Why Divorce Mediation is the Way to Divorce with the New Alimony Tax Laws

At the end of 2017, Congress passed, and the president signed into law a sweeping tax reform bill. Among the numerous changes was one that significantly affects divorcing couples. As of the end of 2018, alimony/spousal support is no longer tax deductible for the payor spouse, and support payments are no longer taxable for the recipient spouse. This means that the payor spouse now has to earn more money to pay the same amount in spousal support.

The tax changes with regard to spousal support have made it more difficult for attorneys to negotiate a settlement. The previously used “cookie cutter” formulas that used to apply to this issue are no longer available, and Congress did not provide any real tradeoff in exchange for taking away this deduction.

Now, since there are no clear guidelines around how to compensate for this change, the only viable solution is for attorneys to work within their clients’ specific circumstances and budgets to understand their real needs. This can be challenging during an adversarial proceeding, however, where both sides have their defenses up, and the goal of the legal counsels is to “win” more concessions on behalf of their clients.

How Divorce Mediation helps Overcome Financial Challenges

Without the ability for payor spouses to deduct alimony payments, many divorcing couples need a more innovative approach to handle spousal support and other important financial matters. This means taking a deep dive into the overall financial picture to identify ways the couple can reach a solution that makes sense for both spouses. As a divorce mediator, this is what I have already been doing for years!

Divorce mediation, by its very nature, he is a much more cooperative approach to dissolving a marriage. Spouses are able to work out the terms and conditions of their divorce through a process that is guided by a neutral, third party mediator.

Although the mediator guides the discussion, spouses are ultimately in control of the outcome, and no agreement can be binding unless both parties agree to it. During this confidential process, spouses are able to speak more freely and bounce ideas off of each other that can bring them closer to a win-win resolution.

For couples with more complex financial situations, we have partnerships with experienced financial experts who can help the spouses make sense of these complicated issues and often identify more creative approaches to successfully resolve them. By understanding all the options that are available to the couple, spouses are frequently able to develop mutually beneficial settlements that would be difficult to accomplish in a court setting.

Divorce mediation provides several other potential benefits as well:

  • The process can typically be completed at a fraction of the cost of traditional divorce litigation;
  • The process can usually be completed much sooner than a traditional divorce;
  • The cooperative environment provided by divorce mediation allows couples to settle their divorce more amicably;
  • Since spouses control the outcome of the mediation process, they are much more likely to take ownership of the final settlement and adhere to its terms and conditions.

For couples in all tax brackets, divorce mediation provides a viable alternative to litigation that can successfully address spousal support and other important financial issues. By working together with the parties to understand their financial needs, we are often able to come to a peaceable and workable agreement with realistic support amounts.