Taxes play a critical role in divorce settlements, and it is essential for matrimonial attorneys to identify tax-related issues accurately. For example, restricted stock units (RSUs) are typically taxed as income when they vest. If a client is considering keeping their RSUs in exchange for a payout, it is crucial to ensure these stocks are taxed correctly and to include a provision in the agreement for future tax adjustments. This allows for reconciliation if taxes were underpaid or overpaid initially.

Capital gains tax is another significant consideration. If one spouse wishes to keep the family home that was purchased decades ago, potential capital gains taxes upon sale must be accounted for. Often, these capital gains aren’t factored into the divorce settlement because it’s uncertain if or when the home will be sold. In some cases, it may be beneficial to sell the home during the divorce or to structure ownership to maximize tax benefits, such as the $500,000 capital gains exclusion available to married couples versus the $250,000 exclusion for single filers.

Additionally, taxes may apply if a business is sold or if other real property is involved, so calculating potential capital gains for these assets is essential. Brokerage accounts also need careful consideration, as stocks bought years ago may have appreciated significantly, resulting in capital gains. When dividing stocks, it’s important to address the tax implications, whether the assets are split through payouts or transferred in kind. This includes equalizing the cost basis to ensure both parties share the tax liability proportionally.

These tax considerations are vital throughout the divorce process to avoid unforeseen financial burdens and ensure a fair and equitable division of assets.