High-asset divorces are certainly subject to many questions concerning how much property from a divorcing couple’s financial portfolio will be divided. Assets can range from pensions, stock options, real estate, and even art. You can bet that these are all considered into the equation when totaling marital property. But what asset transfers during property division decisions can be subject to taxes? This is an important question to ask when you are interested in protecting your assets in a divorce.
As you consider your finances during the divorce process, at first, you need to get a handle on the total value of all assets making sure not to leave anything out. Normally, the transfer of assets between spouses during the divorce is not considered a taxable event. But of course, there are exceptions.
Accumulated assets are one of those exceptions. Accumulated assets include mutual funds, stocks, bonds or artwork which can be subject to a capital gains tax bill. For example, if you buy half of the stock from your divorcing spouse you will be subject to the capital gains tax when you buy half of the originally mutual shares however your spouse, will not.
One thing you shouldn’t need to worry about is transferring cash. For example, if you and your spouse have $50,000 in a savings account and you are entitled to $25,000 you will likely not have to pay tax on that money transfer since divorce is the reason for the split.
Each divorce and circumstance is different. Therefore, these rules mentioned above should only be used as general information and not specific legal advice. Divorce can take your lump sum of assets and cash and make it feel significantly smaller. An attorney can help people protect their assets and get the most from their divorce.
Source: gpo.gov, “1041 Transfers of property between spouses or incident to divorce,” Accessed March 6, 2015