In the event of a divorce, there may be a transfer of property between the former spouses. Thus, a divorce can result in taxes. A risk factor here is the property status of the benefit community. Because in a divorce, this property regime requires a division of assets. This can also lead to the transfer of real estate or company shares. However, such a transfer often reveals hidden reserves, which leads to their taxation. Fortunately, taxes can be avoided after a divorce in most cases. For this purpose, it is necessary that one fulfils a right to a capital settlement or another capital transfer by cash payment. However, if only insufficient liquid funds are available, then taking out a loan is advisable. After all, there should be enough collateral for this with the existing real estate assets or the company shares.

A divorce is in itself unpleasant – even if it means an exemption for all parties involved and is consensual. In addition to the personal aspects, financial questions also arise in a divorce. What type of asset allocation applies? Are there any real estate? Or even corporate investments? It is hard to imagine that you want to continue to accept the divorced partner as a shareholder in real estate or companies. So there is usually a division of assets. And here there are dangers, because then the Treasury could also demand its share on the hidden reserves revealed as a result of the division of assets due to divorce.

We take this opportunity to report on these often surprising aspects that can complicate a divorce even more than already. But we also show ways to minimize or even avoid one or the other risk.

The first point we are discussing is immediately a very important one. Because taxes generally occur when an asset growth takes place. At first glance, divorce may not be a source of wealth growth. But if the spouses dissolve their marriage under the property regime of the community of gain, then the less wealthy partner receives part of the property, so that both partners have equal assets after the divorce.

If the more wealthy partner now holds a large part of the assets in real estate or company shares, the other partner can be satisfied with a part of these assets. However, this leads to a discovery of the hidden reserves contained therein. Consequently, this transfer of assets is subject to taxation. It is comparable to taxation on sales between third parties. However, this taxation has further consequences. Because the person to be satisfied is entitled that the value of the property due to him also takes these deferred taxes into account. In other words, the asset to be transferred must be recognised as gross value.

First, we examine taxes that may arise after a divorce related to real estate. If a partner is entitled to an asset settlement and if this is to be fulfilled by transferring ownership of real estate, different cases must be distinguished.

For rented properties, the period that has elapsed since the acquisition depends. If, for example, the property has been owned by the other partner for at least ten years, the associated speculative period has expired. Ergo you can transfer the property tax-free. Otherwise, there will be a tax on the difference between the acquisition cost and the current market value. The tax administration thus subjects this operation to a tax on a fictitious sales profit.

Similarly complex is the case if the property to be transferred is the former joint or even sole apartment of the now divorced couple. Because here the speculative period falls to three years in which one lived there (no time years).

Another tax aspect regarding the transfer of real estate assets after a divorce is related to the real estate transfer tax. If a partner transfers a property to the other partner as a result of a divorce, there is no real estate transfer tax on it.

Since there is no speculative period in a normal company sale, the transfer of company shares to a partner regularly incurs taxes after the divorce. Here, however, any deferred taxes are even more important. Often companies also include deferred taxes. And these must be taken into account in advance when determining the value of the shares to be transferred.

However, it is such a thing with deferred taxes. Finally, it is up to future taxation to determine its actual level. So you can at best estimate how high you should set it. This in turn means that experts should be consulted to determine these deferred taxes as realistically as possible. Nevertheless, for example, a later operational audit can come to other results.

There is a panacea against taxes following a divorce. In fact, it is quite simple. More importantly, it also ensures that you can satisfy the former spouse without a transfer of real estate or company shares. This means that both real estate and company shares are still held alone.

The magic word here is money. In principle, spouses are only entitled to a sum of money in the case of a claim for property settlement after a divorce. The fact that you can still offer other assets to meet the claim is only another option. If you now have enough liquid funds to pay the desired balance of assets, then this is certainly the more tax recommendable way. Because money is a nominal good and is therefore not subject to tax in the case of a transfer as a result of a divorce. After all, the money itself does not contain any increase in value that could be subject to taxation.

But if you hold a large part of the assets in real estate or in company shares, so that the remaining liquid funds are by no means sufficient for a balance of assets, the situation is different. Although some of these assets could be sold, this would also lead to a taxation of the hidden reserves thus revealed. However, these taxes can be saved if you offer the assets instead as collateral to take out a loan. Although taking out a loan may seem less tempting in times of rising interest rates, it still makes a difference whether you pay a few percent in interest or pay up to more than 45 percent in taxes. In any case, a monetary payment to the former partner avoids taxes after the divorce.

A divorce, as already said, is usually already unsightly enough. But then having to pay taxes as a result of a divorce makes the whole affair even more unpleasant. It is good that you can avoid any taxes after a divorce. This is especially useful if you are in the uncertainty, because deferred taxes must also be taken into account. In addition, it always makes sense to separate the existing assets in one way without remaining connected to the former partner via this. Therefore, it is advisable to fulfil the right to compensation by cash payment in the case of both real estate assets and company shares. If this is only possible via a loan, this is usually more advantageous than paying taxes.

Even more important is the property status before the divorce. Because if a property settlement has been agreed for the divorce case, there is also a claim of a partner. Therefore, it can also make sense to bring the property settlement forward to the divorce in order to avoid the later taxes in the run-up to the divorce. Or you change previously by mutual agreement to the property status of the separation of goods.