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Getting Divorced - Trading Assets Thumbnail

Getting Divorced - Trading Assets

Hello. My name is Scott Johnson.

In this episode of the Financial Success Academy on divorce, I'll discuss the potential tax implications of dividing and trading different assets in divorce.

While it's the court's obligation to ensure that assets are divided equally and fairly, you and your spouse can negotiate who gets what.

We regularly see situations where one spouse wants to keep the house, so they trade other assets in exchange for home equity, or a spouse wants to retain their full DRS pension benefits, so they trade 457(b) assets in exchange for not splitting the pension.

When trading assets, you should always speak with your tax advisor to fully understand the future tax implications that some assets may have over others.

For example, since equity in a primary residence is subject to a significant capital gains tax exemption, that equity is almost always a tax-free asset.

Trading a tax-deferred asset like 457(b) assets for home equity may not be a fair dollar-for-dollar trade from a tax standpoint.

You also need to keep in mind that if one party wants to keep a hard asset like a home, a car, or a work of art, that hard asset needs to receive a current valuation so the court can determine how to divide its value from a dollar standpoint.

Keeping real estate instead of selling it can be especially difficult for valuation purposes. Most licensed real estate appraisers in Washington will not be willing to provide evaluations in a divorce proceeding because of the potential liability of being dragged into court if one party or the other does not accept the valuation as accurate.

I hope you found this video helpful. Again, if you have specific questions about any of this information, please call our office, and we will be happy to talk to you about your specific situation. Thanks for watching and stay safe.