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Taxes and divorce

Individuals in New Jersey who are considering filing for divorce may have questions about asset division and might benefit from a discussion in a recent article. The piece, written by a financial advisor, involved a couple that was planning on divorcing amicably, and one of the parties involved wanted to learn the basics of the property distribution. The financial advisor focused on certain key issues that might be overlooked in some cases, including certain tax issues.

Taxes can play an important role in division when a couple is seeking an equitable divorce agreement. The after-tax value of assets can vary, and some property may be more exposed to capital gains tax than others, which can affect the asset's value in the future. Taking these after-tax values into consideration can help a couple reach an agreeable settlement that provides for the financial future of both parties.

Marriage and divorce also affect taxes in other ways. Filing status on annual tax returns can be subject to change throughout proceedings. When a couple is only separated, they may still be able to file a return married filing jointly, which generally provides the couple with a lower tax rate. However, this might open one party to liability for penalties if the other party fails to pay their share. another option includes, married filing separate, but this often increases the tax burden. When the divorce is finalized, both parties must file as single.

Taxes are only one of many elements that a couple may need to consider during property division. An attorney who is familiar with family law could provide a client with a deeper understanding of the process from a legal standpoint. That attorney could also represent a client's interests throughout the proceedings.

Source: Nerd Wallet, "Divorce: Making Sense of the Confusion", J. Kevin Stophel, June 03, 2014

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