In general, ex-spouses can make a tax-free transfer of assets within a year of the divorce. “Tax-free” means the initial transfer is considered a gift, so you’ll want to make sure you’re fully informed about the basis of assets you receive…. Why? Because you get the same basis and holding period your ex-spouse had before the transfer. That will be important when you sell the assets later.
Another …caveat: Some types of property, such as retirement plans, have extra rules to be aware of. For example, to remain tax-free, a transfer from your traditional IRA to your spouse must be mentioned in your divorce decree, and should take place post-divorce, via a direct transfer to the new account.
Splitting assets in your 401(k) or other qualified retirement plan requires a “qualified domestic relations order,” a document you must get from the court.
These are just a few of the taxing aspects of divorce. Contact us for planning and advice specific to your situation.
Written by: Doug Rodrigues