Florida manages property division during divorce cases by the laws of equitable division. There are a total of nine community property states in which all assets and liabilities are required to be split evenly. Equitable division, in contrast, does not require an even split but simply a fair one. While there are times that even and fair end up being one in the same, it is not always the case is something that can make any divorce, especially a high asset divorce challenging at times.
The media recently published an article that discussed the tax implications as one of the big divorce legal issues that couples must face. From identification of marital versus non-marital assets to determination of ultimately ownership or interest, the process of property division can be lengthy and complex. Transferring ownership of pension funds, IRAs or other retirement accounts are strictly governed by laws that dictate when and how any transfers or distributions can occur without taxes being assessed.
Seeming to be less complex at the time of a divorce is the distribution of most other assets. The IRS Section 1041 Code allows spouses to transfer their interest in assets or to transfer actual cash without either person being assessed taxes. The article is quick to point out however, that this does not mean that there will never be a tax implication. Assets can grow in value and if this happens and they are then sold, there may be taxes owing on the capital gains depending on the specific asset.
When working through the details of a divorce, it is important to look at the current and also the estimated future value of all assets and debts. Getting input from a qualified attorney can be very helpful in making the proper determinations regarding such issues.
Source: The Wall Street Journal, “What’s even worse than divorce? The taxes,” Bill Bischoff, December 3, 2013
