What’s Better: Trading Assets or Selling Assets During Divorce?

When it comes to property division in Atlanta, spouses often choose between selling their assets and trading them. At first glance, the difference between these two choices might seem minor. Whether you trade or sell an asset, you still lose it. So what is the significance of this choice? Speak with an Atlanta divorce lawyer, and you may learn that these two options have distinct legal implications.

How Does Trading Assets Work During Property Division?

The process of trading assets is an important strategy during property division in Atlanta. With this approach, one spouse offers an asset in exchange for something else of equal (or roughly equal) value. For example, one spouse might keep the $250,000 sports car while the other keeps $250,000 in stocks.

If couples want to control how they trade their assets, it makes sense to choose alternative dispute resolution (ADR) instead of a trial. While a judge may order couples to trade assets, the couple does not really control how these trades occur. During private ADR negotiation, however, spouses can choose exactly how they want to trade certain assets.

Why Trading Assets Is Generally Preferable to Liquidation

You may assume that selling off your assets and splitting the cash proceeds is the easiest and fairest way to navigate property division. However, there are a number of issues associated with this approach. First, spouses may encounter significant capital gains taxes when liquidating assets that have appreciated in value over the years. As soon as a couple sells these assets, they incur capital gains taxes.

These capital gains implications can be significant, especially for high-net-worth spouses. While selling and splitting the cash might seem fair, it could result in unnecessary losses for both spouses. In addition, spouses may not want to sell certain assets. For example, a spouse might have a sentimental connection to a valuable piece of fine art or a vintage designer handbag worth tens of thousands of dollars.

Some spouses may not want to sell assets in poor market conditions. For example, a spouse might believe that their stock or crypto portfolio will skyrocket within the next five years. It doesn’t make sense for them to sell and split the cash, especially if the market is in a downturn.

An asset transfer connected to a divorce does not trigger any taxes. For example, a spouse might transfer half of their stock portfolio to their ex. As long as this transfer is connected with the divorce proceeding, the receiving spouse does not owe any tax because of this “income.” Even if spouses split the cash contents of a bank account, this shouldn’t count as income in the eyes of the IRS.

Can a Divorce Lawyer in Atlanta Help Me? 

A divorce lawyer in Atlanta may be able to help if you’re trying to decide between selling and trading assets. Although trading assets generally provides more favorable results in terms of taxes, selling may be preferable under certain scenarios. Start a real conversation on this topic by contacting Buckhead Family Law today.

Source:

irs.gov/individuals/filing-taxes-after-divorce-or-separation