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How Will Tax Planning Affect Our Marital Property?

How Will Tax Planning Affect Our Marital Property?

Most people understand that asset division is a tremendously important part of the Ohio divorce process, but often the important tax implications of asset division are underappreciated. Without proper planning, the end of your marriage can create serious undesirable tax consequences. Unexpected taxes are a headache that you just do not need at this already stressful time in your life. A Columbus family law attorney with experience in divorce tax planning can help you minimize and avoid negative tax consequences.

Effective Tax Planning Is Important When Dividing Marital Property

Taxes Could Affect Your Home: At the end of marriage many couples struggle deciding what to do with the family home. Whatever decision is best for your situation, tax consequences should always be considered. As an example, if you chose to sell your home, you could be subject to the capital gains tax. A divorcing couple is legally allowed to exclude $500,000 in capital gains on the sale of a personal residence from taxation. However, if following a divorce, one spouse decides to stay in the home, and the spouse moving out transfers their fifty percent ownership stake to remaining spouse, $250,000 is lost from the future capital gains exemption. On the other hand, if the spouse that is moving out keeps their ownership interest the full $500,000 exemption is retained. For certain divorcing couples that type of arrangement could be beneficial.

Taxes Could Affect Your Retirement Benefits: Tax qualified retirement benefits (401K, Pension, IRA, stock bonus plan, etc) are always a primary issue in asset division. There are serious tax penalties associated with early withdrawal from qualified retirement plans. Dividing these tax preferred benefits can be complicated. A method for achieving this without harsh tax penalties is called a qualified domestic relations order (QDRO). Without a proper QDRO you may be taxed on any withdrawals taken from your retirement plans that you are simply using to satisfy your divorce asset division settlement.

Taxes Could Affect Your Estate Plan: The end of a marriage will often require changes to the estate plan. It is critically important that estate plans are revised in a manner that fit with every parties new updated goals. Often ownership of property is changed. You must keep in mind the potential tax consequences associated with any future inheritances and any trusts.

Contact a Columbus Family Law Attorney

Whenever assets change hands it opens up the possibility of negative tax consequences and also a potential opportunity for tax savings which can created by effective tax planning. An experienced Columbus divorce attorney can provide the guidance you need in order to minimize or avoid substantial tax expenses during the termination of a marriage. If you and your spouse are going through, or are considering, divorce, contact the Law Offices of William L. Geary to speak to an attorney today.