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Divorces frequently lead to questions

Going forward with a divorce may result in moving into unfamiliar territory for many New Jersey readers. Knowledge about things like identifying marital property, dividing retirement accounts, selling the family home and the tax consequences of each activity may be confusing to most spouses entering divorce proceedings.

Identifying the property that will be allocated and the method for doing the distribution is often one of the first questions a person will ask. Most states allow the exclusion of gifts, pre-marital property and inheritances from the property division determination.

Sometimes, divorcing persons think that each retirement account stands apart from the marital assets, but that is not always the case. A separating person may be eligible for benefits from the other's retirement account. A home can be addressed in several different ways. For example, one of the partners chooses to keep the house, neither keeps the house or the house continues to be owned jointly following the divorce. Another issue for consideration is the status reported on tax filings. Among the options for evaluation are married filing jointly, married filing separately and eventually filing singly.

No matter what the property and how it is kept or distributed in the course of the divorce, the tax considerations can be a significant factor when determining the value of a property or asset. An asset that will be subject to a large amount of capital gain taxes may not be as attractive as an asset that will not be burdened by future taxes. A divorce attorney may be able to help a client understand the pre-tax and post-tax assessments of assets as part of property division negotiations.

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

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