Money Secrets in Divorce, Part 2

11. Understand Debt Obligations

Just because it’s listed in one person’s name doesn’t mean it’s not marital. Also, some states do not divide marital debt if it’s just in one person’s name.

12. Don’t Forget About Beneficiary Designations

For best results, handle beneficiary designations and other tedious paperwork that involves or protects your assets — including your will — as soon as possible.

13. Consider Your Income Before Asking For All Deductible Items

Clients typically strive to get as much as possible in a divorce. However, higher incomes can disqualify individuals from important tax deductions.

In light of this fact, you might not want all the items you originally requested in a divorce. For best results, speak to Certified Divorce Financial Analyst about your specific situation and options.

14. Be Mindful of the Date When Initiating Divorce

While you might be tempted to file as soon as possible, note that courts typically uses a formal date of separation to determine property division and the value of certain assets.

15. Design a Joint Parenting Arrangement Wisely

Unlike claiming a child as a tax dependent, claiming head of household is not assignable. If you’re negotiating who will claim a child as a dependent, you can include a provision that the right to claim the child is dependent on the parent being up to date on their support obligation.

16. Plan Finances for After the Divorce

Clients often neglect to consider how their financial planning can change after a divorce. Your risk aversion may be very different than your former spouse, and you do not need to keep the same investment trajectory you had before the divorce.

17. Have a Paper Trail

While most assets are divisible in divorce, there are some exceptions to that rule. Documents can help preserve what you believe to be separate property when it comes to divorce proceedings and should be collected beforehand.

18. Division of Property Can Be Complex

Dividing assets and properties isn’t always a simple numerical transaction. Negotiating the division of property is an art form all its own.

19. Retirement Accounts Are Not Worth the Balance

Just as it can be difficult to value assets, couples often struggle to determine the true value of their retirement accounts. One reason that retirement accounts pose problems is that deferred tax will have to be paid at some point. In light of this fact, retirement accounts might be worth even less than the balance minus tax.

If one of the parties will be liquidating a retirement account early, then the highest marginal tax rate and the early withdrawal penalty might need to be subtracted from the value of the account.

20. Don’t Forget About Health Insurance

Although federal law might dictate that you have health insurance access under your former spouse, relying on COBRA coverage can be very expensive. Start doing legwork (early) for available options that may be less expensive.



Source = Lia Sestric