Tax Considerations in High Asset Divorces

 Posted on August 23, 2023 in Divorce

Divorce can be a complex and costly process, especially for couples with a lot of money. For those with high net worth, it is important to be mindful of the tax implications of divorce.

In a high-asset divorce, couples must take into account the division of assets. How assets are divided can greatly impact the tax liability of each spouse. For instance, if one spouse receives a highly appreciated asset, they may have to pay capital gains taxes when they sell it.

Minimizing Tax Liability

Child support is not taxable income for the recipient or a deductible expense for the payer. However, in some cases, special rules may apply. For example, if child support is paid as a lump sum, it might be taxable to the recipient.

Couples will also need to decide whether to file taxes jointly or separately after a divorce. If they are not yet legally separated or divorced, the IRS considers them married for filing purposes. However, if they are legally separated or divorced at the end of the year, they must file for single status unless eligible to file as head of household. This can significantly impact the overall tax liability of each spouse.

High-net-worth couples should also be mindful of other tax issues during their divorce, such as:

• Dividing retirement accounts

• Dividing business interests

• Dividing international assets

High-net-worth couples need to consult with a tax advisor. A tax advisor can help them understand their tax options and structure their divorce in a way that minimizes tax liability.

Additional Tips for High-Asset Divorcing Couples

Here are some additional tips for couples going through high-asset divorce:

• Engage the services of an attorney and a tax advisor

• Start planning early to allow enough time to consider options and minimize tax liability

• Keep accurate records of financial transactions

By proactively addressing tax considerations and seeking professional guidance, high-net-worth couples can better protect their financial interests and navigate the complexities of divorce while minimizing tax liability.

Contact a Naperville, IL Divorce Lawyer

Navigating the tax implications of a high-asset divorce requires careful planning and expert guidance. Understanding these tax implications can help high-net-worth couples protect their financial interests and minimize potential costs. Call our DuPage County, IL, divorce attorneys. We can help you make informed decisions and structure your divorce to ensure a fair and favorable outcome for you. Pesce Law Group, P.C. can help guide you in the process. Be proactive and dial 630-352-2240 for a free consultation today.

Source: https://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2086&SeqStart=6000000&SeqEnd=8300000