The divorce process for high net worth couples is generally more complex and involved than divorces of typical couples. The property division portion of a high asset divorce can open high net worth couples up to significant tax implications. Working with an experienced divorce attorney can help these couples identify potential liabilities and draft a plan for limiting their tax exposure.
One of the most significant tax liabilities for high net worth couples is that of capital gains. If for example, a divorcing couple stands to make a significant profit from the sale of their marital home, they may be subject to this tax. Fortunately, capital gains tax of this nature can be avoided by reinvesting home sale profits into another qualified purchase.
A necessary part of property division during divorce is transferring assets, property and debts. When a transfer of property or assets is directly related to the divorce, spouses will likely not be subject to capital gains or other tax. Dividing assets like stocks or mutual funds may create a taxable event if the assets have increased in value. Likewise, retirement accounts that represent a significant worth may also create a taxable event when divided during divorce. When one spouse must distribute funds from a retirement account during property division, they both may be on the hook for the additional tax.
Divorce, like marriage, carries significant financial consequences. By working with an experienced divorce attorney, high net worth spouses can navigate their way through the property division portion of divorce and may be able to limit their capital gains tax liability.