Complex Divorce Negotiations: Know the Real Value of Financial Assets

 Posted on August 06, 2014 in Complex Property Litigation

When a couple is involved in a complex divorce, there are usually a number of financial assets that need to be divided up between the two. However, financial advisors recommend that people who are involved in high asset divorces really examine the actual worth of the asset they are fighting for or willing to concede to the other party during negotiations.

The value of an asset may change when it comes to liquidating that asset, depending on tax liabilities and/or depreciation values. For example, if a couple owns a home that has $1 million in equity and they also have a 401(k) account that is worth $1 million, the actual long-term value of those two assets is different.

The spouse who gets the house will have what the IRS refers to as a "gain exclusion," meaning that if the spouse sells the house, a portion of the profit will be exempt from capital gains tax. But there is no exclusion for the spouse who gets the 401(k) account. If the spouse liquefies the account, he or she could owe up to one third of it in taxes.

When deciding how a marital estate should be divided, judges do not consider the future tax liabilities, only the current value of the asset.

Ideally, when negotiating a division of high assets in a complex divorce, transferring assets from one spouse to another is much better financially than liquidating the assets. There are no taxes owed in transfers. Liquefying assets—selling property, withdrawing from investment accounts, cashing in stocks—all create tax liabilities that can cut seriously into the financial value of the marital estate.

If you are considering a divorce will there will be high financial assets or complex property litigation, make sure you hire an aggressive Round Rock complex divorce attorney to begin planning and strategizing to ensure you receive all that you are entitled to in your divorce settlement.