Florida Estate Planning Lawyer Blog
Divorcing spouses can add flexibility to their tax and estate plans using property settlement agreements according to Private Letter Ruling 12572406.
Kreig Mtichell a Colorado Estate Planning Attorney wrote an article on this process. He stated that the facts involved a Husband and Wife who shiged a property settlement agreement pursuant to their divorce. The husband owned a large amount of publicly traded stock. The wife was to recieive a portion of the stock in the divorce agreement approved by the court.
Later the husband and his ex wife renegotiated the agreement to provide a larger amount of stock to the wife.
The IRS ruled that this accelerated lifetime payment by the husband to the wife was not taxable income to the husband or wife and not a taxable gift from the husband to the wife.
The IRS found that the accelerated lifetime payment by the husband to the wife was not taxable income to the husband or wife because the transfer was “related to the cessation of marriage.” Even though the modification of the property settlement agreement occurred “years after the divorce.”
The IRS stated that the accelerated lifetime payment by the husband to the wife was not a taxable gift from the husband to the wife based on the same reasoning.