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Tax considerations and complex property division in Pennsylvania

Many issues need to be resolved before a divorce can be considered final. One issue that Pennsylvania couples may not consider during the divorce is the tax ramifications of complex property division. Some of the major assets that are divided in a divorce have tax issues that can cause problems later if not contemplated and accounted for during settlement negotiations.

The goal of property division in a divorce is an equitable division of a couple’s property. However, what may seem equitable on paper could end up not being fair at tax time. For instance, when an asset that appreciates is sold, capital gains tax may be due. This will effectively lower the value of that asset. Therefore, when one party gets the house and the other gets cash, it may be a good idea to consider these tax issues first.

Transferring retirement accounts can be particularly tricky when it comes to taxes. These accounts can be transferred without tax ramifications, but there may be additional requirements to follow in order to avoid being taxed while the other spouse gets the benefits. It may take some research to be sure the tax implications associated with these assets are handled in a manner that makes any transfers as even-handed as possible.

It is easy to forget the tax implications that can accompany complex property division. Most Pennsylvania couples are just trying to get through the process as smoothly and quickly as they can. Even though tax issues may not come up for months, they are an important part of the negotiations of a divorce settlement to ensure both parties are able to walk away feeling they were treated fairly and equitably.

Source: marketwatch.com, What’s even worse than divorce? The taxes, Bill Bischoff, Dec. 3, 2013

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