Divorce can be complicated no matter how much money you have, but there are particular challenges when you and your spouse have a high net worth. One of the most important elements to think about might be the tax considerations that have to be made when splitting up a large amount of marital assets. An experienced Peoria County high net worth divorce lawyer from our firm can tell you what to expect.
Will Splitting Up Marital Assets Result in a Tax Bill?
The property division process can cause your divorce to result in a hefty tax bill. This is because it can be difficult to split up certain assets in an equitable manner without selling them. If you and your spouse have similarly valued assets like stocks and real estate, you may be able to go your separate ways with your own properties. If there is an unbalance there, some things may need to be sold off so that everyone gets a fair deal. This can easily result in a significant tax bill.
Do I Have to Worry About Tax and My Retirement Accounts?
Another potential tax problem concerns your retirement accounts. If you have IRAs, pension benefits, and accounts like 401(k)s that need to be split up, you have to be careful. Withdrawing money from these accounts before you are supposed to can result in some significant tax penalties. There are ways around this and smarter ways to handle such accounts, so talk to your lawyer and make sure that you are not opening yourself up to any potential headaches.
Is Child Support Taxable?
If you have children, there could be additional tax consequences for your divorce. First, it’s important to note that child support payments do not affect your taxes. This is true whether you are the one paying or receiving. The payer cannot write off child support payments and they are not seen as income for the receiver.
However, children can affect your taxes in another way. If you claim your kids as dependents, this can qualify you for certain deductions and credits. You and your spouse need to coordinate over who claims the kids though, because the IRS won’t like it if you both try to claim all of your children.
What Else Should I Remember to Do After a Divorce?
Finally, once a high net worth divorce is complete we often recommend that our clients take a look at other important financial documents and their estate plans. Any wills, trusts, or powers of attorney that you have established should be revised. You can also update beneficiaries on any payable-on-death accounts.
Talk to an Attorney Today
If you are going through a high net worth divorce, you need a lawyer who has experience with this process. Contact Butler, Giraudo & Meister, P.C. to schedule a consultation and learn more about how we can fight for you and your best interests during divorce negotiations.
