When Maryland couples divorce, there are many issues regarding property division. This is especially true in the case of a wealthy dissolution. There are often multiple homes, stocks, bonds, retirement plans and much more to split up. There are often many disputes about asset division because of the tax implications involves - something that most couples don't think about. Find out how a high asset divorce can affect your tax liability.
Generally, when spouses transfer assets to each other, no taxes need to be paid. However, when you receive assets that have risen in value since you first acquired them, you are liable for the capital gains tax. This applies to real estate as well. However, if you reinvest the proceeds from the home sale within two years, you won't have to pay the capital gains tax. There are residency requirements that apply as well.
Retirement funds may also be split in a divorce. If this is the case for you, it is often advised that you get a Qualified Domestic Relations Order. This court order details how to split retirement benefits and resolves any future issues, such as remarriage. In a divorce, an IRA can be transferred between spouses tax-free, but a 20 percent federal income tax may apply to the recipient unless the funds are rolled over into his or her own IRA.
Finally, try to file taxes jointly, if possible. It will save you money - money that you likely won't have after paying the IRS for all the assets you accumulated in the divorce. A high asset divorce can be highly complicated, which means you need all the help you can get. In the case of a high asset divorce, it might be important to seek financial advice as well as legal advice in order to address all the divorce issues.
Source: FindLaw, "Divorce, Taxes, and Your Estate Plan," accessed Jan. 10, 2015