Tax Tip of the Week*

ALIMONY AND DEATH
In order for alimony payments to be deductible by the payor and taxable to the recipient, they must stop at the death of the recipient. That is, if an agreement provides for alimony to continue in some fashion after the recipient dies, then the entirety of same from day one is considered not alimony. In some states, such as New Jersey, it is state law that alimony stops when the recipient dies. Thus, for a New Jersey divorce, there is no requirement for there to be language that says the alimony will stop upon the death of the recipient. In the absence of such a state law, it is mandatory that there be language in the divorce agreement or similar document requiring same. Regardless, it never hurts to have that language. Note though that it need only stop at the death of the recipient – it can continue after the death of the payor. That is, the ex-spouse can reach into the grave and still collect alimony – it becomes an obligation of the estate.