Why it is Important to Understand Tax Implications Before Settling
Celebrity divorces can get pretty ugly for two reasons: 1) they are in the spotlight, and 2) they have a substantial amount of assets that need to be fairly divided. Johnny Depp’s and Amber Heard’s divorce, however, is uglier than most celebrity breakups. After the divorce was finalized and a $7 million divorce settlement for Heard agreed upon, Heard took to social media and began accusing Depp of physical and emotional abuse. Depp, calling breach of contract, then refused to pay the settlement.
Tax Implications May Have Spurred This Refusal
Depp has not outright refused to pay the settlement, exactly—he has just refused to pay it to Heard. Heard, upon learning that she would be receiving $7 million of Depp’s wealth, promised to donate the entirety of it to the American Civil Liberties Union and the Children’s Hospital of Los Angeles. Depp, after being slandered on social media, has said that he will pay the settlement amount, but just not to Heard. While some might think this is because he fears she will renege on her promise and keep the money for herself, others believe it is more of a tax issue. If Depp were to pay the $7 million to Heard, he would not reap any tax benefits; on the other hand, if he were to make the payments directly to the charities himself, he would.
Tax Implications of Your Own Settlement
While Depp’s and Heard’s situation is a unique one, it is a good lesson to all divorcing couples to consider the tax implications before finalizing their own divorce settlement. If you are going through a divorce or are about to file for a divorce, allow a Boca Raton division of assets attorney to advise you on the consequences of divorce disbursements and what all to consider before negotiating a settlement.
For instance, many divorcing couples will lump all of their assets together and then come up with a value of the total marital estate. While seemingly a good idea, these couples do not take into account the possible tax implications of each individual asset. For example, the couple may own a house with equity of $300,000, a pension with $600,000, and several bank accounts with a total of $300,000. They might assume that the best way to divide the assets is to give the wife the house and the bank accounts, and the husband the pension. While upfront, the total would appear to be even, once each party liquidated their assets, the wife would end up with much more than the husband.
Once liquidated, the wife could walk away with $600,000 in cash. However, if the husband wanted to (or had to) liquidate his pension, he would be subject to state and federal taxes. Assuming he falls into the 30 percent tax bracket, and assuming a 10 percent early liquidation fee, he would only walk away with just $378,000. In the end, what seemed fair would actually be grossly unfair.
This is just a simplistic example of how taxes can affect your final settlement, and demonstrates why it is so important to work with an attorney throughout the division of assets process—especially if those assets have a high-net-worth.
Consult a Boca Raton Division of Assets Attorney
If you are about to embark on the divorce process, and if you have a lot of assets with a high-net-worth, it would serve your best interests to consult with a Boca Raton division of assets lawyer before signing any final documents. We can help you assess the value and tax implications of everything from your 401(K) to your stocks and bonds and ensure that when it is time to divide assets, the division is truly equal. To speak with a Boca Raton division of assets lawyer, call Law Offices of Schwartz | White at 561-391-9943, or contact us online to schedule your appointment.