A property settlement is an arrangement under which one spouse will pay another a fixed amount in the years immediately after the divorce.
This is typically done because there are not enough liquid assets to equalize the property division in the year of the divorce.
Property settlements do NOT appear on the state’s financial form.
This is NOT where you divide assets between the parties. Do that on the Analysis tab on the Divide Property screen.
Here are some key issues to consider in connection with property settlements:
- Property transferred is neither taxable to the recipient spouse, nor tax deductible to the payer spouse.
- The tax basis of any property transferred carries over to the recipient. If you are the payer, you want to use low-basis assets. An example might be a stock that has increased significantly in value since it was purchased.
- If you are the recipient spouse, you want to receive high-basis assets. This would be either cash, or even better, a stock that has declined in value since it was purchased.
- A property settlement can be useful if the payer spouse has assets that it will take time to liquidate, or expects to receive assets in future years.
You enter a property settlement at the bottom of the screen where you enter assets and debts.