Texas couples who have decided to dissolve their marriage must come to an agreement regarding the division of their assets or accept that a court will do it for them. It is important to understand that some assets may hold more value than they initially appear and that taxes can negatively affect the value of certain assets.
Taxes may play a large role in a divorce. Authorities on divorce recommend that spouses examine past jointly filed tax returns to identify ‘tax assets,” such as charitable contribution carry-forwards and capital loss carry-forwards. Spouses ought to take into account how much assets will be worth after taxes, including certain types of retirement benefits. This does not include Roth IRAs and Roth 401(k)s, as they get funded by money that has already been taxed. With regard to some retirement benefits, a tax-free, one-time transfer is permitted, which is another factor to consider.
However, retirement benefits may be especially valuable to spouses in a position to think long-term. On the other hand, primarily liquid assets, such as cash and bonds, may hold more value for the spouse in greater need of immediate cash flow. Assets with a greater degree of liquidity may be more readily translated into spendable cash.
According to authorities, divorcing spouses should be sure to resolve all liabilities prior to the completion of the divorce. This can be accomplished by transferring them to a single spouse willing to take on the debt or by paying them off. Toward this end, it may be prudent for spouses to order a credit report so as to check for any outstanding debts that need to be resolved.
While digital assets might not hold much monetary value, digital passwords, access to online accounts and pictures and videos stored on phones or tablets may be critically important to a spouse. In many cases, digital assets may hold a sentimental or emotional value for one particular spouse.
Deciding upon which assets to seek is only one step in a divorce settlement agreement. Another important, primary step is retaining the counsel and resources of a family law attorney.
Source: Market Watch, “Divorce? The 6 worst money mistakes“, Leslie Thompson, September 23, 2014
