When dividing assets in divorce most people, individuals, mediators and attorneys alike, tend to focus on the property division spreadsheet. Current asset and debt values from statements are deemed to be separate or marital and funneled onto the division worksheet. Typically, above all else, the focus and end goal is to split property 50-50. With so much emphasis on this spreadsheet that dictates the remainder of your financial future, is there anything missing that could dramatically skew the end results?
The old cliché of ‘nothing is certain in life except death and taxes’ rings loud and true in divorce, don’t ignore them. It is important to realize that the value of an asset can drastically morph, being cut in half or double in value depending upon when the funds are needed. Retirement accounts have tax benefits and may be invested more aggressively allowing funds to grow faster over a long period of time. Money doubles every 10 years if invested at a rate of 7.2% per year. However, if investments are needed to purchase a new home, pay legal fees or subsidize an individual’s life style, the amount of money available after-tax could potentially be cut in half.
Different tax rules need to be applied to different types of accounts. For example, annuities versus stock accounts have different tax rules. Roth accounts versus IRA or 401k accounts are significantly different and should be analyzed. Additional withdrawal expenses such as surrender fees maybe applicable to some accounts or penalty waivers available in other scenarios.
There is a tremendous value in taking the time to sit down with a Certified Divorce Financial Analyst™ to support you in making informed decisions during your divorce regarding your future.