Often times divorcing men and women think about what is most important to them and what they want in assets from the divorce. It is also important to think about what assets are taxable. If one spouse receives all of the assets that are taxable, they could be losing a lot of money to tax payments.
You may think your divorce settlement is 50/50, but after taxes, you may feel it was spilt unequally.
What you want vs. what is best for you
When dividing property and assets, you first need to determine what you want. Second, you need to consider which items are taxable assets. Typically, the court awards spousal maintenance and child support, but allows the couple to determine how they would like to split their assets.
An article written by the LA Times covers the story of a woman who got nearly everything she wanted from her divorce. She was happy, until she realized the taxes she had to pay. Most of her assets were taxable, while her husband’s assets were not.
There are so many assets to consider in a divorce. Sometimes what you want upfront won’t be the most beneficial for you financially. Getting legal advice and counsel from an attorney can help determine not only what you want, but also what you should consider fighting for, for financial reasons.
The house
Many people want to keep the house. However, it is important to consider a few things.
- Does the house have a large mortgage?
- Maintenance and upkeep fees
- Property taxes
If you want to sell the house later down the road, you shouldn’t have to pay taxes on the gains of the sale. You also want to consider if there are house payments left, make sure you factor this into your settlement.
Alimony
Stay-at-home moms and dads are typically awarded alimony, or spousal support. This isn’t typically considered a dividable asset; it is awarded to you from the courts. You should know that this payment from your spouse is subject to tax payments.
Retirement fund
The transfer of half of your spouse’s retirement fund should not be taxed if you follow proper IRS protocol. Once the money is placed into your retirement account, if you withdraw early, there will be tax consequences.
Sometimes it can be better to ask for more from the retirement fund than it is ask for property or other assets that may be subject to taxes.
It is important to understand what assets and property are going to benefit you in the long run. Sometimes sacrificing a little bit upfront can set you up better in the long haul. An experienced divorce attorney help identify your goals and what you want out of your divorce. They can help you determine what is going to be best for you both emotionally and financially.