When most people think about divorce, matters related to child custody, spousal and child support and the division of personal possessions come to mind. The division of assets is also a crucial aspect of divorce that must be addressed. However, for most couples, assets consist of more than simple checking and savings accounts.
Depending on an individual's job, age and income; he or she may have a substantial amount of money held in investment and retirement accounts. While the process of both discovering and dividing assets held in these types of accounts can be an arduous task, doing so is crucial to ensuring for both one's current and future financial security.
In some cases, it can be difficult to discover all of the accounts held in a soon-to-be ex's name. In cases where a spouse has highly diversified his or her investments or may be attempting to hide assets, it's wise to hire a financial professional who can aid in the discovery of long-lost or hidden accounts. When all of a spouse's investment and retirement accounts are known, there are a number of factors that must be taken into account prior to any divorce settlement agreements being finalized.
First, it's important to note that accounts that may appear to be of equal value are in fact not. For example, investment accounts are subject to different tax terms and rules with regard to how they are taxed and when withdrawals are allowed. For these reasons, it's imperative to hire a divorce attorney who can help an individual determine the real value versus the perceived value of a spouse's investment accounts.
Likewise, divorcing individuals must be careful when agreeing to terms related to the division of assets held in retirement accounts such as ROTH IRAs or 401(k) plans. The assets held in these types of retirement accounts are also taxed at different rates and subject to different rules related to when and how assets can be transferred to avoid hefty penalties.
Individuals going through a divorce are forced to make important personal and financial decisions under tremendous emotional duress which increases the likelihood that he or she will make mistakes. It's important, therefore, to enlist the assistance of an attorney who has a client's best interests in mind and will help ensure a divorce settlement takes an individual's current and future financial needs and goals into consideration.
Source: The Wall Street Journal, "If Divorcing, Divide Investments With Care," Lisa Ward, April 6, 2014