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Will complex asset division incur significant taxes?

Let's continue our discussion of complex asset division and related issues at the end of a marriage with a look at some other considerations for wealthy Boulder County residents. For example, how could a divorce affect each partner's taxes? We present the information as general in nature only, not as legal advice.

One important point to emphasize is that divorcing spouses can more or less continue to exchange property between each other without the IRS getting involved, just as they could while they were married. They'll need to be able to show that they are making the exchange as part of the divorce, but that is not usually difficult. Exceptions, however, include stocks, bonds, or other securities that one partner may sell to the other; assuming the price has gone up since the original purchase, the spouse buying the securities from the other will likely be face capital gains taxes.

Individual Retirement Accounts, or at least a portion of an IRA, may be subject to property division if a spouse made contributions while married (i.e., using marital funds). As part of a divorce, the money in an IRA or a percentage of it can be paid to one's partner without incurring tax penalties. However, it's up to the recipient partner to see to it that the money is properly rolled into his or her own IRA. Failure to do so could provoke a federal income tax of 20 percent on the transferred amount.

Of course, couples will think of taxes when it comes to the sale of real estate or other major assets, but there are scenarios in which taxes may arise unexpectedly. Working with an experienced legal professional can help prevent unpleasant surprises during a high-asset divorce and property division.

Source: Findlaw.com, "Divorce, Taxes, and Your Estate Plan," accessed on Dec. 29, 2017

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