Oops … Don’t Forget to Consider the Various Tax Impacts in Property Division

Equitable distribution or property division can be deceptive.

In Florida, and other states, the law presumes a fifty-fifty split of assets and debts.

But even where that is the agreed upon goal, the devil is in the details.

Some proposals can look like an even split right down to the penny.

Yet be anything but.

How so?

Thanks to taxes.

Taxes can have a significant impact on the ultimate value of certain assets.

By not taking the tax impact into account, a seemingly even split can turn decidedly unequal.

Tax credits, tax deductions, ordinary income taxes, capital gains taxes, etc., may eventually apply to transfer of any distributed marital asset.

To take an extreme example, suppose the wife receives all marital assets that will be subject to capital gains tax. Further suppose that the husband receives only assets that will not be subject to capital gains tax.

In that event, the husband’s fifty (50%) percent distribution of marital assets will in effect be worth more than the wife’s fifty (50%) percent distribution of marital assets.

So it’s important to be tax-aware in reviewing or presenting alternative distribution scenarios – or to have a tax professional involved in that process.

Read more in this Wall Street Journal article: Divvying Up? Check Taxes.