Who gets the house? How will the investment accounts be divided? How much will be paid in alimony? There are numerous financial decisions that the Texas couple must make when they become embroiled in a high net worth divorce.
In some cases, one spouse will be expected to pay alimony to the other spouse. Under current tax laws, the individual who pays alimony can claim this as a tax deduction; the individual who receives alimony must claim it as income. In most instances, the individual paying earns more and is therefore in a higher tax bracket. However, 2019 is bringing with it changes to the tax law that will have a significant impact upon some divorcing couples. In fact, beginning with new judgments of divorce in 2019, alimony will no longer be claimed as income or a deduction.
Additionally, in a high net worth divorce, the couple has typically built up considerable equity in the family home. As such, capital gains taxes may be applicable upon the sale of the home. If the home is sold while the couple is still married, $500,000 in capital gains is exempt from taxes. However, if one individual retains the home and then later decides to sell it as a single individual, only $250,000 in capital gains is exempt. This can have significant financial implications for each individual.
Each decision that the Texas couple makes throughout the high net worth divorce process can have a lasting financial impact. It is often a good idea to analyze each financial asset, its current value, future value and tax considerations prior to making a final determination regarding how it should be handled in the divorce. As such, each individual will want to consult with experienced legal counsel throughout the process.