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TX divorce lawyerEvery divorce case will involve financial issues that a couple will need to address as they divide the property they own and determine whether one spouse will pay financial support to the other. However, high net worth divorces will often require spouses to consider complex financial matters related to high-value assets, multiple real estate properties, investments, business interests, and different forms of income, including bonuses, executive compensation, and retirement plans. When determining how to handle these concerns in a way that ensures that each spouse receives a fair and equitable share of the marital estate, it is important to consider tax issues that can affect the spouses both during their divorce and in the future.

Common Tax Concerns in High Asset Divorces

Some tax-related issues that divorcing couples with a high net worth may need to address include:

  • Capital Gains Taxes - Certain types of assets may be liquidated during the divorce process to ensure that their value can be divided between spouses. If these assets appreciated in value since they were acquired, capital gains taxes may apply to the profits earned, and spouses should be sure to understand who will be responsible for paying these taxes. When selling a marital residence, up to $250,000 of gains can be excluded from capital gains taxes when filing as a single person, or $500,000 can be excluded when filing as a married couple. These exclusions will be available if the person or couple lived in a home for at least two of the previous five years prior to the sale.
  • Carryforwards - Business owners and others with high incomes can realize tax benefits by carrying forward certain types of losses, expenses, or deductions and applying them to future tax years. These may include carryforwards for capital losses, investment interest expenses, charitable contributions, or a business’s net operating losses, These carryforwards are considered marital assets, and they should be divided between spouses along with other types of marital property.
  • Retirement Assets - Either or both spouses may own retirement savings accounts, or they may be eligible for pension benefits. Funds from these retirement accounts may be transferred between spouses as part of their divorce settlement, and to avoid paying taxes on these withdrawals, spouses should be sure to use Qualified Domestic Relations Orders (QDROs). Spouses may also want to work with a financial advisor to understand whether taxes will apply to pension benefits or other retirement assets either at the time of the divorce or when they begin using these benefits after retirement.

Contact Our Austin, TX Divorce Tax Planning Lawyers

With the proper planning, you can ensure that you will be on good financial footing following your divorce. If you and your spouse have a high net worth, you will want to be sure you have considered all aspects of your financial situation, including the income you earn, the assets you own, and the taxes that will apply both before and after your marriage ends. The attorneys of Powers and Kerr, PLLC can advise you of the issues that you will need to address, and we will help you negotiate a divorce settlement that will meet your needs, or we will advocate for your interests when litigating your divorce in court. Contact our Austin high asset divorce attorneys at 512-610-6199 to schedule a consultation and learn how we can help with your case.

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TX divorce lawyerWhen couples get divorced, one issue that they will need to deal with is how to divide the property they own. In some cases, this may involve complex property litigation, especially if a couple has a high net worth or owns complex assets. One issue that can complicate this process is distinguishing between community property and separate property. In some cases, these forms of property can become commingled, making it difficult to determine what types of property should or should not be divided between the spouses.

Examples of Commingled Property

Community property includes all property or assets that either spouse acquired while the couple was married, while separate property includes property the spouses owned before they were married, as well as assets received by a spouse as a gift or inheritance. Separate property can become combined with community property in a variety of ways, including:

  • A spouse may own a house before they were married, but during the couple’s marriage, both of the spouses may have contributed to ongoing mortgage payments or improvements, maintenance, or repairs to the home. During divorce, the house may still be considered the separate property of the spouse who originally owned it, but the other spouse may be reimbursed for their contributions to the equity in the house or the improvements that caused the house to increase in value.
  • A spouse may receive an inheritance during the couple’s marriage, and this amount may be deposited into a joint bank account, with both spouses making additional deposits to and withdrawals from the account during the marriage. Under Texas law, it is presumed that community funds are withdrawn from joint accounts before separate funds, so if the balance of the account is higher than the amount of the inheritance, the inherited funds will be considered separate property. If the balance of the account is less than the amount inherited, the spouse who received the inheritance may retain ownership of the full balance.
  • A spouse may use funds or other assets owned before getting married to make investments, and money earned from these investments may be reinvested or used in other ways during the couple’s marriage. Distinguishing between community property and separate property may be complex in these cases since dividends earned during the marriage will usually be considered community property. To determine what portion of these assets are considered separate property, it will be necessary to trace assets back to their source and demonstrate that they originated from separate property.

