For many Minnesota couples considering divorce, the cost of divorce can be overwhelming. What few people know, however, is that the real costs of divorce are not attorney fees or court costs but rather taxes. Unfortunately, the recently enacted federal tax law, which went into effect at the beginning of 2013, will likely cost wealthy Minnesota couples a whole lot more. Minnesotans considering divorce might find the following blog on taxes and divorce helpful.
While there are many reasons couple part ways, sometimes the timing is grounded more in practical considerations than marital woes. For example, it isn't uncommon for high-income earners to postpone divorce until the new year. This allows couples to cut their tax burden for one more year by filing jointly. Taxes also effect how couples divide big-ticket items in divorce negotiations, such as a family-owned business, financial holdings and real property.
The American Taxpayer Relief Act, which raises taxes on individuals making over $400,000, could add significantly to the costs of divorce for some couples. This is something clients will have to take into consideration when negotiating payments such as alimony. If receiving alimony pushes a person above the $400,000 threshold, the client might be better served opting for a greater percentage of the couple's stock portfolio or even their vacation home.
Negotiating a divorce agreement, especially when significant financial holdings and complex asset division is involved, can be a difficult task. Clients need to keep in mind not only the immediacy of the asset at hand, but also the long-term costs and consequences of holding the asset. Identifying and negotiating the best possible agreement, and protecting the client's financial interests, is the ultimate goal of every experienced family law attorney.
Source: The Wall Street Journal, "New Taxes Make Divorce Trickier," Arden Dale, Feb. 1, 2013
No Comments
Leave a comment