Remember to focus on finances during divorce
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Everyone knows that filing for divorce can be tough to deal with at any age. Those who choose to file for divorce later in life, however, face a unique set of challenges: not only can it be more difficult to start the next chapter of life, but also more difficult to achieve financial stability. Indeed, when older couples choose to get divorced, it can wreak havoc on their financial plans. In some cases, it may be necessary for the couple to sell their marital home, cash in a life insurance policy or even go back into the workforce. When making the decision to file for divorce, it is essential that couples remember to focus on several important financial issues.
First, before the divorce process begins, it is essential for each individual to get a better understanding of their assets. This includes not only joint checking and savings accounts, but also investment accounts, retirement accounts, rental properties, insurance policies and more. While this may seem straightforward enough, it is easy to forget that some assets exist, particularly for older couples. In some situations, it may even make sense to speak to a financial planner for assistance.
Second, once you have a better idea about your assets, it is essential to learn more about the possible tax consequences of dividing property in a particular way. For example, if a couple has a $100,000 Roth IRA and $100,000 in a brokerage account, they may seem at first glance to be equal. The Roth IRA, however, allows retired individuals to receive distributions tax-free. Taxes may still be due when stocks in the brokerage account are sold. This means that the Roth IRA may be worth far more than the brokerage account.
Finally, it is important to understand the rules when splitting certain kinds of assets. Dividing an IRA is fairly easy, but dividing assets held in a 401(k) or pension plan is a different story. When dealing with the latter type of accounts, it is important to have a well drafted qualified domestic relations order. A properly drafted QDRO can help individuals save money and potential tax liability.
The reality, of course, is that the divorce process can present significant challenges. The good news, however, is that a divorce attorney has the experience to help you through it. If you are considering filing for divorce from your spouse, schedule a meeting with an experienced divorce attorney to learn more about your options.