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The Effect of the 2017 Tax Bill on Divorce in Arizona | Hildebrand Law, PC

Posted on : December 19, 2017, By: Chris Hildebrand

The Effect of the 2017 Tax Bill on Divorce

The Effect of the 2017 Tax Bill on Divorce.

President Trump and the Republicans have advocated for the elimination of the income tax deduction for the payment of alimony. The Republican party’s reasoning for eliminating that income tax deduction is that it is being exploited by the wealthy in their divorces.

The result of the elimination of the spousal maintenance deduction, however, will create more income tax for the federal and state governments and negatively affect those in the middle class who pay a majority of spousal maintenance. The republican premise for the elimination of the spousal maintenance deduction is flawed and actually hurts the middle class.

I have been a divorce attorney for over 20 years and can attest to the fact that neither I nor any family law attorney with whom I have had a case has ever raised a discussion on how we could game the Internal Revenue Service with a strategy to increase spousal maintenance for a tax benefit. There simply is no beneficial reason for doing so.

If an attorney represents a wealthy divorce client, the chances are that no spousal maintenance will be paid. The reason for this is because the spouse of that wealthy person will receive so much property and cash or cash equivalents that he or she will not have a need for spousal maintenance.

It would, likewise, make no sense and would arguably be malpractice for an attorney to negotiate an arrangement whereby the wealthy party retains more of the assets in exchange for a contrived spousal maintenance award which may or may not be paid in the future due to the death of a party or the remarriage of the spouse receiving alimony.

There is no reason a person would accept less of the assets they can receive now for a promise of future payments from the other spouse. Although some divorces are amicable, I have seen no reason a spouse would subject themselves to unknown risks for the tax benefit of the spouse there are divorcing.

Divorce and the 2017 Tax Bill.

As in most cases, you can find the answer to a question by following the money. The person paying alimony always has greater earnings than the spouse receiving alimony. As a result, the spouse paying alimony is always going to be in a higher top tier marginal income tax rate.

Under the present law, the higher earning spouse paying spousal maintenance is able to deduct that alimony from his or her income takes which reduces the payment of his or her income taxes at their highest marginal income rate while the spouse receiving the alimony pays income taxes at a much lower marginal income tax rate.

The result is the government receives less income tax. By eliminating the income tax deduction, the person paying alimony will be taxed at his or her highest marginal income tax rate resulting in more revenue to the internal revenue service.

Why will this impact the middle class? That is easy to answer. People in lower economic classes do not, as a general rule, pay alimony. Those in the highest economic classes, as a general rule, do not pay alimony either because the other spouse typically receives so much in assets, investments, and financial accounts that they do not qualify for alimony.

The middle class, however, is a much different story. They typically do not have enough assets in the divorce settlement to support themselves and one spouse may be the breadwinner. As a result, someone earning $100,000.00 to $500,000.00 a year or more will be most affected by this portion of the 2017 tax bill.

All of this should be no surprise to law-makers and I suspect it is not. This may be an example of how the Republicans provide tax breaks for the wealthy and finance those in a lower economic position with a subsidy from the middle class in the form of the elimination of deducting alimony.

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Chris Hildebrand wrote this article to ensure everyone has access to information about family law in Arizona. Chris is a divorce and family law attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and, quite frankly, actually caring about what his clients are going through in a divorce or family law case. In short, his practice is defined by the success of his clients. He also manages all of the other attorneys at his firm to make sure the outcomes in their clients’ cases are successful as well.

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I retained Hildebrand Law after interview a number of firms in the valley. Working with Michael C. was incredibly easy and informative. My case progressed in such a organized and thought out way to ensure that my needs were met. Michael was incredibly proactive and was able to see far ahead into my case to steer clear of some roadblocks. I would not hesitate to recommend Michael Clancy, and Hildebrand Law in general, to anyone.

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Despite the unfortunate situation I found myself in, Chris Hildebrand @ Hildebrand Law helped me maneuver every step with professionalism, expertise, and even a sensitivity that was an added bonus. Chris and his staff helped me even when I didn't know I needed the help. In other words. . . they made sure we did not leave anything undone. And in the rare instance we needed the expertise of another professional, Chris knew exactly who to recommend. Chris also knew, because of his experience, what to anticipate down the road of litigation. That meant we were better prepared to meet the challenges head on, which lead to a more equitable and fair outcome. I appreciated that Chris did his best to meet my every need in a timely fashion, even if I had a simple question that required only a phone call or e-mail or if we needed to talk face-to-face. I highly recommend Chris Hildebrand @ Hildebrand Law, PC.

