The taxman - the sometimes forgotten person in mediation settlements

To quote Shakespeare in The Merry Wives of Windsor: ‘If money go before all ways lie open’. In the sometimes febrile atmosphere of a mediation this can be reflected in the ‘how much can I get from’ or ‘how little do I have to pay the other person’ approach that is sometimes used by the parties involved in a mediation.

Unsubtle and simplistic

However this can be an unsubtle and sometimes simplistic approach to things if tax is ignored as is sometimes the case. This ‘how much’ approach can be to ignore the saying: ‘A person doesn’t know how much he has to be thankful for until he has to pay taxes on it.’

If the settlement payment (referred to here as a payment which includes payment in cash or in specie) is taxed the recipient ends up with less to keep. This can...