What's one common denominator with divorce agreements among the wealthy?
Investment portfolios. This is the heart of asset distribution when you
think about it, so you can only imagine what the American Taxpayer Relief
Act has potentially done in the configuring and organization of those
portfolios to ensure everyone gets an equal piece of the pie.
Thanks to the new 3.8% Medicare surtax on all capital gains, dividends
and other investment revenue consisting of well over $200K adjusted gross
income, you may be looking at more "horse trades" over many
portfolios. Why? The problem with maintaining portfolios generating more
taxes is the loss in return. Nowadays because of the higher Medicare tax,
divorcing spouses are looking for another tactic – seeking other
assets, such as rental properties, to generate tax
losses. This imbalances it all out. Instead of going for that 50-50 split, the
share of the portfolio might go 60-40 or 70-30. Why is that? Consider
a divorcing spouse noticing that there will be more tax paid on a specific
portion of that portfolio related to the new Medicare surtax. If that's
the case, the spouse may want more of an allocation to offset that increase in tax.
Naturally, this could open up a whole new pandora's box, unless the
other party's amicable enough to come to an agreement with the imbalanced
share of the portfolio. Either way you look at it, it compels more deliberation,
discussion and maybe even dispute on how to split the assets. Some assets
might have more value than others – but when it comes to taxes,
in the long run, the unlikely spouse with the less 'valuable'
property might benefit better from their tax returns.