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Financial matters commonly overlooked during a divorce

Colorado couples who are in the midst of a divorce may face hardships regarding the settlement process. Especially in high-asset divorces, couples can overlook some important financial aspects. Understanding these aspects may help avoid complications during divorce proceedings.

Individuals should consider if they need to liquidate their valuable assets such as Roth retirement accounts, mutual funds and any stocks and bonds. These are easily sold and can bring in instant cash. However, taxable accounts could be more beneficial in the long run if kept intact. Divorcing couples should evaluate their financial needs when deciding which of their valuable assets should be kept and which should be sold.

Another important financial factor to consider during the settlement process is the subject of taxes and how they can impact the couple’s assets. Knowing which investment accounts or assets are tax-free can make a huge difference in the final withdrawal amount. Money withdrawn from traditional 401(k) accounts, for example, will be taxed; withdrawals from Roth 401(k) and IRA accounts are basically tax-free. Also, if a person withdrawing from a non-Roth retirement account is under the age of 59 1/2, he or she will have to pay income tax in addition to a possible penalty of 10 percent on the amount. However, the penalty is waived if the withdrawal occurs within a year after the divorce.

Divorcing couples may also wish to consider capital gains on any taxable investments and tax assets. If these matters are not properly addressed, they can lead to errors or confusion on future tax returns.

In a high-asset divorce, the settlement process could become quite complicated. Individuals in these circumstances may wish to enlist the services of a family law attorney. The attorney can help protect the client’s best interests in matters of investment and retirement accounts, real estate assets and other high-value assets.

Source: Forbes, “6 Money Matters Divorcing Spouses Often Overlook“, Leslie Thompson, August 19, 2014

Source: Forbes, “6 Money Matters Divorcing Spouses Often Overlook“, Leslie Thompson, August 19, 2014

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