The end of a marriage is a complex legal and financial process, and the potential ramifications of decisions made during this time are significant. It is in the interests of a Virginia spouse to carefully consider the tax ramifications of all property division decisions. Without careful consideration, it is possible for a divorce settlement to leave one with unexpected taxes and expenses.
The cost of retaining assets
Alimony is one area where some make the mistake of overlooking the potential tax implications. This support is offered from the higher-earning spouse to the lesser-earning spouse to offset the economic inequity brought about by divorce. After changes to tax laws in 2018, these payments are no longer tax deductible. Not every divorce settlement involves alimony, however, as some spouses choose instead to negotiate a one-time lump sum payment.
A lump-sum payment or the transfer of assets is sometimes a part of a divorce agreement. When accepting a large payment or substantial asset, such as a vehicle or home, it could be subject to certain taxes. There are also property taxes associated with ownership of certain types of property, which should be taken into consideration before accepting a settlement.
The best financial future
The goal of any property division settlement is to provide a California spouse with a strong post-divorce future. Seeking terms that provide long-term stability and minimize the chance of unexpected financial loss should be a priority during a divorce. It may help to seek the guidance and support of an experienced divorce attorney before making any important decisions.