Liquidating Marital Assets Creates a Taxable Event
There are so many things to consider when getting a divorce that it can seem overwhelming at times. Figuring out post divorce finances is a significant concern for most Utah couples, and determining what to do with marital assets is certainly one of those areas that can take a lot of time and negotiation to find the best solution for both parties. As every family’s financial outlook is very different, a one size fits all attitude toward asset division just doesn’t work.
Marital resources are typically comprised of an assortment of assets, all ranging in value. Determining if these assets should be liquidated or transferred to one spouse can become a rather difficult task. When making this decision, it is important to recognize the possible negative side effects that may follow. Those contemplating or currently working through a divorce m,ay benefit by becoming aware of the possible tax implications involved with liquidating assets.
The liquidation of assets often creates a taxable event that can result in a hefty tax bill and may have long-term financial consequences. For this reason, liquidating assets is frequently considered a last resort in divorce. Negotiating and trading assets to create an equitable distribution is generally considered the way to go, as transferring assets is usually a nontaxable event.
For some Utah couples, there may be situations where liquidating marital assets is simply unavoidable and the only way to fairly divide property. Tax implications should be considered to ensure each spouse is receiving a fair distribution and not just left with a financial mess. Cases involving the liquidation of assets may take more time and may benefit from a collaborative setting rather than litigation. Negotiating the terms of the liquidation can certainly help each spouse walk away from the marriage financially prepared for their next chapter in life.
Source: CNBC, “Not always a rose: Avoiding thorny asset-liquidation issues in divorce“, Deborah Nason, June 14, 2014
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