Tax Consequences of a High-Asset Divorce
For obvious reasons, the major challenge of a high-asset divorce revolves around the division and allocation of assets. These types of things still present problems for those without vast assets that need to be considered. The first part of the process is determining which assets belong to you and your spouse individually and which assets are property of the marriage. In Ohio, any property that was acquired during the marriage is marital property and thus subject to equitable distribution. Only property acquired before the marriage, money acquired through a personal injury lawsuit, or property acquired via inheritance can be protected.
For instance, let’s say that you own a piece of real estate outright. But, at the time of your marriage, you only had 25% equity on the property. The 25% that you had purchased before the marriage still belongs to you while 75% of the equity is property of the marriage. In addition, the property may have increased value during the marriage and this also factors into the equation.
If you think that’s confusing, imagine how this same process would work when appraising a business. Value and growth that accrued during the marriage are considered property of the marriage. It can get confusing.
High-asset couples end up having to hire independent third parties who are willing to appraise the business or a piece of real estate. There are a number of ways to go about this process.
Offshore Accounts and Out-of-State Trusts
While you were married, you were likely filing together as a married couple. In some cases, high-asset couples may file separately if each owns their own business. Once the divorce has been finalized, you will no longer be able to file as married either jointly or separately. This can change your financial situation and it will certainly change your tax situation.
The attorneys at Lawrence Law Office can explain the tax consequences of your divorce to head off any issues that may arise.
Common Challenges in High-Asset Divorces
In some situations, there may be one spouse who seeks to hide assets from the other spouse by setting up out-of-state trusts or hiding funds in offshore accounts. In this case, you need a legal team that you can trust to conduct a full investigation in order to find the hidden funds.
One of the biggest mistakes that a divorcing spouse can make is to rush through the process of financial disclosure. Obviously, divorce is a difficult time and most people just want it behind them, but you don’t want to jeopardize your financial future either.
On the other side of the equation, if you are the primary breadwinner in your household and you attempt to hide assets during your divorce to prevent your former spouse from getting a larger payout, it can backfire. If your deception is exposed, it will damage your credibility with the court.