Getting Divorced? Here’s the Path to a More Financially Sound Separation
Separating your finances after a divorce is a vital first step on your road to singlehood. This checklist can help you get off to a strong start.
Getting Divorced? Here’s the Path to a More Financially Sound Separation
Separating your finances after a divorce is a vital first step on your road to singlehood. This checklist can help you get off to a strong start.
There’s no sugarcoating it. Divorce is just plain hard. But you’re not alone. According to research, nearly 1 in 2 marriages in the U.S. – or nearly 50% -- end in divorce or separation.
Most couples going through the legal process of divorce find that dealing with the financial aspects is just as difficult as coping with the emotions. One of the most difficult tasks – and potentially one of the trickiest – is deciding who owes what to whom and who is assuming which obligations.
Let’s consider an example of a couple whose joint assets are a sizable 401(k) account and an equally sizable cash savings account. Would it be fair to trade one of these assets for another? Not exactly. The 401(k) comes with tax penalties for early withdrawal and each withdrawal, even once permitted without penalty, is fully taxable to the recipient, while the cash is immediately available with no penalties and is not subject to income taxes.
Your separation agreement will spell out how property is to be divided, therefore, it is important that you are comfortable with the details prior to signing the agreement. You also need to make arrangements for your own responsibilities going forward and remove yourself from title of assets and liabilities that no longer belong to you.
Here’s a checklist to get you started and help you transition from "ours" to "mine" and "yours" in a fair and financially sound way.
Day-to-day transactions and financial accounts
Other financial assets
Retirement plan issues
Property and other resources
Moving forward on your own
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This information is not intended as legal or tax advice and should not be treated as such. You should contact your estate planning and/or tax professional to discuss your personal situation.
Wealth planning strategies have legal, tax, accounting and other implications. Prior to implementing any wealth planning strategy, clients should consult their legal, tax, accounting and other advisers.