What are the dangers associated with the liquidation and trading of assets in a divorce proceeding?

One thing that many people find difficult about divorce is the effect it often has on their finances. You might come out of a marriage in a totally different financial situation than you were in before. Fortunately, an experienced divorce attorney can help you reduce the impact that a dissolution of marriage has on your overall financial picture.

Arizona is a community property state. This means that all of the property acquired by a couple during the marriage is considered to be owned by both spouses. Only property acquired before or after a marriage or designated as belonging to one spouse is considered separate property. When a marriage ends, the couple and sometimes the court has to decide how the community property will be divided amongst the parties. Sometimes, in order to come to a settlement, assets need to be transferred or liquidated.

If assets need to be liquidated, both parties must think about the implications this liquidation will have. Liquidation is what is known as a taxable event and therefore proportionate taxes will be assessed. These transactions can have a major impact on each of the parties’ taxes and future finances. Also, courts do not always take them into account when deciding whether the settlement is fair. Therefore, tax consequences should always be considered when making a determination to either liquidate assets or use another option.

Essentially, the other option is trading assets between spouses to come to a settlement. Exchanging assets between spouses is not a taxable event and each party can receive what they are entitled to without worrying about the taxes that go along with liquidation. But, there are other things to consider. For example, if one spouse agrees to accept the family home as part of the settlement, he or she should determine ahead of time if they can make the monthly payments. A detailed analysis of the effects of accepting an asset should be done before reaching an agreement.

The attorneys at Nirenstein Garnice in Scottsdale, Arizona, regularly work with clients to reach a divorce settlement that is beneficial to both of the parties. Call us today at (480) 351-4804 or email us for a free, confidential consultation.