Lindsay Donoian

06:53 27 Sep 14

I cannot express enough how thankful I am that I found Hildrebrand Law. Chris Hildebrand is an excellent attorney who has my best interests in mind and always encourages me to do the right thing regardless of what the opposing party is doing. Chris knows family law very well and relies on that knowledge to format options and solutions for each situation that may arise. He knows what the Court expects and what will and will not be tolerated. He has attempted to settle this case quickly and as inexpensively as possible from the start. His paralegal, Laura, is remarkable. She is organized, quick to respond, and compassionate. Chris is well prepared with a binder full of detailed and organized information and that is likely due to her thorough skills and expertise. While getting a divorce that was unexpected is a painful and difficult process, Chris and Laura treat my family and I like friends rather than another just "client." I am hopeful that I do not need to recommend divorce lawyers to anyone in the future but if I do, Hildebrand Law will be a recommendation I would give hands down.

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I first should comment on how I found this law firm. I am an attorney myself, though never licensed in Arizona. I moved to Arizona to rejoin my wife and son, who had moved out to Arizona ahead of me. Things soured. I don't know why, but they did.There was a particular issue for me with inherited property. I did some basic Internet research, and Hildebrand's name kept coming up as the author of scholarly articles on the issue concerning me. I asked that Hildebrand be assigned to my case. This was not possible, but his second in command, Mr. Micuda, took over, and Mr. Micuda knows his business.The initial scheduled 1 hour meeting ran for an hour and 45 minutes, and facts, law, and strategy were fully discussed. Throughout the case, everything was explained to me clearly, both verbally and in writing.Proceedings went forward without delay. Because I had selected one of the most prominent Domestic Relations firms in town, there was no serious opposition. This ended up being an essentially co-operative divorce between the two sides, the reasoning being to conserve assets rather than enrich lawyers.Through a series of 3 or 4 payments, I put up about $10,000 for fees and costs. I found the Hildebrand law firm's billings to be fair. They billed for work done; no padding. I am getting about 25% of what I paid in back, as a refund.The matter was done in about 6 months: divorce, agreed property settlement, agreed support provisions as to my son. My matters were handled by an attorney and paralegal team, and handled efficiently.Mine was not a "big" case in terms of its economic value to anyone, but I did not feel like a second or third class citizen; I was treated with the same respect, even though the dispute was over a condo, as opposed to, say, a Scottsdale mansion with land.This may sound strange, but i was actually somewhat sorry that the matter had to come to a conclusion. I felt that I had been treated like a friend, not just an anonymous customer. Being a practical man, I realize it's down to sending a Christmas or other seasonal card.As I said at the outset, I found this place by dint of my own research. I feel I am a lucky man that I did.

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HIGHLY RECOMMEND! Cannot say enough wonderful things about my experience with Hildebrand Law. I have been working with Chris and the firm for about 6 years now, and I always feel like my concerns, issues and questions are addressed in a thorough and timely manner. They definitely have my best interests at heart. I recommend Chris whenever anyone asks me who I used as my divorce attorney. Great firm and great results!

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I hired Michael Clancy just when I was about to give up on an existing post-decree case which I started with a different attorney over a year ago. Michael is knowledgeable, upfront and personable; he gave me the confidence to continue and settle my post decree case. I knew he was secure, capable and could handle my case and represent me well. He did everything he could to ensure a great outcome for the modification of my current court orders to help my son have a more stable mental, social and physical well-being, which to me is priceless! I would highly recommend him to anyone who wants to be in the best possible hands during one of the most stressful events that could happen to any parent that wants the best for their child/children. Thank you Michael for fighting for my son's safety!! Also, his paralegal, Alison, was awesome and very helpful!

Shari Abbit

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The Effect of the 2017 Tax Bill on Divorce in Arizona | Hildebrand Law, PC

The Effect of the 2017 Tax Bill on Divorce

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