A divorce in Carlsbad, Oceanside or anywhere in Carlsbad carries enough emotional, financial and practical every-day life burdens to overwhelm even the most sturdy of us. In the spirit of the day we thought it might be good to focus on something that might actually be a positive note when it comes to divorce.
Here in California and across the United States there is no taxation of transfers of assets or monies between the parties if it occurs during or within a year of the divorce. For example, lets assume the wife wishes to remain in the family home and the husband’s share of the equity is $175,000. In order to keep the home the wife must pay the husband for his community property interest in the equity of the home, in this case the $175k.
She transfers a portion of her 401(k) account or her interests in a joint investment account to cover the $175,000 resulting in apparent “income” for the husband. The good news is there is no taxable event. The husband would not have to declare the transfer of property as income and pay taxes upon it.
Transfers are often used to offset community interests in business ownership and professional practices, as well as in high net worth and complex divorce cases. While this rule does not apply to taxes related to the receipt of child support or spousal support, it can be a comforting thought for the person receiving the benefit of the transfer.
There are many strategies the seasoned attorneys at Burke & Domercq, APC provide to help make the experience of divorce lighter for our clients. In addition to cost-saving options such as mediation, we work to foster a more cooperative and constructive atmosphere between the parties.
It is important to realize the more the parties are able to work together dispassionately to resolve areas of disagreement and complete their divorce the better they will feel during the course of the divorce and in the months and years that follow. This benefit carries over to any children shared by the couple, and to the quality of their lives as well.