Heymann & Fletcher

Taxes can be complex in a high asset divorce

When people make the decision to get a divorce, they generally do not do so lightly. They know that they will have to make choices about how to divide their assets and how to handle custody of their children if they have any. One matter that may not get a lot of attention is the impact that a high asset divorce can have on taxes. Experts say there are two things that people in New Jersey and all over the nation may want to consider when they file for divorce.

First, up until last year, alimony used to be something that a person could deduct on his or her taxes if he or she was the payor. This is no longer the case and can have an influence on how much the paying spouse is willing to give to the receiving spouse. Fortunately, there are ways to offset this added cost. While some paying spouses may be tempted to liquidate assets, doing this can incur more taxes. A better bet is to use an advanced structure to defer paying capital gains and working with the receiving spouse to determine a fair agreement.

Second, there is a certain type of real estate investment that can be affected by divorce. When a married couple shares a property that produces income, such as an apartment that generates rent, it can be tricky to determine what to do with that property in a divorce. If they decided to sell it, the capital gains tax may be very high. Establishing a Delaware Statutory Trust means the ex-spouses can sell the property and invest the equity while deferring the taxes.

The takeaway is that anyone with significant investments, property or assets will want to consult professionals in the event of a high asset divorce. Divorce can be a stressful time for people, and it is important that all parties involved are treated fairly. Those here in New Jersey who are considering divorce may want to consult a family law attorney who can counsel them on the best course of action.

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