A spouse who has not been heavily involved in the family’s finances can often times find himself or herself at a disadvantage when it comes to dividing marital property.
Understanding your post-divorce financial needs and current financial situation is vital to the process. Here are some items that can be overlooked – you’ll want to be an expert in all of them, and hire an attorney that is an expert at advising you about these items.
Understand what your cash flow situation will be – is your need immediate? Or is it not an issue at all? Will you need to sell some assets – bonds, stocks, mutual funds?
What are Your Joint Liabilities?
Do you have any joint liabilities such as outstanding tax liabilities on jointly-filed tax returns. Do you have any joint credit cards? Will a mortgage need to be refinanced? All of these things will need to be settled before the divorce is deemed final. That means you will need to either pay them off or transfer them completely to one spouse’s name. Running a credit report will also help you identify any outstanding debts.
Taxes on Assets
Review the tax impact of your investments. Though two assets might have the same dollar value, taxes can cause them to be vastly different. Are there any unrealized capital gains on taxable investments that might be due someday?
Previous Tax Returns
Review the last three to five years of tax returns that you have filed jointly. This will give you an idea of what needs to be considered in the negotiations. These can include capital loss carry-forwards, charitable contribution carry-forwards, or net-operating losses. “Tax assets” reduce future taxes. Because of that they should be considered as an asset when the marital estate is split.
Dividing Retirement Assets
Retirement assets play a part and represent the couple’s net worth – or at least a portion of it. There are special rules that allow the transfer of them to be tax-free. You’ll need to work with a financial advisor that understands those special rules.
Though digital assets, such as pictures and videos that exist on computers or phones might not have financial value, they do have large emotional value. Arrange for both spouses to be able to access these assets.
Source: Forbes, 6 Money Matters Divorcing Spouses Often Overlook, August 19, 2014
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