Property Settlements and Third-Party Transfers
When marital separation occurs and a divorce is contemplated, spouses must decide how to divide their property. Property includes such assets as the family home, rental property, automobiles, pensions, bank accounts, and stocks and bonds. It also includes art and antique collections, furniture, IRAs, life insurance cash values, and family businesses. A formal property settlement agreement is usually drawn up and signed by the couple, formally assigning assets to one spouse or the other. In some cases, the couple may decide to sell one or more assets to a third party, splitting the proceeds. This type of transaction is known as a third-party transfer.
Although it's important for divorcing spouses to understand the property laws regarding the division of marital property, it's also essential for them to understand the tax implications of their decisions.