Some people in Michigan may think of strategic divorce as primarily an option for ultra-wealthy couples. At the highest tax bracket of 37%, two high earners may end up paying more in taxes as a married couple than they would as single wealthy individuals. Some have speculated that more couples may choose to divorce if tax reforms are implemented that raise the tax burden imposed on the wealthiest individuals and couples across the country. In practice, though, the tax savings realized through a divorce are usually far smaller than the costs associated with a divorce itself, and most people involved are too wealthy to be concerned about the relatively small tax difference.
However, strategic divorce can be a real possibility for couples of more modest means facing particular types of financial barriers. In order for a person to be admitted into a nursing home with Medicaid payments, a couple must often spend down their assets significantly and run through their retirement funds. When one person needs serious nursing care for issues like dementia or Alzheimer’s, couples may be willing to do anything necessary to help secure that support. In some cases, these couples may decide to divorce in order to protect some assets for one spouse while allowing the other to receive care.
With the costs of college attendance continuing to rise and student loan debt posing a major barrier to many, parents of teens may also consider divorce to boost their child’s chances of receiving financial aid. Only the custodial parent’s income is taken into account when awarding aid.
There are also significant costs associated with divorce, including lost shared pensions, retirement funds and health insurance. A family law attorney may provide guidance and advice on the financial implications of divorce and property division, including both potentially positive and negative consequences.