Financial considerations during a divorce
Provided by MidAmerica Financial Resources
Going through a divorce can take a tremendous toll, especially on your finances. Here are a few key areas where you should pay particular attention if you are going through a divorce.
For property and assets, generally, anything that you acquired while married will be divided when you divorce. Exactly how it’s divided depends on the state where you reside.
The most common jurisdiction is where common law applies. In these states, the judge has discretion to listen to individual circumstances before dividing assets and property.
If you live in a community property state — as of this writing, those include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — courts generally divide assets and property acquired during the marriage equally.
Debt survives a divorce, and how it is treated depends on whether you live in a common law or community property state. In a common law state, debt acquired in individual accounts is the responsibility of the account holder, while debt in joint accounts is generally treated the same way as assets and property. In a community property state, debt is typically divided equally between spouses, no matter whether it was from an individual or joint account.
Close all joint accounts after your divorce, to avoid being responsible for debts that your spouse incurs. Once the divorce is finalized, have them reclassified as individual accounts by your creditors.
If you and your spouse have a mortgage for a home that has appreciated in value, consider selling it before the divorce is finalized, as the IRS allows you to take advantage of $500,000 in realized capital gains if you are a married taxpayer.
If you or your spouse have money in a 401(k) or pension plan, it may also be divided during a divorce. You can seek a share of your spouse’s 401(k) or pension plan benefit, if you obtain a Qualified Domestic Relations Order (QDRO) and present it to your spouse’s plan sponsor before distributions have been completed.
Don’t forget estate planning implications. If you’ve drafted a will, review it. And if you don’t have one, work with an estate planning attorney to draw one up. You’ll also want to review and possibly change your beneficiary designations for any pensions, 401(k)s, and insurance policies.
With so much at stake financially, consult an attorney or financial professional who specializes in divorce to help protect your assets to the greatest extent possible.
MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@lpl.com www.mid-america.us
Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC.
MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to LPL.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.
This material was prepared by LPL Financial, LLC.
