Before entering into a divorce property settlement, you should consider the following financial matters:
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Tax Implications
It is be beneficial for you to consult with an accountant to learn what the tax implications of the property settlement are before signing the agreement. Some things to think about regarding taxes matters are: tax basis of property, losses carrying forward on previous tax year, claims on tax returns related to children and real estate, capital gains, how maintenance will be treated for tax purposes, and many more concerns.
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Insure Financial Support Obligations
If there is an ongoing financial obligation such as child support or maintenance the person designated to pay the obligation should obtain a life insurance policy in an amount that is sufficient to insure the financial obligation. Including such a provision in the settlement agreement makes certain that if the person obligated to pay the financial obligation dies, then the recipient is not left without that income, which could put him or her in financial ruins.
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Permissible Retirement Division Options
There are many types of retirement plans. You will need to get a copy of your plan to ensure that agreements included in your property division settlement are permitted under your retirement plan. It is also important to look at options regarding survival benefits. Keep in mind that there are consequences with early withdrawal of these funds and receiving $50,000 in cash is not the same as receiving $50,000 in retirement funds.
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Value of Investment Assets
Some investments have penalties, taxes and other financial consequences if liquidated. This means that if you enter into a 50/50 property split and these items end up on your side of the property division, you may not be getting the equivalent of your spouse’s property settlement. You should consult with an attorney to determine whether your property division is fair given the type of assets you are allocated.
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True Pension Values
The value on your pension statement can be misleading. A pension may be one of the most valuable assets you have. Some pensions will require a trained expert to determine its true value. As with other retirement assets, it is important for you to obtain information regarding the rules and regulations related to your plan. Failure to correctly value your pension could be a costly mistake.