Strategic divorce may have unintended consequences

On Behalf of | Oct 21, 2019 | Divorce

Once couples reach a certain income bracket, their taxes may increase because they are married. Sometimes called the “marriage tax,” this applies to couples who in 2019 made at least $612,350. While some Virginia couples may be tempted to file for what is sometimes referred to as a “strategic divorce” in order to avoid these taxes, there are a number of additional costs to consider.

For example, a divorce may affect retirement benefits. The couple may need to have a complex document known as a qualified domestic relations order prepared in order to split a pension. After a divorce, removing the other person as the beneficiary on the account becomes much easier. Another consequence is the potential loss of health insurance benefits, which are often provided by one spouse’s employer. A divorce could also mean splitting business assets and giving an ex-spouse voting rights.

A strategic divorce might be more effective in protecting personal finances for couples who are not particularly wealthy. For example, since financial aid is based on a custodial parent’s income, if one parent’s income is substantially lower, a divorce could mean the child qualifies for financial aid. Another situation is one in which one person needs nursing home care but cannot qualify for Medicaid without spending down the couple’s assets.

Whatever the reason for getting a divorce, couples should keep in mind they may need to work out these and other issues. This can be complicated even when the divorce is amicable and might be even more complex if the two are angry or upset with one another. However, even a high-conflict divorce does not mean that the couple has no choice but to go to litigation. Attorneys may be able to help the couple reach an agreement through negotiation, and this can be a less costly and stressful option.



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