The financial implications of divorce can be just as unsettling as the emotional aspects, especially if you have no idea how to negotiate for your fair share of the marital assets. Here are four issues you should consider in your divorce asset negotiations:
- The tax implications of your assets.
One of the most potentially harmful mistakes divorcing couples make in dividing marital assets is not considering the tax implications of each asset. Cash in a traditional IRA cannot be valued the same as cash in a savings account since IRA withdrawals are taxed and early withdrawal penalties can apply. Each asset that qualifies as marital property should be analyzed for potential tax consequences prior to negotiating a divorce settlement so accurate comparisons can be made.
- The true value of complex assets.
If your divorce involves the division of complex assets like an art collection, jewelry, multiple properties and/or real estate in other states or countries, you will likely need to obtain professional appraisals of these unique assets so you know their value before you engage in the fair distribution of marital assets. Couples who divorce as they are nearing retirement need to consider the long-term worth of each asset; trading away retirement assets in order to keep the house may be a sentimental choice but could end up being a foolish financial decision.
- Project future values.
It can help settlement negotiations if the value of marital assets are calculated as to current as well as future worth. If one spouse is interested in retaining a home in exchange for investments, it will be helpful to see what each asset will look like in 5 or 10 years, taking into account tax differences and anticipated rates of return.
- Give careful consideration to selling the family home.
When it comes to marital assets, the family home is typically the single largest asset for a divorcing couple. It is also the one that usually causes the most conflict, especially if minor children are involved. Many times, people want to keep the house without fully considering the financial consequences of their decision and instead make this choice based on emotion alone. There are several factors that should be examined when determining whether or not to keep a house in a divorce or sell it and split the proceeds. These include:
- The appraised value of the home
- The employment status of both spouses
- The ability of the remaining spouse to refinance the home
- The ability of the remaining spouse to buy out the other spouse
- The alimony and child support obligations
- The availability of cash for a down payment
Divorcing couples should examine whether continuing to own the home jointly for a limited time after the divorce would be beneficial, not only for the children but there may be tax benefits as well.
We know that family law issues are often difficult, life-changing events. We also know how much it helps to have knowledgeable legal advocates on your side to help you obtain the best possible outcome. Contact us today for your free consultation.
