Financial risks during divorce

Pierre Domercq Divorce

Although some California couples going through a divorce might be familiar with the process because of prior marriages, many are unfamiliar with important issues such as financial decisions that could have long-term implications. The emotional side of the process can further cloud one’s decisions as efforts are made to make a clean break from a partner. Time is an important asset that should be used carefully to ensure that the decisions and agreements made are in one’s best interest.
Consulting a financial adviser may be one of the most important preparatory steps, allowing an individual to get a comprehensive view of both marital and separately-owned assets. An individual who plays an integral role in the management of family resources and finances may be better positioned to understand their standing heading into divorce. However, it may still be prudent to enlist the help of an investigator to ensure that there aren’t any hidden assets that should be included in the division.
Smart tax decisions should be made before a divorce settlement is accepted. If significant taxes will be owed on an asset, that tax basis might be figured into the value of the asset. The source of funds for a settlement should be considered as well since tapping some funds could increase one’s annual income for that year and erase potential deductions. It’s wise to avoid using retirement resources to settle a divorce because of such issues. Emotional decisions based on guilt or the hope of future reconciliation can also lead to serious financial losses.
By discussing one’s potential plans for divorce with an attorney, it is possible to identify the steps needed to be financially prepared for the divorce process. An attorney may recommend a financial adviser and suggest steps such as closing joint accounts and evaluating credit reports.