All Dollars Not Equal

home money.jpgThe division of assets between the spouses is an important decision to finalize a divorce. The exercise looks relatively simple: assign a value for each of the assets and divide them based on a mutual agreement between the parties.

The challenge is to make a fair division which requires an analysis to determine their value after they’re converted to cash.

Assume the two major assets in the example, a retirement account and the equity in the home, are equal at $100,000. It might seem logical to give the home to one spouse and the retirement account to the other. However, if the person receiving the home decides to sell the home, the net proceeds could be considerably less than the spouse receiving the retirement account.

Let’s pretend that the spouse with the home negotiates a lower price of $475,000 due to current market conditions. The former couple had owned the home for many years and refinanced several times, pulling money out of the home each time. When the remaining spouse sells the home, there could be a considerable gain that was never recognized.

As a single person, he or she is now only entitled to $250,000 exclusion and would have to pay tax on the excess gain. After paying the sales costs, outstanding mortgage balance and the taxes due on the gain, the remaining spouse would have net proceeds of $24,375 compared to the $100,000 that the former spouse received in the settlement.

The message in an example like this is to examine and consider the potential expenses that may be involved with converting the assets to cash after the divorce. Obviously, expert tax advice is valuable in making such decisions.
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All my best, 
Myra Spano, REALTOR® 
 

About the Author:
 
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
 

For information about purchasing a home in Virginia Beach, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.

If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
 
Myra Spano & Prudential Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!
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