When surveying life's financial landscape, most people can gaze into the future and identify some of the major expenses that may come their way, like retirement savings and homeownership. Often, however, people fail to appreciate just what a huge financial burden a divorce can be, especially when it is not approached with sober judgement and planning. If you are headed toward divorce, or in the middle of one now, it is vital that you take stock of your situation and take precautions against the many ways a divorce can shipwreck your financial life.
When it comes to asset division, conventional wisdom seems to think that getting more is always better — however, this is not remotely true. Nearly every asset that can be claimed carries some sort of responsibility or tax burden with it. Achieving an ideal asset division requires a comprehensive understanding of the implications of owning this asset or the other, and what adverse consequences may arise in the future.
For instance, if the marital property includes a home and also an approximately equal amount of monetary assets, it seems like simply allotting the home to one spouse and the assets to the other is a reasonable approach. What if the home has a hefty mortgage payment to go with it? Or, if the home is owned outright, does the partner receiving it have the necessary income or accumulated assets to ensure that he or she will be able to pay the ongoing property taxes?
Similarly, the monetary assets may be realistically worth much more or less, depending on their form. Money held in various retirement accounts are taxed differently than money held in a simple banking or savings account, or tied up in one form of investment or another.
The important thing to keep in mind when planning for a divorce, and especially when negotiating asset division, is how the choices that are made in the divorce settlement negotiation will affect you for years to come. An experienced attorney can help you understand the full scope of your situation, and keep your rights protected throughout the process.
Source: CNBC, "Headed for divorce court? Here are your top 5 financial musts," Andrew Osterland, Dec. 22, 2016