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Financial planning for post-divorce life

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Michigan couples who are ending their marriages and have a variety of assets might also need to carefully plan for financial changes during the process, after the divorce has been finalized and even in how the divorce might affect their estate planning. Anticipating these issues in advance might prevent some mistakes that might become very costly in the future.

In a high net worth divorce, a property settlement might include transferring of financial assets that might also have tax implications. Generally, for tax purposes, the transfer of cash and other assets between spouses has no taxable effect, as long as it can be shown that the transfer was a result of the divorce.

There are assets, however, that might be liable for capital gains taxes once the spouses attempt to divide them. These include artwork, mutual funds and stocks and bonds that the couple might have acquired together over the course of their marriage. There are special Internal Revenue Service rules regarding the sale of a principal residence that could affect a property settlement, so people who are in this position might want to have their attorneys pay special attention to this aspect.

Retirement funds can be another area where tax implications can have an impact. These accounts can be treated as marital property and therefore both spouses will have the right to receive some of the funds. In most cases a qualified domestic relations order will need to be prepared and submitted to both the court and the plan administrator. The failure to do so can result in adverse tax consequences, and a family law attorney can be of assistance in this regard.

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Mason, MI 48854

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