Author: Kathy CostasThe pandemic has definitely caused many people to reevaluate their relationships and decide to divorce. Taxes are usually one of the last considerations in that decision, but they are certainly an important part and consequence of any divorce. Recently I was honored to be quoted by Jeff Stimpson of Financial Advisor Magazine in his article, "The Tax Consequences of Pandemic-Era Divorces" which highlights some of these issues.
Dividing Your Assets in Divorce
As I expressed in the article, divorce is, simply put, the division of one balance sheet and one cash flow into two. There are tax implications in both of those equations but unfortunately many couples do not seek tax advice during the process. They are under the misconception that their attorney will also give them tax and financial planning advice but that is not the case and is not the role of that professional.
When to Seek Tax Help
There is also the misconception that they should wait until after the settlement has been agreed to consult with a tax and financial planning expert. The reality is they should begin the process with that advice and guidance and structure their settlement in a way that ideally benefits both parties.
Is Divorce a Taxable Event?
It is also important to keep in mind that the division of any asset incident to divorce is not a taxable event. However, what happens next with that asset can often result in a tax liability. This is why a cash flow analysis is so vital to the settlement process in addition to the standard balance sheet division.
Here to Help
As a Certified Divorce Financial Analyst®, I help my clients make the best financial decisions during a divorce. They end the process with a solid financial plan and clear understanding of their assets and what their cash flow will be.
Please reach out if you or someone you know has questions or could benefit from this information. Here is the link to the full article.