Tax consequences must be considered when the Court determines Equitable Distribution, along with other economic consequences, and contractual or legal consequences to third parties, of the proposed distribution;
This blog is one in a series of blogs regarding Equitable Distribution in Mississippi. Equitable Distribution is the method employed by the Court’s to determine how marital property is to be divided in a divorce. The basics and factors to be considered can be seen here, Marital Property; How it’s Divided (click).
- Tax Consequences.
Typically division of real property and even personal property can be had without tax consequences to the parties. One party can buy the other out of the house and get the furniture without arousing Uncle Sam. However, certain transactions can create significant tax consequences. Usually investment/retirement accounts may be transferred without tax liability, but there is a catch. The receiving party must roll the monies over into a qualified account and not access same to avoid taxes and penalties. If the receiving party will need the monies to live, then they better make sure the Court is aware of the tax consequences for using those monies. (Alimony may also have tax consequences.)
- Other economic consequences;
Other economic consequences can include the nature of the asset. Is it something that can be used and liquidated like an account or is it something that cannot be easily turned into cash, like a house or a collection of 17th French dishware? The Court may determine the type of assets. Also, some assets produce income or returns and some assets may decrease in value or require considerable upkeep expenses like an Arabian Horse.
Make sure you have discussed the type and nature of the assets that the Court is being asked to divide and be sure to consider the tax and long-term considerations regarding the asset(s).
Matthew Thompson is a family law attorney in Mississippi and recommends you pass on getting the Arabian Horse, as it will eat you out of house and home.
You may also contact Matthew with your family law case, question or concern at (601) 850-8000 or Matthew@wmtlawfirm.com.