PROPERTY SETTLEMENT – TAXES?

By Daniel H Moss, Attorney

So, you want to sit down with your spouse and agree on how to divide your property? How do the two of you propose to divide assets such as such as cars, clothes, the home, stocks, pensions and other property? You think you are dividing everything 50-50, but are you really?

In many instances, people who think they are fairly doing their own property settlement have problems later. They think they have divided everything equally, but have done so without considering taxes. The result can turn out to be very costly for one party and a huge advantage to the other. This is because some property carries a tax liability and others do not.

One example is where one party keeps a $100,000.00 equity in the house, and the other party keeps a pension plan with the same apparent value. It both were liquidated, there would be no income tax consequence on the house, but a substantial income tax and possible penalty on the pension plan. The same might be true on the sale of a stock. When you sell a stock that has gone up in value, the gain in value would be a short term or long term taxable gain. The greater the size and complexity of the marital estate, the more likely it is that there will be tax consequences attached to the various assets.

Be sure you are getting what you think you bargained for. I advise my clients to consult a good CPA about the tax ramifications of proposed property settlements. You should consult a CPA – BEFORE you sign the agreement.

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