Unfortunately with divorce comes tax consequences. There are some important issues to consider when you are dividing your assets.
- If you live in a community property state, each spouse is entitled to half of the total community property, minus liabilities. All other states, assets must be split according to what the court deems fair. If possible, you and your soon to be ex-spouse can agree outside the court to the splits and generally the court will go along with your decision.
- There are generally no gift tax consequences during the split of items.
- The spouse that ends up with an asset that may be sold or converted to cash must recognize the income.
- The tax-free transfer rule definitely does not apply to tax-advantage retirement accounts or employer sponsored retirement plans.
To read a more detailed review of these items, click here.