However, front loading of payments as alimony can cause such excess to be treated as a property transfer by recapturing the excess amounts in the third year. Life insurance premiums can be treated as alimony in some circumstances. The deductibility of the mortgage interest and real estate taxes depend upon both the terms of the separation agreement and the form of ownership under local law. It can be a very difficult to structure the payments to qualify. REA specifically pre-empts state domestic relations laws insofar as they pertain to qualified plans.
Federal law is a permissive statute.
It permits a broader assignment of the interests than state law. In many marriages, a privately-held business is the major marital asset. It is usually impracticable for the couple to jointly run a business when they could not solve the problems of marriage. Courts are reluctant to order the business sold. It may be possible to divide the business, but usually not.