Divorce, even under the best circumstances, is complicated. However, this is particularly true for high-net-worth couples, as these divorces often involve intricate financial issues. If you fit into this category and are considering divorce, it’s crucial to understand the tax implications of the decisions made during the divorce process. Please continue reading to learn about the tax implications of a high-net-worth divorce in New York and how a skilled Nassau County High Net Worth Divorce Lawyer can help protect your financial interests.
What Qualifies as a High Net Worth Divorce?
When a divorcing couple possesses at least $1 million in assets, they are in what is known as a high-net-worth divorce. Essentially, high-net-worth divorces involve individuals with significant wealth to divide. These divorces are much more complicated than others and may require outside experts to navigate property distribution terms, child custody arrangements, business valuation professionals, financial advisors, forensic accountants, and more. Since these divorces come with many unique issues, having a proficient lawyer in your corner who has experience handling complex matters, including divorce cases involving significant assets, is imperative.
What Tax Considerations Should I Be Aware of During a High Net Worth Divorce?
First, it’s crucial to understand that dissolving your marriage will likely change your filing status. Once the divorce is finalized, you will no longer file a joint tax return. Therefore, it’s essential to understand the implications of this change and how you should adjust your withholdings.
The division of marital property in high-net divorces is complex due to the significant value and complexity involved in assets such as investments, real estate properties, business ownership, retirement accounts, stock options, etc. How the court divides these assets can have substantial tax consequences for both parties. For instance, capital gains tax liabilities may be triggered when dividing appreciated assets like stocks. It’s important to note that transferring certain assets from one spouse to another may change the cost basis for future sales or transactions.
If you are dividing employer-sponsored retirement accounts such as 401 (k)s, IRAs, or pension benefits, it’s crucial to understand that withdrawing funds before reaching retirement age means you incur an early withdrawal penalty and income taxes. However, a knowledgeable lawyer can help you proactively minimize your tax liability. For example, a Qualified Domestic Relations Order (QDRO) may allow you to divide the retirement holdings without incurring any tax penalties.
If you are considering a divorce, please don’t hesitate to contact an experienced Nassau County high-net-worth divorce lawyer who can help you protect your legal rights and hard-earned assets. Contact our firm today to learn more about the tax implications of a high-net-worth divorce in New York.
