The treatment of a tax debt in divorce proceedings is a critical consideration when the parties assets are being divided between them.

Tax debts incurred by either party to a marriage prior to separation or divorce are counted as liabilities of both parties.  Therefore when parties are engaged in settling their share of the matrimonial pool in divorce proceedings, the Family Court is required to take tax debts into consideration.

Equitable Distribution of Tax Debt in Family Court

The Family Court takes a nuanced approach to the distribution of tax debt, considering various factors to ensure a fair outcome. If both partners benefited from unpaid taxes, perhaps living a more extravagant lifestyle, the court might allocate the tax liability accordingly.

However, situations where one partner incurred tax debts without the consent or knowledge of the other—acting “on a frolic of their own”—could influence the court to adjust the distribution of these debts.

Financial Losses and Division Exceptions

Financial missteps during a marriage, whether through reckless management or deliberate devaluation of assets, are generally shared responsibilities. Yet, the court makes exceptions, particularly when losses arise from unilateral decisions not aligned with joint marital objectives.

The Role of Knowledge in Tax Avoidance

The court also considers each spouse’s awareness of tax avoidance strategies employed during the marriage. An “innocent” spouse may still face legal repercussions if they benefited from these arrangements, highlighting the complexity of these cases.

Seeking Professional Advice

Given the intricate nature of “tax debt in family court,” individuals facing these issues should seek professional legal advice. Our team is ready to provide support and guidance tailored to your situation. Contact us for expert assistance.

Expert Representation from Bernie Kerr

Bernie Kerr, our Senior Counsel with extensive experience in family law, can offer invaluable advice and representation. Whether you’re navigating tax debt implications or seeking strategies for asset protection, Bernie’s expertise is a click away. Meet Bernie Kerr.