The Marriage May be Over, but Tax Implications Could Linger

The Marriage May be Over, but Tax Implications Could Linger

 

DISCLAIMER

The information contained in this blog is for educational purposes only and is not legal advice.  The use of this blog does not create an attorney/client relationship between you and the Law Offices of Wallitsch & Iacobelli.  If you are considering separation or divorce, or if you are involved in any legal matter including, but not limited to present divorce proceedings, custody proceedings, or support proceedings, or any other legal matter, you should seek formal legal advice and would strongly urge you to retain an attorney

 

As Susan contemplated a divorce from her husband, the couple’s multiple assets, including investments, real estate holdings, pension plans and several successful businesses came to mind. Upon the dissolution of her 20-year marriage, how would these assets impact her in terms of tax liability?

While wanting to make it as painful on her soon-to-be ex-husband as possible, Susan was unsure of how to lessen her own tax burden. She was concerned about what their marriage dissolution would mean ultimately for their lavish home, their children’s private school education and the lifestyle she had grown accustomed to, which afforded her the opportunity to take pricey vacations.

But, what Susan did not know was that receiving higher alimony sums would essentially increase her tax liability. In her particular instance, what, on the surface, appeared to be an even distribution of assets would actually cost her in higher taxes for years to come.

Deciding to divorce involves much more than determining who gets the house, any joint monies, custody of the children and the possibility for alimony.

Each of these potential outcomes must be carefully analyzed and evaluated against your own unique financial situation. If left to chance, or settled without a thorough understanding of tax law, any of these examples could cost you more in taxes over time.

Before signing a divorce settlement on the dotted line, you should consider the tax implications of the following:

• Alimony payments and what it means for the payee versus payer
  (I.R.C. §71; Pa.R.C.P. 1910.01, et seq; Pa.R.C.P. 1910.16-2(a)(7).
• Asset distribution
  1. Savings bonds and how interest accrued figures into your total taxable income (Rev.Rul. 1987-112, 1987—2 C.B. 207.)
  2. Investment accounts and how future spending could warrant the need for capital gains tax (I.R.C. §§1001 (a); 1221; and, 1223.)
  3. Property transfer and how its eventual sale plays a role (I.R.C. §121 related to the exclusion of gain from the sale of a principal residence.)
  4. Pension plan distribution and paperwork needed to be effective ( I.R.C. 414 (p)(1)(A))
• Dependents and the agreements and guidelines necessary for claiming a minor child

Attorney Abele Iacobelli practices tax law. Mr. Iacobelli is adept at sorting through the ever-changing tax laws to find the most equitable division of property, assets and future financial support. Most importantly, Mr. Iacobelli will find the best solution for you with the least amount of tax implications.

 

For more information please visit us at www.greendivorce.net