(801) 254-9450 More goes into dividing property during a divorce than just comparing the current value of each asset and splitting them between spouses. Two assets worth the same amount today can have very different tax consequences later, and it is crucial that you take those differences into account. Our compassionate property division attorneys can help you weigh how a proposed property split will impact you now and in the future.
This area of the law is complex, and it is natural to have questions and concerns about how to handle the process. If you are ready to learn more about the tax implications of asset division in Heber City, reach out to Carr | Woodall today for skilled guidance.
First and foremost, marital assets are not automatically considered capital gains. Capital gains generally become an issue when you sell or otherwise dispose of certain property for more than its adjusted tax basis. For the most part, the act of dividing property on its own does not trigger a capital gains tax. This is outlined specifically under federal law, which protects property that passes between spouses or former spouses as part of a divorce.
However, receiving the property could still have tax implications for Heber City residents going through a divorce, depending on the tax history of the asset. Typically, you take the transferring spouse’s adjusted basis in property you receive as part of the divorce. If you later sell an appreciated asset, that carryover basis can affect capital gains tax liability.
Retirement accounts require special attention because dividing them incorrectly can create unexpected tax obligations. Certain employer-sponsored retirement plans rely on a Qualified Domestic Relations Order (QDRO) to divide benefits during or after a divorce. A QDRO directs a retirement plan to provide some or all of a participant’s benefits to an alternate payee, which can include a former spouse. Usually, a company distributing retirement plans will not agree to make these payments unless it has a court-issued QDRO on file.
Your tax debt depends on what happens to the money. A spouse or former spouse who receives taxable benefits under a QDRO generally reports those payments as though they were a plan participant. However, an eligible distribution received under a QDRO may generally be rolled into another eligible retirement plan or IRA without forcing you to immediately pay taxes on it. Understanding this aspect of asset division in Heber City is especially important, given the way your taxes can otherwise be impacted, and our attorneys can provide guidance to avoid any pitfalls that could affect you later.
An IRA can often be divided without an immediate tax bill if you follow the federal requirements for a transfer incident to divorce, but small procedural mistakes can lead to real consequences. Some of the most common mistakes include:
Using the correct transfer procedure can instead allow IRA assets to pass to your former spouse without treating the transfer itself as taxable. Our attorneys serving Heber City can help you navigate the complicated asset division process and avoid unnecessary tax bills and consequences along the way.
If you are concerned about the tax implications of asset division in Heber City, Carr | Woodall is ready to help. We understand how dividing your marital assets can impact you now and in the future, and we are dedicated to helping Heber City couples avoid tax consequences. Reach out today for a private consultation. If you cannot come to our office outside the city, we are happy to meet virtually or travel to you to make working with us easier.