A divorce filing might be a highly emotional affair. In fact, there are plenty of celebrity stories about filings made in the heat of the moment. However, there can be great benefit from consulting with an attorney and carefully planning the timing of a divorce filing.
For starters, an individual’s marital tax status for the entire year is set on December 31st, so there may tax advantages or disadvantages depending on whether one’s status is single, head of household or married/filing jointly.
Securities are another asset that can benefit from advance planning. Unrealized capital gain does not have a tax consequence, so that gain is not yet part of the marital estate. It may be cheaper for an individual to wait until after a divorce to liquidate certain long-held securities.
Debt obligations that are part of the marital estate can benefit from the same advance planning. If a couple’s home mortgage is more than their equity, for example, there may be benefit to waiting to divorce until the real estate value rises.
Parents considering a divorce should also think about the impact on their children. Waiting until a child has completed a school year might be less disruptive. In fact, waiting until after other significant events in a child’s life may also provide for less emotional upset, regardless of the child’s age. For example, even grown children who are engaged might appreciate parents who delay a divorce filing until after their child’s marriage ceremony.
Divorce at any time may be difficult, but an attorney can help to ease couples through the process. An attorney can also provide valuable counsel about strategies to maximize property division benefits and minimize the tax consequences.
Source: Market Watch, ” Divorcing in 2016? Get your affairs in order first,” Quentin Fottrell, Dec. 12, 2015