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Tax laws could impact division of assets in a divorce

As if the divorce process didn’t already have the potential to be protracted and complicated, new laws that took effect at the beginning of the year may have a significant impact on the process for many people. Of all the issues in a divorce, property division usually has the potentially to be the most contentious. Now, with new tax laws in effect, it could get even worse.

According to a recent article, these new laws may even have affected couples who had already decided to split last year, but held off until the beginning of this year so that they could file a joint tax return. The top income tax bracket was increased as part of the “fiscal cliff” deal, and many couples may have wanted to avoid an increase in the personal income tax.

Beyond taxes, bank accounts, business assets or even artwork can either increase or decrease in value over time, and many couples may have found it advantageous to put off a divorce filing until this year. Of course, even if there was an agreement to put of the filing, that doesn’t necessarily mean that there has been an agreement on the division of property.

Going through a divorce is usually a highly emotional and stressful time for all parties involved. When a couple can’t agree on certain issues, like asset division, the likelihood of contentious litigation increases. For most couples, the best result in a divorce can usually be obtained through negotiation and give-and-take – compromise, in other words. Coming to an out-of-court agreement on the issues, including property division, can save all of the parties involved a great deal of stress, heartache and money.

Source: The Wall Street Journal, “New Tax Rules Complicate Divorce,” Arden Dale, Jan. 31, 2013

Related Posts: Divorcing and splitting your retirement account can be hard, Navigating the process of a high-asset divorce, A personal approach for even the most complex high asset divorce, Why a high asset divorce needs a detailed separation agreement, How does a high asset divorce impact my tax liability?,
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