Divorce and Taxes – A 4-Part Guide to Avoiding Costly Mistakes – Part 4: Long-Term Tax Planning for Divorce: How to Protect Your Financial Future

By Vacca Family Law Group

Most people focus on the short-term during divorce—but smart financial planning means thinking years, even decades, ahead. A settlement that looks fair today may become burdensome tomorrow if it doesn’t account for long-term tax consequences. In this final installment of our series, we look at how to build a divorce agreement that supports your financial stability well into the future.

To offer expert insights, we once again turn to Lili Vasileff, Certified Divorce Financial Analyst (CDFA) at Wealth Protection Management, and Stacy Collins, Certified Public Accountant (CPA) at Stout, who have helped countless individuals navigate post-divorce financial planning.

Divorce and Gifting: How to Avoid Tax Pitfalls When Transferring Assets

Vasileff shares that gifting can be a strategic tool for high-net-worth individuals to minimize tax liabilities, but it comes with important considerations, especially during a divorce. Currently, you can gift up to $18,000 per person per year without triggering tax reporting, meaning a couple can jointly gift up to $36,000. For larger gifts, legal vehicles like irrevocable trusts can help remove assets from a marital estate, potentially lowering estate tax obligations.

However, in the context of divorce, gifting must be carefully structured. Once an asset is transferred out of the marital estate into an irrevocable trust, neither spouse can access or control it. As a result, the gifted asset is no longer considered marital property but instead serves as a legacy or benefit for heirs or charities. Given that tax laws may change in 2025 with the potential expiration of the 2017 Tax Cuts and Jobs Act, staying informed on evolving regulations is important when planning gifts during or after divorce.

How Can I Protect Myself from Future Tax Issues After My Divorce?

You should always consult a Certified Divorce Financial Analyst (CDFA) and a Certified Public Accountant (CPA) to help you identify potential tax liabilities, ensure assets are transferred correctly, and prevent costly mistakes that could lead to unexpected tax consequences in the future.

While both professionals are crucial, their expertise differs:

  • A CDFA specializes in divorce-related financial planning, focusing on long-term stability, asset division, and minimizing future tax burdens. They can help you navigate complex financial decisions and plan for retirement, investments, and potential tax implications that arise from the divorce agreement.
  • A CPA is an expert in tax planning and compliance. They ensure that your tax filings are accurate and that you understand how tax laws will impact your post-divorce finances.

Vasileff emphasizes that while the financial tasks in a divorce may seem similar, every case and individual are unique. Since many individuals are making major financial decisions for the first time under pressure, a CDFA can break down complex concepts, listen to concerns, and guide clients through each step. This expert guidance not only provides reassurance and a clear roadmap but also ensures that tax implications are carefully considered, helping avoid surprises when filing taxes post-divorce.

Court-Free Divorce Processes Offer Better Tax Outcomes and Custom Solutions

Keeping your divorce out of court allows for a more personalized and thoughtful resolution. When a judge makes decisions, they often have limited time and information. Complex issues, like dividing assets or considering tax implications, can be overlooked in a “one-size-fits-all” court ruling. Mediation or Collaborative Divorce provides a more comprehensive approach, where legal, emotional, and financial experts guide you toward a customized plan that fits your family’s unique needs.

Most divorce cases never actually go to trial. Judges are often hesitant to make life-altering decisions without fully understanding the couple’s circumstances. In fact, for the majority of cases that don’t reach trial, judges typically direct couples back to Mediation. By choosing Mediation or Collaborative Divorce from the beginning, you maintain control over the process and work toward a solution that is both practical and sustainable. By working with professionals outside the courtroom, you gain the expertise and support needed to reach a fair agreement while avoiding the stress and uncertainty of a trial.

Long-Term Divorce Planning Tips to Minimize Taxes and Protect Your Wealth

  • Work with a CDFA and/or CPA early in the process to create tax-smart settlement proposals.
  • Include provisions for handling future tax liabilities, especially with joint assets that will be sold or divided later.
  • Create a post-divorce financial plan that includes projections for retirement income, taxes, and healthcare costs.
  • Review your divorce agreement periodically with professionals as tax laws or your financial situation change.

Build a Stronger Post-Divorce Future—with Experienced Legal Counsel and Financial Experts on Your Side

Dividing assets during a divorce can be a complex and emotional process. With so much at stake, it’s important to understand your financial rights and options. Being well-informed about asset division can help you protect your future and make decisions that align with your long-term goals.

At Vacca Family Law Group, we know how challenging this time can be. Our experienced team is here to provide the knowledge and support you need to make informed decisions. Contact us today for a free introductory call and learn how we can guide you through the divorce process with care and expertise.

More from this series:

Vacca Family Law Group is located at One Grand Central Place, 60 E. 42nd St., Suite 700, New York, NY 10165.

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