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Full transcript by James Nolletti below.
The first financial mistake to avoid during divorce is failing to consider the tax impact of each asset. For instance, receiving IRAs is not the same as receiving cash, especially if you need to withdraw the funds from the IRA to cover up living expenses. If you hope to keep the family home or a vacation property, you should know about the tax basis of the property, the rules related to capital gains to be imposed on a subsequent sale of the property, and what, if anything, can be done to lower those taxes.
You must also consider the rules regarding eligibility and phaseout of dependency exemptions to ensure the maximum available benefit. Alimony, now called maintenance, in New York, must comply with certain rules to be tax deductible to the payor and avoid any subsequent recapture disallowance. Working with financial experts if necessary, the attorney must calculate the client's after-tax cash flow of the award of settlement offer so they'll understand what they are really getting.
For more information about how taxes could impact your divorce settlement, talk to your family law attorney, or see IRS publication 504, entitled divorced or separated individuals.
