In most divorces, the assets of both parties will be determined and then separated evenly. This is easy to do when the assets are clearly defined, and a couple does not have a high net worth. On the other hand, when a couple has $500,000 in a savings account, property, and other important assets, determining what belongs to who can be more difficult. Spouses with significant wealth between them are considered to have high assets. In the case of a high-asset divorce, a couple will want a family law specialist with experience handling this type of sensitive case.
Tax Consequences in Divorce Proceedings
As if a high asset divorce isn’t complex enough, tax consequences make them even more complex. The tax implications will make the divorce feel much less like a settlement and more like a consequence. This is yet another reason to have an experienced family law specialist to understand how property and other facets of your settlement are going to be taxed.
One such consequence, for example, is capital gains tax. A capital gains tax is a tax on the profit from the sale or investment of a property. If a couple owns several properties, they will likely be worth more than the original price and a capital gains tax will be taken. Property transferred as incident to a divorce will not be taxed to the person receiving the property right away, but will be if and when the owner decides to sell the property later down the road. The gains will be determined by calculating the difference in value from the time the new owner sells the property from the value of the property at the time it was purchased together by the couple, not the value at the time of transfer.
Another tax implication that accompanies high asset divorce is spousal support or alimony. In a high asset divorce, it is likely that one spouse makes significantly more than the other. In these instances, one spouse is able to ask for assistance known as spousal support, though even this amount is taxed. The spouse paying the alimony will be able to write it off as a deduction, however the spouse receiving money will have to claim this as income and therefore be taxed.
Hiring a Family Law Specialist
Couples often don’t consider these and other tax consequences when filing for divorce. They will also be taxed for retirement funds that are withdrawn early. In addition, any income from the sale of stocks, bonds, or other investments will be taxed. Any high asset divorce will come with high monetary stakes. The best way to ensure that financial loss is minimal is by hiring an expert.
An experienced family law attorney will not leave anything to surprise. They will know the tax implications before you do so that you can prepare for the financial loss that comes with settlement gain. This also includes avoiding any fraud that may result from an inexperienced family law attorney. In a high asset divorce, your assets will not remain the same, but with advanced professional help, they will help you receive the best settlement possible.