Imagine you and your spouse own a sizable marital estate together that includes art, collector’s items, luxury vehicles, real estate and investment accounts. However, you’ve decided to get a divorce and now you’re facing the task of determining a fair and lawful way to divide your extensive assets. One thing you’ll want to remember when valuing these assets is to calculate the tax liabilities that accompany your assets.
To illustrate this issue clearly, let’s say you and your spouse own a $300,000 painting that you purchased for $3,000 approximately 20 years ago. You and your spouse also own a $300,000 vacation home that cost $300,000 when you bought it five years ago. One of these assets, the painting, experienced substantial financial gains over the years you owned it. If you were to liquidate the painting in a sale, the increase in value would trigger enormous capital gains taxes. If you were to liquidate the property, on the other hand, you would not trigger any capital gains taxes. As such, the true value of both of these assets is quite different because, as in the case of the painting, you would receive a great deal less by selling it (after subtracting taxes) than you would for the real estate.
By factoring potential tax liabilities when valuing all assets in a marital estate, soon-to-be ex-spouses can ensure a fair property distribution process that honors the true value of the items at hand.
If you’re concerned about the tax liabilities that could be attached to the furniture, art, real estate, vehicles and investment accounts associated with your high-asset marital estate, learn more about your marital property division rights now.