Philadelphia High Asset Divorce Attorney
Philadelphia High Asset Divorce Attorney
Divorce or the dissolution of a marriage is a tough and trying time for all parties that are involved. Regardless of the exact reasons behind the decision to divorce, there are frequently feelings of betrayal and the potential to make emotionally charged decisions that are not in the individual’s best long-term interests. A divorce of any type is a complex situation that affects the financial well-being of all involved parties. The stakes and complexities are only increased in divorces involving significant amounts of assets. In a divorce involving substantial assets, the equitable distribution of these assets and concerns regarding child support, spousal support, and custody disputes are anything but typical or routine. Furthermore, important tax concerns are often implicated in each of these decisions.
At Sadek & Cooper, our legal team can provide a comprehensive and nuanced analysis of all aspects of your divorce. Once we have discussed the legal and financial implications of certain decisions, we fight strategically and aggressively to achieve your desired outcome. While every marriage and divorce proceeding differs, you can rest assured that you will be guided through the process each step of the way.
Grounds for Divorce in Pennsylvania
In Pennsylvania, married couples can proceed with a divorce on either no-fault or fault-based grounds. Today, fault-based divorce is less common, but it can provide relief for an “innocent and injured spouse.” In many cases, the grounds under which an at-fault divorce can proceed are:
- Cruel and barbarous treatment
- Mental illness
- Conviction of certain serious crimes
To be clear, a fault-based divorce typically introduces additional complexity to the matter and should generally only be utilized when a no-fault divorce is unlikely to produce a favorable outcome for the party. Thus, most divorces in Pennsylvania proceed on no-fault grounds.
A no-fault divorce is available in Pennsylvania with the consent of both parties or following a separation of more than two years with the intent to terminate the marriage. As its name suggests, a no-fault divorce is not concerned with assigning responsibility to a party for the end of the marriage. Rather, the grant of a no-fault divorce is premised on the existence of an “estrangement due to marital difficulties with no reasonable prospect of reconciliation” (irretrievable breakdown) or other valid grounds.
Child Support and Spousal Support Tax Issues Raised by High Asset Divorces
In a high asset divorce, important tax issues are regularly raised by decisions made relating to child support, alimony or spousal support, and the equitable distribution of the property.
To start, the U.S. Tax Code provides significantly disparate handling for payments on the basis of whether they qualify as spousal support or child support. As defined in Section 71(b) of the U.S Tax Code, a gross income deduction is typically available for spousal support payments. To determine whether a payment qualifies under the U.S. Tax Code as a spousal support payment the payment must be made under the instruction of a written, legal divorce or separation agreement. It must be described as an alimony or spousal support payment in the document. Furthermore, the payment must not extend beyond the death of the former spouse who receives the spousal payment. By contrast, a child support payment is one that is linked to the financial needs of a child or characterized as a payment of this type in a written legal document. It is typically made by the non-custodial parent to the custodial parent. Unlike spousal payments, child support payments are not eligible for tax deductions. Thus, precise wording and clarity are of the utmost importance. Furthermore, careful drafting is also essential to avoid the potential for alimony recapture due to mischaracterized payments.
Concerns Regarding Equitable Distribution of the Marital Property
Under Equitable division of marital property § 3502 of the Pennsylvania Code, the court may consider each marital asset or group of assets independently and apply a different percentage to each marital asset or group of assets. There are many factors which the court will deem as relevant to the equitable division of marital property.
An additional tax issue raised by high asset divorces is that of the equitable distribution of property. Under Internal Revenue Code Section 1041(a), divorcing or separating spouses are permitted to engage in property transfers without immediately realizing a gain or loss from the transfer. This property is taken on a carryover basis and the receiving party will need to account for built-in gain on the property when he or she engages in a subsequent transfer. However, careful tax planning can minimize the tax burden of property transfers. For instance, it may be wise to shift the property to the spouse with a lower marginal tax rate to minimize taxation. It is also wise to begin preparing for the tax liability a liquidation of this property will create. Finally, all negotiations regarding the equitable distribution of property should be informed and guided by this consideration.
The Attorneys at Sadek & Cooper Regularly Represent Clients in all Aspects Related to High Asset Divorce
If you are going through the process of a divorce and are looking for a firm that can provide a comprehensive handling of the issues raised, Sadek & Cooper may be able to help. We can handle the issues raised in a divorce including child support, alimony, and property distribution. We can also assess and provide advice regarding the tax and other considerations that should guide your approach to a high asset divorce. To schedule a free and confidential legal consultation, call our Philadelphia law firm at 215-814-0395. We have offices conveniently located in Center City, Delaware County, Bucks County Northeast Philadelphia, and Moorestown, New Jersey.