It’s been said that only two things in life are certain: death and taxes. Divorcing couples can certainly be sure that their dissolution of marriage is likely to lead to some tax challenges. Couples with simple assets — cars, bank accounts, credit card debts and even retirement accounts — are often able to divide their marital property without too much trouble. That is, they are able to achieve equitable distribution, meaning that both parties leave with a fair share of the marital estate.
This can become more challenging for couples who own real estate, 401(k) accounts, investments, small businesses and even life insurance. These assets are not always easy to value, and it is not always clear how the property should be divided. As a result, equitable distribution often requires divorce professionals including an attorney, financial professional, business appraiser and even a real estate appraiser. Spouses can take some steps to make sure that they get their fair share, too, during their Colorado divorce proceedings.
Couples are encouraged to consider the deferred or immediate income tax effect that will be felt for the recipient of the asset. In some cases, a tax impact will not be relevant — think property division that includes household items such as furniture. In others, though, taxes play a major role. Retaining the family home has different implications than keeping a vacation home, for instance. Real property cannot always be considered equally, largely because its value fluctuates.
Colorado spouses should pay special attention to the division of real property assets and certain types of retirement accounts. Financial professionals may be able to help determine the true value of these assets, both currently and in the future. The more information that is available to both parties, the more equitable the distribution will be. Make sure you get your fair share by proceeding with caution during the property division phase of your divorce.
Source: Tallahassee.com, “Divorce brings its own set of tax implications” Larry Houff, Apr. 29, 2014
