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Tax Issues and Obligations Related to Divorce

DuPage County divorce attorneyWhether we like it or not, tax issues are a part of any divorce. This is especially complex to navigate when the divorce involves high-income spouses and high-value assets. The stakes are often higher when large marital estates have to be divided, and if it is not done in accordance with relevant tax law, the IRS can take a distressing amount in recompense.

Standard and Complex Questions

Even in an average divorce, there are multiple tax issues that might become apparent. Some of the most common include deciding who will claim the children on future tax returns, determining whether to file as joint/married or single if your proceedings are happening during tax season, answering any residency-related questions, and so on. These same issues often arise in high-value divorces as well, but because the value of the marital estate is higher, it is more common for wealthy couples to discuss such issues beforehand—in a prenuptial agreement, for example. If this is not done, tax considerations may be handled along with the more specific issues at the time of the divorce.

In addition to the basic tax concerns, there will likely be more complex issues that disproportionately affect couples with higher incomes. Many couples with average marital estates will not have to contend with issues such as capital gains tax, estate taxes, and other potential obligations. Proper planning is key to managing your tax liabilities and guidance from a skilled attorney can help you make the best possible decisions.

Issues Specific to High-Asset Divorces

The primary objective of most couples in any divorce—and especially in high-value divorces—is to have a fair tax burden for each spouse and to avoid unforeseen traps or pitfalls. One of the most common ways to avoid these tax pitfalls, for example, is to pay close attention to potential issues with titled assets. The IRS Form 1041—which is completed to provide an accounting of assets in an estate or trust—holds that transfers between spouses in the event of a divorce are generally non-taxable. However, high-income couples are more likely to have their assets titled not in their own names but held under living trusts, estates, or partnerships. Transfers involving these types of assets may be taxable in the wake of a divorce, and it is important to plan accordingly.

Contact an Experienced Attorney

Tax law is one of the most complicated areas of U.S. jurisprudence, and its effects on divorce proceedings are more than many people can handle. Contact a skilled DuPage County divorce lawyer to get the help you need today. Call MKFM Law at 630-665-7300 to schedule a confidential consultation.

 

Source:

https://www.irs.gov/uac/about-form-1041

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From our law office in Wheaton, IL the family law and civil litigation law attorneys of Mirabella, Kincaid, Frederick and Mirabella, represent businesses and individual clients throughout the western suburbs of Chicago, Illinois including Wheaton, Naperville, Oak Brook, Glen Ellyn, Carol Stream, Lombard, Downers Grove, Burr Ridge, Lisle, Elmhurst, Oakbrook Terrace, Winfield, Woodridge, Warrenville and throughout DuPage, Kane and Kendall Counties.

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