Property division is often one of the most significant concerns people have when contemplating divorce in Ohio. They worry that they will have a hard time reaching an agreement with their spouse concerning how to split their assets. When judges decide what happens to property, they may order people to sell certain assets, and the spouses involved in a litigated dispute will have very little control over the actual terms set in the property division order.
People with valuable assets may also feel concerned about secondary losses related to asset division. For example, the transfer of sizable resources to other people can sometimes triggers tax liability. People may worry that they will have to pay taxes when transferring real property, retirement savings or any other significant personal assets to their spouse during or after a divorce.
Proper planning minimizes or eliminates tax risks
There are special rules that apply to property transfers pursuant to a divorce. Provided that there is a property division order and the transfers align with that court issued-document, people can avoid the vast majority of transfer-related taxes.
Retirement accounts are a perfect example. There are often taxes and penalties that reduce the value of specialized retirement savings accounts, like Roth IRAs, if people divide them or take a distribution from them prior to reaching retirement age. However, if the transfer is to a spouse in accordance with a qualified domestic relations order (QDRO), the taxes and penalties that typically apply will not be a concern.
Financial resources and real property ownership are among the resources that people can typically transfer without triggering taxes during an Ohio divorce. Of course, there are limitations on those protections. Generally speaking, the transfers must reflect the terms included in the court order and must occur within six years of the divorce.
Many people with complex, high-value marital estates require assistance when planning to conduct large transfers as part of the property division process in an Ohio divorce. Ultimately, seeking legal guidance and learning more about the different risks and liabilities inherent in divorce proceedings may help people set themselves up for success after the end of a marriage.