Prenuptial agreements are a valuable tool for individuals with significant assets that they wish to protect. Many Texas couples utilize these agreements to establish the terms of a divorce should their marriage end, which includes addressing future alimony payments. With new tax changes set to take place in 2019, some people are worried about the effect on their prenups.
Although prenups are now increasingly common across every income level, the highest earners still create the majority of agreements. Most of these high-earners set forth who will pay alimony and how much. However, alimony plans made before the announcement of the new tax plan may no longer be realistic. For instance, the tax change means that, effective with divorces finalized after Jan. 1, 2019, a high-income partner who agreed to a $10,000 per month alimony schedule would suddenly be on the hook for nearly $20,000 a month.
Couples have a few options for handling the new tax laws. Amending an agreement might not seem ideal, but it can ensure that no one will be forced to pay more than they can afford. During or after a divorce a person may ask a judge to revise his or her financial obligations based on the new law. Others may try to have the prenup thrown out altogether during the divorce, although this can be difficult.
A change in the tax law does not immediately negate the overall effectiveness of prenuptial agreements. However, Texas couples need to be aware of how this shift will affect alimony for both the payer and the recipient. Having the agreement thoroughly reviewed by a counsel knowledgeable in family law is a smart way to ensure that everyone’s interests will be respected during a divorce.