The concept of how to divide assets is often a primary focus of divorce. When you’re talking about liquid assets like bank accounts, dividing them is as often fairly straightforward. Generally, we can assign each person an amount and then transfer the money accordingly.
Unfortunately the division of a house or a pension, or other long-term investments like those, can mean “destroying” them. In divorce cases, the sale of a house can be disruptive, stressful, and further reinforce children’s fears about how dramatically their lives are changing. Cashing in certain investments, like stock options, 401(k)’s or IRA’s can result in tax penalties that further add to the costs of a divorce.
If couples can avoid the courtroom, by using mediation, collaborative law, or negotiating with each other, they often stand a much better chance of being able to divide their assets without destroying them. If a case ends up in formal litigation, it becomes one of many cases that a judge is tasked with reconciling. Both parties are trying to keep assets intact and ultimately be awarded them. However, you may only win a portion of a prized asset in the judge’s final decision. Often parties are stuck with a Judge’s decision that may not work for either of them.
Often keeping the divorce out of the courtroom is critical to keeping homes, pensions, and similar assets intact. The use of experts like accountants, and appraisers to help determine what everything is worth in a timely and honest manner expedites the process. With good lawyering and open and frank discussion amongst the parties and the financial professionals we can help each party walk away from the divorce with what’s most important to them. For instance if we know at the outset that one party wants the house, and the other party is willing to agree provided there’s adequate compensation, we can work with that as a goal for the negotiations.
Notwithstanding, you must always be cognizant of minimizing tax implications in a way that Judges might not care or even be aware of. For example, most everyone is aware that a 401(k) or IRA can be transferred, totally or in part, in the case of a divorce, rather than liquidated to avoid a tax liability. Those who don’t know that, and are “eager” to protect their assets, could make a very bad tax decision prior to engaging a lawyer to discuss their options.
Ultimately, the most successful divorces allow couples to divide assets in the manner they prefer to divide them. Divorce is not easy and the process can be time consuming, stressful and costly, but it is almost always in the best interest of the parties to try and negotiate resolutions to their estate on their own terms.