When an Ohio couple ends their marriage, the divorce process will force spouses to divide all of their marital property and assets. Although many variables could influence the division of property, including the law, spouses have some leeway when negotiating their settlements. In some situations, two parties might exchange assets of similar value instead of splitting them. Before making decisions like these, people should carefully consider potential tax obligations and unexpected expenses.
Real estate generally includes a marital home and perhaps other assets like vacation houses or commercial properties. A person giving up portions of the marital estate in order to keep a home needs to know if a single income can sustain the mortgage payments. Additionally, an ex-spouse who signs away a home might still have legal liability for the loan if both spouses originally signed for the loan. When spouses decide to sell a property and split the proceeds, they need to decide who will pay the taxes and upkeep on the house until it is purchased.
Retirement savings come with some complications as well. Most savings, such as a 401(k) plan, will be taxed upon distribution if the recipients have not reached retirement age. This tax obligation often reduces the value of the asset significantly. For example, a person might only get $75,000 after taxes on a $100,000 account. For those who have workplace pensions, the rules of the plan will calculate the amount cashed out for an ex-spouse at the time of divorce.
When a person must negotiate the terms of a divorce, an attorney could provide insights about taxes and rights to assets. An attorney might suggest strategies that allow a client to offset a tax bill on a 401(k) distribution by requesting additional assets to create an equitable settlement.