What is being referred to as the “marriage penalty” has some Texas couples talking about a strategic divorce in order to save money on taxes. This is something that is of special interest to high-income couples since they are the ones who have a higher tax liability. However, saving money on taxes is not the only thing that has some couples looking to divorce on paper.
Some couples, especially ones who are not mega-rich, use this strategy in order to qualify for more federal aid to help college-age children get an education. High-earning couples are not likely to qualify for as much aid as a low-income single parent. Another situation where strategic divorce is sometimes used is to help a sick spouse qualify for Medicaid. Instead of exhausting the couple’s assets, getting a divorce and then having one individual classified as low income may mean that they can get the nursing home care they need.
While there may be some benefits to a divorce on paper in order to save money, there are some potential landmines as well. For example, if a couple owns a business and then they divorce, it is likely that the business will be split in the divorce settlement. This means that one individual may and up giving up full control of it. While the divorce may be amicable, one spouse may hold a lot of power, and the other could end up losing out completely if things eventually go bad.
Other landmines include the loss of retirement benefits or insurance that covers the entire family. Before a person decides to end their marriage, they may want to discuss their situation with an attorney. The attorney may be able to provide information on divorce legal issues like alimony, spousal support and post-divorce modifications.