One of the most challenging aspects to handle during a divorce is property division. Your asset division may be more complex than average divorces if you own a business, real estate or significant personal possessions.
When you live your life as a couple, you do not expect to divorce. After years of obtaining assets, how do you divide them?
Keep taxes in mind
When dividing assets, keep taxes in mind. Two items that appear to be of a similar value may not remain as such. For example, $100 stock is not the same as $100 cash. If you sell stock, it affects your taxes. When one item has more or less tax, you must subtract the taxes from the value.
Consider taxes when it comes to your home too. For instance, if one spouse keeps the house and sells it, he or she would receive a higher tax exclusion while married. The person who owns the house has the sole responsibility to pay capital gains taxes. Likewise, if one of you had a home office, you may have to include the effect of the office on taxes.
Analyze your retirement accounts
If you have a retirement account or 401(k), you can arrange to divide it. If you take money from your 401(k) to give to your spouse, you must deal with a 20% tax withholding. You may also face a penalty if you withdraw early. To lower the withholdings, couples need a qualified domestic relations order. The QDRO spells out how the ex receives the share of your retirement account.
The valuation of assets is not always as easy as looking at the item’s price.