Know About Liquidity And Illiquidity
Not knowing the liquidity of assets accumulated in the marriage is a mistake. Liquidity refers to the ability to turn an asset into cash. For example, money in a bank account can be quickly turned into cash. A different kind of asset such as a stamp collection is not liquid because it would take time to put it up for sale, find a buyer and decide whether or not the offer for the collection is sufficient to justify selling it. When there is a divorce, one spouse might receive a series of assets that are considered illiquid. The home and car are examples of this. The other spouse, however, might receive access to retirement accounts, stocks and other assets that could be converted quickly to cash. Making the mistake of not having liquid assets is avoidable and will prevent such drastic measures as having to sell the home or take out a second mortgage when it would not be necessary with adequate planning.
Think About Taxes
You may not think about this at the time, but there could be tax consequences to receiving certain assets in the portfolio that was accrued during the marriage. Capital gains taxes is an important phrase to know because if, for example, you own a home that is worth $250,000 and the value of the property rises to $275,000, that is an increase in its value of $25,000 and you will have to pay taxes on that. This also applies to stocks and other objects of value.
Know The Rules Of Retirement Accounts
With retirement accounts, there may be penalties for early withdrawal. If the retirement account is to be awarded to the person who is known as the “nonparticipant spouse” meaning that it was given to the person who did not have the account as part of work, a QDRO must be filed. QDRO is short for Qualified Domestic Relations Order and the “participant spouse” must agree to turn all or part of it over to the nonparticipant spouse. Certain plans may not be transferable. A 401K might have tax penalties linked to it so you would not receive the amount you expected due to a tax withholding.
Know Your Credit Rating Before The Divorce Is Finalized
If you believe that you will not be penalized for a spouse's debts and transgressions with credit and bills because they were not yours, you are mistaken. With joint debts and bills, you are just as responsible for them as the former spouse. Whether you were the one who accumulated the debts is irrelevant. When trying to get a credit card or a mortgage, not knowing this information and taking steps to separate the debts prior to the finalization of the divorce is a big mistake.
Keep Up With Insurance Policies
Insurance policies can relate to medical, auto, home and life. If there is a life insurance benefit and the former spouse is still listed as the beneficiary, then this must be changed. If the vehicles are still in the spouse's name and insured under the spouse's name, it is important to change that as well. The spouse who may have taken out the policy and was paying the premiums for it might stop doing so and you would not even be aware of it until it is too late.
Have A Budget
It sounds simple, but many people fail to have a budget for money coming in and going out. Prior to coming to a divorce settlement and being happy that the family property was awarded to you, you have to know whether or not you can afford its upkeep. Even if there is alimony and child support coming in, it might not be enough to live as you have grown accustomed to and changes might be required.
Learn About Hidden Assets
It is possible that there was money acquired in the marriage that you were unaware of. Spouses might have secret investments, bank accounts, assets and other items that could be seen as “hidden,” but which you are entitled to a part of in the divorce settlement. Going through tax returns, cancelled checks, savings accounts, checking accounts, statements from brokerages, expense accounts and even accounts in the names of your children might be a location where money and assets you were unaware of were placed. In some circumstances money might even be in bank accounts overseas.
Contact A Qualified New Jersey Divorce Lawyer
If you or a loved one are in the process of getting divorced in Monmouth County, Ocean County or anywhere else in New Jersey and are unsure how to move forward with knowing your financial situation, contact the Law Firm of Villani & DeLuca, P.C. in Point Pleasant Beach, New Jersey for assistance.
A divorce can be a difficult time that you just want to get over with to get on with your life, but not knowing the financial situation of you and your family could be a drastic mistake that could lead to long-term problems down the road.