Even under the best of circumstances, divorce can be a harrowing process. From the emotional impact of a lost relationship, to the logistical nightmare of dealing with the court system, almost no aspect of divorce is easy to handle. One of the biggest issues many divorcing spouses face lies in dealing with their financial situations. One spouse may target the assets of the more affluent partner. Some spouses may take such actions out of revenge, entitlement, or desperation. Financial professionals have offered some tips for divorcing spouses on how to protect their financial security.
Divorce and Spending
Some spouses may look at divorce as an opportunity to make the large purchases they’ve always wanted, such as a new house, a new car, or investing in a new business venture. A spouse who is considering such a substantial purchase may be better off making that investment prior to filing for divorce. In many states, divorce law prohibits one spouse from liquidating assets or making large purchases after the divorce papers have been filed. This law prevents spouses from devaluing their assets during the divorce proceedings.
Divorce and Property Valuation
Texas divorce law specifies that all property gathered by the couple during the marriage is “community property”. This concept means that the divorcing couple will split the value of any property accrued during the marriage. During the divorce process, a spouse should consult an expert on the value of that marital property. Without an expert appraisal, the spouse may be left to the mercy of the other spouse and their attorney to determine the value of their share of the marital property.
Divorce and Hiding Assets
Some more affluent spouses may consider hiding, disguising, or devaluing assets during a divorce. They may see such actions as a means to protect their assets, but the penalties for such behavior can be severe. At best, the spouse hiding the assets can lose credibility in court. At worst, the spouse could face criminal charges ranging from contempt of court to felony fraud. These charges carry fines of thousands of dollars and potential jail time.
Divorce and Taxes
Another frightening aspect of divorce and finances involves taxes. Even if one spouse has given up assets to the other in the divorce, the original owner of those assets could still be responsible for taxes on that asset’s value. For instance, if a husband loses his house to his wife in the divorce agreement, he may still be responsible for property taxes on that house. The same principle holds true for assets ranging from investment instruments to co-owned businesses to real estate.
Divorce and Retirement
A couple who jointly holds a retirement account can encounter some serious problems with managing that account during a divorce. In some cases, the assets in the retirement account can have a higher value than any other asset, including the family home. However, the taxes on the value of that account are deferred until either one of the account holders retires or liquidates the account. A professional financial adviser can help a spouse determine what to do with a retirement account during a divorce.
Source: Huffington Post
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NOTE: This post is a news story and does not imply an endorsement of Arguello Law Firm by any concerned parties mentioned herein.