Arizona residents may wonder about the financial needs they will have after a divorce. This is partly based on an individual’s economic status during marriage. Understanding marital assets and the way they might be divided is important. There are a few financial areas that spouses should scrutinize during the divorce process.
When dividing marital assets during divorce, a major consideration involves taxes. The dollar value of two equally valuable assets might differ significantly after taxes are paid. If funds are deposited in a retirement account, the value of that account depends on whether taxes are due when money is withdrawn. Roth accounts are funded with previously taxed dollars, so no taxes are due. Some retirement accounts, such as traditional 401(k) plans, are funded with non-taxed dollars, so tax is due later. Knowing the difference may make the settlement more equal.
Tax assets on income tax returns, such as capital loss carry-forwards or charitable contribution carry-forwards, should also be considered. Not addressing these assets may result in a spouse not receiving the benefit of their value on future returns.
A spouse may need liquid assets as they start their post-divorce life. Expenses for furniture, another car, rent and groceries accumulate. Factoring this into the settlement is important. In this case, a spouse may opt to receive assets such as stocks or bonds, both of which may be liquidated quickly.
Finally, marital liabilities should be considered carefully. At the dissolution of the marriage, it is important to pay all bills if possible. Conducting a credit check and taking credit cards out of joint status is also advisable.
An family law attorney’s advice may be beneficial when a spouse is attempting to move on after a divorce. The attorney may assist by structuring a divorce settlement properly to meet their client’s needs.
Source: Market Watch, “Divorce? The 6 worst money mistakes“, Leslie Thompson, September 23, 2014