Planning For Tax Issues In Divorce
Creating Strategies That Protect Your Finances Now And In The Years To Come
When spouses who have substantial assets decide to divorce, there are many complicating factors. Massachusetts is an “equitable division” state, which means that each spouse will receive an equitable share of marital property. When there are many assets to divide, the question of what is “equitable” becomes very complex.
Additional factors to consider are taxes. Certain types of property distribution can have a positive or negative impact on a spouse’s finances. It is critical that your lawyers know how to plan for the tax consequences of divorce. For years, high net worth individuals across Massachusetts have placed their trust in Porcello Law Offices. With locations in Salem and Gloucester, we serve people across the state.
What Are Some Of The Tax Consequences Of Divorce?
Under the Tax Code, most asset transfers in divorce are not taxed. With this said, there are critical exceptions to this rule. For instance, capital gains from stock or stock options could be taxed. Therefore, if one spouse receives stock, he or she will have to pay capital gains taxes upon selling it.
Another tax issue relates to retirement accounts. If one spouse is transferring all or part of a 401(k), your lawyer will need to set up a Qualified Domestic Relations Order (QDRO) to minimize the tax issues. Whatever your situation, we will develop a strong plan of action, working with other professionals as necessary to help you accomplish your goals.
Property Settlement Or Alimony? That Is Often The Question.
Under the law, alimony is included in the gross income of the spouse receiving it. Alimony is deductible for the spouse paying it. For these reasons, spouses who may be entitled to alimony may wish to increase their share of the property distribution. On the other hand, spouses who are paying alimony may want the tax deduction.
We can help minimize tax burdens in your divorce
The fact is, there are no hard and fast rules when it comes to determining whether alimony or a larger share of property distribution is in your best interests. Our attorneys will carefully examine the specific facts of your situation and work to put you in the best position both now and in the long term. Call our law office to speak with an attorney and learn how we can help.