Financial disputes are often at the heart of marital discord for couples. Those disagreements often continue when divorce becomes the only solution.
When emotions run high, some spouses just want to be done with the process as soon as possible. However, it’s crucial that you understand how complex assets are divided, so you receive your fair share of marital property.
Pay close attention to these three assets
In addition to working with a family law attorney who understands how to distribute complicated assets equitably, it’s a good idea to do a little homework on your own. High-net-worth individuals should pay particular attention to:
- The family home: Some divorcing couples agree to sell their house and split the proceeds. Many times, one spouse wants to remain. But it’s essential to remember you’ll become solely responsible for the mortgage and upkeep. If you sell, later on, you may face capital gains taxes if the profit exceeds $250,000.
- Investment accounts: Bear in mind that getting $10,000 in cash in your settlement is different than receiving $10,000 in stocks. If you sell the asset, you face tax consequences. An experienced divorce attorney understands how to allow for those costs upfront.
- Retirement accounts: Dividing a 401(k) or other workplace retirement account can be tricky. If you withdraw funds from a qualified retirement plan to pay your soon-to-be-ex, you face a 20% tax withholding plus a 10% penalty if you are under age 59 ½. Instead, have your attorney draft a qualified domestic relations order or QDRO.
While splitting an IRA or other nonqualified retirement assets doesn’t require a QDRO, you can avoid potential tax consequences by placing those funds in a rollover account.