It is very important to take into account tax consequences when negotiating a property settlement in a divorce case. For example, if one (1) spouse is awarded $100,000 in cash and other spouse is awarded $100,000 in retirement assets, this would not be an equal award. The spouse who receives $100,000 in retirement assets would ultimately have to pay Federal and State Taxes. In addition, if the withdrawal from the retirement assets occurs before a certain age (typically 59 and 1/2), there may also be an “early withdrawal penalty” of ten percent (10%).
Bottom line: The nature of the assets and the potential tax consequences of assets must be carefully considered.
Do you have questions about the effects your divorce may have on future Tax Returns? Contact our Minnesota Divorce Attorneys today by calling 651-647-0087 or clicking below to schedule a free, confidential consultation.