Your marriage lasted several decades, but you and your spouse feel that you should divorce to experience happiness. As you prepare to retire in Florida, you must also prepare for the nuances of gray divorce.
Kiplinger explores two essential factors in marital splits for those over 50: alimony taxation and estate plans. Learn how to set yourself up for success in your golden years.
You may not know that the 2017 Tax Cuts and Job Act affected alimony taxation. Now, those receiving alimony do not pay taxes on it, and those paying alimony do not qualify for a tax deduction. If you suspect that you may pay your spouse alimony, consider taking action to minimize payments to you safeguard your retirement fund and other assets. Specifically, look into a qualified domestic relations order. The measure lets you bypass taxation if you pay alimony, but your former spouse would pay taxes.
Review your estate plan after starting the divorce process. If you have a retirement plan, you may need your current spouse’s say-so before selecting a new beneficiary other than your husband or wife. Consider negotiating a mutually beneficial agreement with your soon-to-be-ex-spouse before finalizing your split. That way, you protect your retirement plan and account for your former spouse’s unanticipated death. As for an investment account or life insurance policy, expect fewer obstacles when designating a new beneficiary. You may like the idea of setting up a trust for your children, especially if they have poor money management skills.
Work with financial and legal professionals to protect your assets and future during a gray divorce. Expert insight and experience help improve your outcome.