipping transfer taxes such that the gift tax exemption and generation-skipping transfer tax exemption will be $5 million each and the tax rate for both of these taxes will also be 35%.
- Offers “portability” of the federal estate tax exemption between married couples. In 2009 and prior years, married couples could pass on two times the federal estate tax exemption by including “AB Trusts” in their estate plan. The new law eliminates the need for AB Trust planning for federal estate taxes by allowing married couples to add any unused portion of the estate tax exemption of the first buy proscar no prescription spouse to die to the surviving spouse’s estate tax exemption. What this means is a married couples can pass $10 million on to their heirs free from estate taxes with absolutely no additional planning. Be advised, however, the portability was not applied retroactively to January 1, 2010, and as it now stands is only available for deaths that occur during the 2011 and 2012 tax years.
As many people are aware, when Congress changed the tax laws in 2017, one of the changes was to make alimony no longer taxable to the recipient spouse, and no longer tax deductible to the paying spouse. This change goes into effect for all new alimony orders as of January 1, 2019. However, what many people do not realize is that modifications of existing alimony orders, that is alimony orders in place prior to December 31, 2018, can be grandfathered in and remain tax deductible to the paying spouse, and taxable to the receiving spouse. Indeed, unless the modification of alimony order specifies that the modified alimony order should be governed by the new law such that it is tax neutral, the modification of the pre-2019 alimony order will also be grandfathered in.
In other words, all new alimony orders entered after January 1, 2019, will no longer be tax deductible for the payor spouse. However, if the order is modifying an existing pre-2019 alimony order, it will remain tax deductible unless specifically.
This can be a helpful tool for negotiating modifications to existing alimony orders as the tax implications have been a relevant consideration in alimony orders up until the changes to the tax law in 2017. For the spouse paying alimony, the ability to deduct their alimony has often resulted in an ability to pay a larger sum to their former spouse because of the tax savings at year end. This change to the law removes this consideration from all future alimony negotiations, but it also means that the spouse receiving alimony will be able to count on the full sum of the money received, rather than a reduced amount due to alimony being taxable.
If you have questions about alimony in 2019, or any other issues related to divorce, we are here to help.