When considering a divorce, money is often one of the greatest sources of stress and worry. Whether you have significant assets or just a few, it is crucial to have a plan to protect your wealth. Working with an experienced divorce lawyer who understands the complexities of financial matters can help you safeguard your hard-earned money. This article will discuss practical steps to protect your finances during a divorce.
Prepare Your Finances For Divorce
Improving the probability that you come through your divorce financially intact starts with having a solid accounting of what you have financially.
Inventory your assets, including bank accounts, real estate investments, retirement funds, and any other income or property that may be affected by a potential split. Ensure you get copies of all financial documents, such as tax returns and credit reports so that you, your attorney, and your financial advisors can understand your current financial situation thoroughly.
Be Smart When Offering To Divide Assets
Divorce is typically a nightmare for everyone involved. The division of assets is a critical component of the divorce process that should not be taken lightly. However, with the help of an experienced divorce lawyer, you can protect your wealth and ensure you get what is fair in the settlement.
At Brandon Legal Group, our experienced legal professionals will work with you to ensure your rights are upheld throughout the asset division process. We understand that this challenging time requires a delicate approach to navigating assets. Therefore we strive to provide personalized advice on protecting your wealth during this time.
The second most contentious divorce issue is the division of assets. (The first is Child Custody.) We urge our clients to consider just how much any asset is needed and the financial impact of every asset being divided.
For instance, that curio you may have purchased on your honeymoon has sentimental value, but is it worth $1,000 in legal fees to fight for it instead of giving it to your ex? That house you purchased for an income investment, have you considered the tax implications of letting it go? It’s possible that your ex is in a higher tax bracket and would trade something of greater value to you than the investment house because they get the depreciation. Emotions tend to run away from any form of control while “dividing the stuff.” In your negotiations, try to focus on your long-term needs, the benefits of each asset you will have part with, and tax implications.
The truth is that every asset will be worth something different to each party to the divorce. Everything is negotiable. Giving something away that is important to your ex but not as important to you in exchange for something of greater long-term value is smart negotiation. We consider all relevant factors, including pre-existing agreements, current financial standing, and prospects, when negotiating asset division on behalf of our clients.
Don’t Hide Assets! Is Your Ex Hiding Assets?
Although hiding your belongings is the easiest method to secure them, when it comes to divorce assets, doing so sends a message to the court that you intend to lie for financial advantage. Of course, a spouse may transfer assets to a third party or transfer monies to trusts or offshore accounts, but this will be detected and should be avoided.
There are various methods for concealing assets. The most popular is transferring funds to another account or a third party. If you are aware or believe that your spouse is hiding any, immediately tell your divorce lawyer. You should consult a forensic accountant if your spouse refuses to reveal their assets. If any monies or other valuables are hidden away, you can be confident that they will be discovered. In high-asset divorces, a forensic accountant is almost a must to have.
The court does not let you open someone else’s bank statements. The law also does not let you open your spouse’s email accounts or their online banking accounts. Any evidence obtained in this manner is often inadmissible. Financials from both parties are required as a part of the discovery process; however, misstating assets is surprisingly common. Those caught hiding assets generally are not well received by the judge.
Reevaluate Insurance Policies
Divorce may be difficult, but it’s important to remember that life moves forward. One of the best ways to protect your financial future post-divorce is by reevaluating your insurance policies and ensuring you are adequately covered.
It is essential for those who have gone through a separation or divorce to review their health, home, auto, and life insurance policies. Before signing any paperwork with a divorce lawyer, ensure you understand what coverage you need and how much coverage will be enough for your particular situation. It’s also wise to select an insurance provider with flexible payment options so that you can keep up with premiums in case of any job changes or other financial alterations.
During a divorce, insurance issues may arise, including determining who will maintain coverage for health, life, and car insurance and addressing any outstanding claims or debts related to insurance. For example, suppose one spouse was covered under the other spouse’s health insurance during the marriage. In that case, it will need to be decided who will be responsible for obtaining coverage after the divorce. Additionally, any life insurance policies that list the other spouse as the beneficiary must be updated to reflect the new marital status. It’s recommended to consult a lawyer or financial advisor to help navigate these issues.
Tax Implications of Divorce
Divorce has significant tax implications for both parties involved. Some key tax issues include the tax treatment of alimony payments, the transfer of property between spouses, and the tax implications of child custody arrangements.
Alimony payments are taxable income to the recipient and tax-deductible for the payer. However, starting from the 2019 tax year, Alimony will no longer be a tax-deductible expense for the payer, nor will it be considered taxable income for the recipient. On the other hand, child support is not considered income to the person receiving it. Therefore, it might be wise to negotiate higher child support in favor of a lower alimony payment purely for the tax advantage. Also worth considering in that scenario is that Alimony can sometimes be forever, and Child Support stops.
Property transfers between spouses are generally not subject to capital gains tax as long as the transfer is part of a divorce settlement. However, if the property is sold after the transfer, capital gains tax may be due on any appreciation in value.
Child custody arrangements can also have tax implications, as the custodial parent is often entitled to claim the child as a dependent for tax purposes. If the parents have joint custody, the parent with the higher income may be able to claim the child as a dependent, or whoever gets to claim the kids might rotate year after year. If you fail to negotiate this, the courts will decide.
When going through a divorce, it’s essential to understand how taxes will be affected, as this could heavily impact individual finances. Filing status for single or married filing jointly is one consideration when looking at taxes and potential capital gains if there was any property division during the divorce process. In addition, depending on the state of residence and other factors, certain assets may incur more taxes than others upon transfer.
Securing Your Future
We all know that divorce is a roller coaster of emotion and provokes a sense of irrationality at times. Therefore, it is vital to understand the financial implications of a divorce before making any decisions. With the help of a divorce lawyer, you can protect your wealth during this process. A knowledgeable divorce attorney can provide insight on how to protect your assets during a divorce settlement best. Through informed decision-making and intelligent planning, you can ensure that your financial future is secure even after the dissolution of your marriage.