Tips on Protecting Your Home and Assets During Divorce
There are very few people who plan to get divorced, but many find themselves looking at a divorce regardless of all their other plans for their life, their marriage, and their relationship. If divorce is on your horizon, a few simple steps can help you prepare for a smooth financial separation while protecting your home and your assets.
1. Examine Assets that May be Affected by Divorce
2. Evaluate Separate Property
3. Evaluate Marital Property
4. Be Cautious of Financial Fraud
5. Consider the Need for a Certified Divorce Analyst
6. Don’t Damage Your Retirement Accounts
7. Gather Records & Document Goods
8. Take Social Security Benefits Into Consideration
There are numerous types of assets that may be impacted by divorce: retirement accounts (401(k)s, pensions, and IRAs), checking accounts, savings accounts, stocks, mutual funds, brokerage accounts, your home, vacation properties, rental properties, furniture, electronics, other household belongings, vehicles, family businesses or practices. Know what assets you need to protect before you dive in and do everything you can to maintain your finances through the divorce process.
In a divorce, assets are looked at and determined to be either marital property or separate property. Individuals considering or just filing for divorce should evaluate their assets early so they have an overall idea of what finances will look like after their separation. Separate property includes any property owned by one spouse before the marriage, any inheritance that was received by one party in the marriage, gifts from third parties to one individual in the union, payment to an individual received due to a personal injury lawsuit, etc. Identifying the separate property amongst the marital assets will offer a better idea of which assets will likely still be accessible to you after the divorce.
When considering the marital assets, evaluate “big ticket” items that would count as marital property. These larger or more valuable items are often divided equally between the two divorcing parties. Knowing the value of these assets before filing for divorce can be very useful when attempting to determine a basic understanding of how the finances will turn out post-divorce. The court considers a number of factors when determining how marital assets are divided, including: duration of the marriage, standard of living during the marriage, age of each party, health of each party, income (and earning potential) of each party, income or assets brought into the marriage by each party, financial situation of each party post-divorce, and the need to provide financially for the children.
Intentionally hoarding assets is financial fraud. If you suspect your partner of financial fraud during your divorce, consult with your attorney immediately.
In addition to working with an experienced attorney, you may want to consider the benefits of hiring a Certified Divorce Analyst. An analyst can be useful in divorce cases with complicated financial matters as well as cases involving financial fraud.
It is also worth noting that while it may be tempting to avoid the stress of paying for a divorce by pulling from retirement accounts, this is not a good idea. Borrow money from friends or family or use a credit card to pay for your divorce before you raid retirement accounts. Cashing out early typically results in a 10% early withdrawal penalty if you’re under 59 ½ and it also incurs income taxes. And that’s not even considering the opportunity cost of removing money that was compounding on a tax-deferred or tax-free basis.
When considering divorce, immediately start to gather records and document your household goods. Include all jointly held accounts, properties, and assets. The documentation will be essential when attempting to ascertain a fair share of the assets. It can also be instrumental in preventing either party from hiding tangible assets. Include clear copies of tax returns, loan applications, wills, trusts, financial statements, banking information, loan documents, insurance inventories, insurance policies, brokerage statements, car registrations, credit card statements, deeds to any property, etc. Make sure to have a copy of any records that verify separate property such as a family gift or an inheritance. Once documents are gathered, create an inventory of household goods and their value. Receipts can be included if they are available and always include antiques and heirloom items with appraisals if they are necessary to determine value.
Consider how divorce may impact Social Security benefits. Women over 50 should be particularly aware of this when getting divorced and determining their assets moving on after the divorce is final. For information on estimated social security benefits contact the Social Security Administration.
If you have questions about protecting your home and assets during a divorce, or if you need assistance filing for divorce, please get in touch with one of the experienced California divorce attorneys at The Maggio Law Firm today.
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