Contact Our Austin, TX High Net Worth Divorce Attorneys

If you own complex assets or have a high net worth, determining how to divide property with your spouse during your divorce may be a complex undertaking. At Powers and Kerr, PLLC, our attorneys can help you understand how Texas law applies to your community property and separate property, and we will make sure these matters are addressed properly during your case. Contact our Austin property division lawyers today by calling 512-610-6199.

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TX high asset lawyerWhen you are in the midst of divorce, it is necessary to protect your rights from all angles, especially when it comes to finances. The lengths you go to in order to secure your financial well being and how you handle those proceedings will determine a great deal in terms of your quality of life and your overall lifestyle once the marriage has officially ended.

Why You Should be Concerned About Marital Assets

There are multiple reasons you should be aware of the possibility of hidden assets within your marriage as you undergo divorce. While it is obvious that every spouse should naturally be concerned about finances during a split, if you are not vigilant, hidden assets, in particular, can significantly affect your bank account, investments, and other financial resources after the divorce is final.

When your spouse conceals assets, it places you at risk for losing large chunks of marital property that you would otherwise be eligible to claim. This loss of property can affect everything from your day-to-day bills to your general financial stability. It can also trigger more long-lasting consequences, such as creating obstacles to your future financial plans, as retirement funds, savings accounts, and more can be affected.

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TX divorce lawyerDuring a high net worth divorce, couples will need to address multiple different types of assets, including financial accounts, vehicles, jewelry, furniture, valuable artwork or collectibles, and family businesses. Real estate, including the marital home, vacation homes, or commercial properties, are often among the most valuable assets owned by a couple, and complex property litigation may be needed to determine how the division of this property will be handled. During the divorce process, spouses should be sure to understand their rights regarding real estate property and the legal and financial issues that they may need to address.

Community Property Vs. Separate Property

The first thing to consider when addressing real estate is determining whether it is considered community property or separate property. Community property includes any assets acquired by either spouse during their marriage, and Texas law requires these assets to be divided equally during a divorce.

A home or other real estate property purchased during a couple’s marriage will be considered community property, while real estate owned by one spouse before getting married will usually be considered separate property that will remain in the possession of that spouse. However, these issues can become more complex if a spouse contributed toward an increase in the value of the other spouse’s separate property during their marriage.

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TX high asset divorce lawyerThe division of community property is a complicated process in any Texas divorce, but it is often particularly complex in high asset divorces in the state. If you are planning for a divorce or you have just begun the process of filing, you probably already know that, under Texas law, Texas is a community property state. What does this mean for your divorce and your property? In short, most property acquired after the date of the marriage will be classified as “community property,” or property of the community (the community being your marriage). Property acquired prior to the date of your marriage, as well as certain property acquired after the date of marriage, will typically be classified as separate property. In Texas, community property is divided in a divorce in a manner that is “fair and just,” according to the Texas Family Code.

What, then, is commingled property? The term commingled property refers to debts or assets that have characteristics of both separate property and community property. In a high net worth divorce, dealing with commingled property can get complicated, but an aggressive Austin high asset divorce attorney can help. In the meantime, we want to provide you with more information about commingled property and to discuss how courts handle it.

How a Court Will Handle Commingled Property in a High Asset Divorce

How will a court handle commingled property in your high asset divorce? The answer to that question depends largely on just how commingled the property has become. The level or amount of commingling will probably depend upon a few different factors, including, for instance, the type of property and the length of time for which it has been commingled. If the court can trace out, or separate, the community property from the separate property, it will likely do so. However, if the property is so commingled that it is not feasible to determine what amount of the property is community property and what amount is separate property, all of the commingled property could end up being classified as community property and divided between the spouses.

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