Taxes and Divorce
For most couples, divorce is traumatic and ranks among the top five most stressful experiences a person can endure in a lifetime. In addition to the emotional angst felt by the divorcing couple (and their children and pets, if there are any), the future financial uncertainty can be oppressive as can the divorce advice eagerly dispensed by well-meaning friends and relatives.
Both parties need to take the time to carefully consider all the aspects of the divorce advice ― including the impact on the children, the division of marital assets, attorney fees, etc. ― and be prepared to sift through a barrage of documents requesting personal and financial information. Divorce advice can include discussions surrounding the tax pros and cons, especially if there are assets to split ― such as brokerage accounts, real estate, retirement (IRA, 401k) accounts, automobiles, boats, and household furnishings.
If a couple’s primary residence or vacation home needs to be sold in order to distribute assets, the capital gains tax can potentially put a huge dent in the proceeds bucket. Along the same divorce advice lines, if they couple jointly owned stocks, bonds, mutual funds, or other investments, they might be subject to substantial capital gains taxes and commissions if the assets need to be sold.
In addition to the divorce advice provided by the attorneys, additional experts may be brought in to help determine a settlement. For example, a tax specialist or even a forensic accountant may be enlisted to uncover potentially hidden assets, analyze the impact of taxes on the couple’s divorce and provide a recommendation for minimizing taxes after the divorce.
Attorneys will also provide divorce advice on alimony, which varies from state-to-state. If there are children involved, the divorce advice extended may cause additional friction between parties, especially if there are disagreements over custody and visitation rights.
Child support obligations will also need to be calculated and many states have actual guidelines and calculators that judges use to determine the amount, duration and payment method for spousal and child support. In many states, the judge even has the option to consider the cause of the divorce in addition to the income and assets of the individual parties involved in the divorce.
If you are seeking divorce advice, just keep in mind the lyrics from the Beatles song, “Try to see it my way. Do I have to keep on talking till I can’t go on...We can work it out. We can work it out.” Hopefully, when the dust has settled, you and your ex-spouse can still have a harmonious relationship.