The Financial Impact of Divorce
September 25, 2020
Divorce can be devastating personally, but many couples don’t consider the financial impact of divorce when deciding to end their marriage. A lot of financial worries comes from fear of the unknown. You may have heard that divorce has a big impact financially, but you don’t understand how. It’s important to take a hard look at the financial impact of divorce, and using a certified CDFA consultant can make the process easier to navigate.
Understand Your Assets
When you look at your joint assets, you need to understand which assets will be considered liquid. Retirement accounts, savings accounts, and brokerage accounts are looked at as liquid because they can be easily accessed. Your home, cars, and other property will be looked at as illiquid, because they are harder to sell quickly to access the cash value. Many couples don’t understand how all these assets will be handled and split during the divorce proceedings, and not knowing can make living expenses very difficult.
Consider the Tax Implications
A divorce settlement can have very costly tax implications, especially if you don’t proceed in an informed way. Capital gains taxes can be quite high when it comes to stock, real estate, and other investments that you may liquidate during a divorce settlement. Most divorce lawyers are not tax experts, and may not be able to guide you through the tax implications, which is where a consultant such as Jeff Mohlman, CDFA, can help.
Understand Your Retirement Accounts
Transferring a retirement account during a divorce settlement may help avoid penalty taxes, but not all retirement accounts are straightforward when it comes to dividing these assets. Penalties can be quite high, and if you make moves without understanding how the moving and splitting of your retirement accounts will impact you financially, you could end up losing 10% of your savings to taxes.
Look at Your Debt and Credit
Debt and credit ratings are very important to understand when you are looking at your financial picture. The first thing you need to do is look at your credit report so you have a complete understanding of all your joint accounts, which may include accounts you weren’t aware of. Any joint accounts need to be closed and paid off during the divorce settlement, with the new accounts opened for the individuals if necessary. If the debt was held jointly, both parties are liable for the debt.
How a CDFA Can Help
Every couple has a different financial picture, which means that every couple going through a divorce has a different scenario to work through. Adding financial insecurity to an already stressful process can put you at risk for making mistakes that have long term financial consequences. While your attorney may be able to help guide you through your divorce settlement, hiring a CFDA, like Jeff Mohlman, is one of the smartest moves you can make. A CDFA understands the financial impact of divorce and can guide you through making the right decisions.
Divorce often involves unraveling many financial situations. To many, the financial impact of divorce feels more stressful than the emotional impact. When you’ve made the decision to begin the divorce process, talking with a financial professional who understands the financial implications of divorce can take some of the stress out of the situation, and will allow you to begin your new life from the strongest financial position possible. Contact Safe Money Partners today to learn more about ways to create a financially successful future for yourself and your family.