High-asset divorces impacted by new tax regulations

Attorneys and accountants have recently felt a push to behave in an increasingly collaborative fashion. Due to tax increases mandated by certain provisions of the American Taxpayer Relief Act, those navigating high-asset divorce proceedings are almost certainly in need of both experienced legal counsel and experienced financial counsel.

When individuals seek to create a fair high-asset property division settlement, the process they face is not so simple as "I'll take this piece of property and you take another." When significant assets are involved, issues of valuation, devaluation, payout timing and tax consequences feature prominently in fair division discussions.

Currently, new tax regulations are forcing both attorneys and accountants to look at the timing and division of settlements very carefully. Especially considering that alimony and other income payouts may be affected by certain new thresholds. For example, a significant tax increase now occurs on individual incomes over $400,000. As alimony is considered tax-deductible income by the individual who receives it, the option of receiving alimony may no longer look as appealing as retaining other assets.

In addition, new dividend taxes, capital gains taxes and tax liability for investment income have changed the way that investments are being treated during divorce. For example, portfolios that generate an investment adjusted gross income of $200,000 or more are now subject to a significant tax increase. This may make the division of certain investment income an increased liability.

High-asset divorce is never an easy process. The new tax regulations have made this process even more challenging. It has therefore become increasingly important to retain the counsel of experienced attorneys and accountants in order to ensure that you receive the most fair and financially beneficial settlement possible.

Source: Wall Street Journal, "New Tax Rules Complicate Divorce Plans," Arden Dale, Jan. 31, 2013

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