There are very real factors that must be kept in mind after the decision to divorce has been reached. The costs involved are obviously one and often this requires a change or reduction in the quality of lifestyle. For one, attorney fees and court costs will become an everyday part of life as might those of other divorce-related professionals and will now cut into previously disposable income.
Recognizing the Risk
There are potential financial risks, too, both present and future. For example, if a present or former spouse in defaults on a loan, commits fraud, files bankruptcy, becomes disabled or even dies. Therefore, it is important to analyze the particulars of your case so that all financial connections are thoroughly dismantled and potential risks for the future minimized.
A Glance at Tax Implications
Perhaps the greatest risk involved tax implications of the financial transactions about to be undertaken in conjunction with the divorce. On the surface, the transfer or sale of property might seem to be simple enough but in the eyes of the Internal Revenue Service, these actions may be considered a "taxable event". In short, never discount potential tax liabilities for any and all transactions. Generally speaking, the transfer of real estate in concert with divorce is non-taxable, however, any property acquired as part of a settlement will be held accountable in the future. For example, you would be held accountable for ALL GAIN (i.e., profit) on a property or asset sold from the time it was purchased JOINTLY, not from the time it was received as a result of settlement. Also, decisions with respect to how to file tax returns can be of great significance. How will the return monies or added liabilities as dictated by the IRS be divided? Perhaps the best way to protect yourself is to consult with a tax accountant or related professional who can best advise with respect to implications involving Federal Tax Return filing as well as property and asset division and the resulting tax liabilities incurable.