Tennessee residents likely understand that their financial situation is going to change after their divorce is finalized. Unfortunately, not everyone quite grasps how much it is going to change and the fact that it might never return to the way it was while they were married. Where previously income and assets were being split between one household, now the same is being divided into two houses with possibly more people involved. To ensure one’s financial independence after a divorce, it is important to understand the implications of every decision being made and to have a voice.
Equal value assets may not be equal
It can be a common part of property division negotiations: find two assets worth the same and give each one to each party. However, not all assets are created equal, even when they have the same value. Taxes can create the imbalance, with a hundred dollars in cash being unequal to a hundred dollars in stock. Selling the stock will have tax implications that differ from the cash amount. In order to ensure an equitable distribution, taxes should be subtracted from the value.
Retirement accounts
People often withdraw money from their retirement account to split it with their soon to be ex-spouse, but forget that they will suffer a significant withholding tax on that amount. Depending on one’s age, an early withdrawal penalty may also apply. Sharing the amount through a qualified domestic relations order is one way to avoid these penalties, but it is separate from the divorce decree.
Family residence
The family house is often the subject of heated debate during a divorce, with both parties arguing to keep it but rarely realizing that they will now be maintaining it on one or half an income. Some couples decide to sell the house and share the proceeds, while other decide that one may buy the other out. During all these discussions, it is important to get a fair estimate on the property price and land price.
Property division decisions during a divorce have long lasting implications, which is why it is important to understand them. An experienced attorney may be able to help with that.