Most people understandably focus on the emotional side of divorce when their marriage comes to an end. The pain entices many to pursue the quickest resolution possible.
But sometimes, a fast AND equitable divorce may not be in the cards. It’s also not advisable when mistakes over dividing complex assets lead to financial losses, only increasing the emotional pain.
Be careful when dividing these three marital assets
The first step to securing a fair divorce outcome is working with an experienced family law attorney who understands how complex assets are handled. Your lawyer will advocate for your best interests, which can help avoid painful, costly mistakes for dividing items, such as:
- Investment accounts: Sharing $10,000 in stocks is much different than splitting cash. The seller faces short- or long-term capital gains taxes depending upon whether the stock was held for more or less than a year. Any tax consequences should be figured into the settlement.
- Retirement funds: A paying spouse faces tax consequences when taking money from a 401(k) or other workplace retirement plan. A 20% tax withholding generally applies as well as a 10% penalty if they are under 59 ½. Instead, their attorney can draft a qualified domestic relations order (QDRO) to transfer money to a rollover IRA avoiding tax liabilities.
- Family home: It may be easy to divide this asset if both spouses agree to sell and split the proceeds. However, when one spouse wants to remain, they need to make sure they can afford the mortgage and monthly expenses. If they sell the property later, they may also be solely responsible for paying a capital gains tax on a profit exceeding $250,000.
Don’t let divorce derail your financial well-being
Everyone going through a divorce wants to come away with as little emotional damage as possible. However, it’s essential to remember that short-term financial mistakes for the sake of expediency can lead to long-term damage, especially for high-net-worth individuals.
Everyone’s marriage and divorce are unique. That’s why it’s crucial to take a step back and discuss a divorce strategy with your lawyer that makes sense for you. Creating a plan that ensures an equitable outcome can lead to relief now and in the future.