Mention the words “unallocated support” to a number of people who have gone through the divorce process, and you might be met with a stare of incomprehension.
That is of course understandable for any person to whom the particulars of the term simply did not apply during divorce.
If unallocated family support is something that would have been relevant for divorcing parties and was never invoked and applied, though, that failure to understand and make use of the family law tool likely worked a detriment.
Because, as we note on a page of our website at the Norfolk County Law Offices of Lisa A. Ruggieri in Wellesley, unallocated support is potentially a “win-win” scenario for some divorcing couples.
And here’s why, in a nutshell: It puts more money into the pockets of both divorcing parties.
It is a truism that child support payments are not tax deductible for the payer, but that comes with a caveat where unallocated support is concerned. When the paying party combines both spousal support (alimony) and child support obligations into one unallocated support payment, he or she can in fact take a tax deduction.
The process works like this, and can be especially effective when the payer is from a higher tax bracket and the recipient from a lower bracket, respectively. The combined unallocated payment is transferred from the former parent to the latter parent, who actually pays taxes on the amount.
Here’s the benefit, as we note on our website: “The payer pays less support, and the receiver receives more support.”
Taking advantage of unallocated support entails doing things right from the outset, given that the IRS must be satisfied and accountants who do the divorcing parties’ taxes must understand what occurred.
A proven divorce attorney with demonstrated experience in helping divorcing parties take advantage of the legal benefits conferred through unallocated support can help ensure that it is set up correctly.
As noted, when it is, it can be a mutual win for both parents in a divorce.