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Divorce Financial Planning – Watch the Assets
Divorce Financial Planning – Watch the Assets because studies show that divorce among couples over 50 is increasing.
If you have been married for decades, the chances of more money (assets, savings etc.) being involved in your divorce are much more likely. When considering divorce, divorce financial planning is crucial.
Often, at this stage, one party or the other has been entrusted with the couple’s financial affairs. Only one knows what the couple is worth, what stocks are held, where investment accounts and insurance are being held – even where the bank accounts are and how much is in them!
This is the time to put emotions aside and focus on facts. Once the judge rules in a divorce case there is no going back. From experience, we know the emotions brought out in divorces can have a former spouse act in ways unimaginable — up to and including hiding assets.
If you are the spouse in the dark about these matters it is crucial to get the very best professional help possible. All these things can be learned by simply asking the right questions in the right way.
It is impossible to know what you do not know. That may seem a silly statement but we can make it clear. Let’s look at a hypothetical example: Your spouse offers to leave you the house. Since it has been recently valued at $250,000, and the trade is a bank account with only $200,000 in it for the former partner, it seems like a good deal. However, if you do not know that there is a $200,000 mortgage on the house, and do not know the cost to maintain the house, you could be in for a very bad trade.
Here are some other traps we have seen people fall into by not knowing and are key to good divorce financial planning.
Not knowing your living expenses can be very painful. If you have not been paying the bills, and are not completely sure of the finances necessary to maintain your current lifestyle, you could end up living a very different life. You need to be very clear how much it cost to maintain your current lifestyle including things you might not otherwise think about. Insurance (car, life, health, house), housing costs including maintenance, living costs – food, transportation, education etc. Make a list of everything you do and its associated costs.
Knowing how much you need to maintain your lifestyle will be crucial to negotiating the terms of your divorce settlement.
How will taxes affect you? Make sure you completely understand how your taxes will work. Did you know you might be taxed on alimony? If you get part of a distribution from a retirement account and do not put it back into another, similar account you could be taxed. If you sell a home together or stocks and split the proceeds you may have to pay capital gains taxes.
If this all sounds new to you – get help! Taking time before filing for divorce to gather as much information as you possible will not only avoid some or all of these issues, but will also save you time and money. These things are much more difficult to do once you are in the legal process.
Work to assemble records of all assets with notes as to who owns what. Sometimes a spouse finding themselves in the wrong end of an unwanted divorce can take documents with them as they move out and make it very hard to recover.
Once again, we highly recommend anyone considering divorce to call for help – especially for the divorce financial planning, which is so very important to the process!