I am a Principal in the Tax Department of Fairman Group Family Office. We are located in Berwyn, PA. I am an attorney, CFP and CDFA. I've been involved in the financial/tax aspects of divorce for a few years, and I handled a handful of divorce cases from my days as a practicing attorney.
The use of a trust in equitable distribution and tax planning in divorce situations can be complicated and not right in every situation. However, using a trust for equitable distribution and support payments could add an extra layer of protection for your client.
Usually, transfers of appreciated property between parties result in gain recognition. However, by utilizing Section 1041 of the Internal Revenue Code and a properly drafted property settlement agreement, divorcing spouses can transfer property between themselves without triggering a gain.
Valuing a business is complicated. Throw divorce into the mix and you run the risk of counting the value of the business twice -- once when the marital estate is divided and again when support is awarded. The concept is called "double dipping", and practitioners need to be aware of the concept to make sure their clients don't pay more than their fair share in their divorce.
Distributions from qualified retirement vehicles made in the context of divorce negotiations could have unintended tax consequences if not structured properly.