Divorce is a difficult time in anyone's life, and is a route that is only taken after much thought and deliberation. Although many attempt to prepare for the consequences of a split, some of the financial implications are often overlooked.
Financial decisions extend far beyond who gets the family home. An experienced Massachusetts divorce attorney will also discuss how divorce affects taxes, investments and retirement savings. In order to ensure a strong financial foundation post divorce, consider the following questions:
How will the property we own be affected?
A judge typically reviews assets and requires an equitable split of all the couple's marital property. This does not necessarily mean everything is split 50/50, but instead focuses on fairness. When making this determination, a judge takes all types of property into consideration, including:
- Homes and vehicles
- Stocks and other investment funds
- Retirement savings
- Debts accumulated during the marriage
When discussing how assets will be divided, it is important to also consider the tax implications.
How will my taxes be affected?
Capital gains implications may apply if selling a family home. Generally, avoidance of the tax is allowed on the first $250,000 of gain as long as the home was owned and lived in for at least two out of the last five years.
In addition to tax implications on the sale of a home, your actual filing status is also affected by divorce. The ability to file as married or single is determined based on your marital status as of December 31st of that tax year.
What about retirement investments?
Tax implications can also apply if retirement transfers are not handled carefully. It is important to avoid a precarious financial situation that requires removing finances from retirement accounts. If money is removed, tax penalties can be steep.
Retirement assets are most successful when balanced. As a result, ideally each spouse will be left with a diverse investment portfolio after the divorce settlement. If that is not possible, hopefully the parties are at least on the road to a secure financial future.
The financial implications of divorce can be complex and far-reaching. An experienced divorce lawyer can provide advice and guidance that will help ensure your interests and finances are protected.
