Among the reasons given for divorce, in Orange County as in other areas, disputes over money are consistently near the top of the list whether in a high net worth divorce or a more traditional divorce. Many married couples have disagreements over how much money they have, over what money is spent on, over how much is spent, and so on.
Understanding your options
Experts say that it’s important for those who are considering divorce to take the time to understand your financial options and to think carefully before making decisions on matters involving property division both in a high net worth divorce and in a more traditional divorce.
“Once the ball starts rolling and all the emotional stuff is at the forefront, it can be challenging to deal with the financial side,” said certified financial planner Danielle Howard, principal at Wealth By Design.
Howard was recently divorced after 28 years of marriage. She stresses the importance of studying your finances before the legal process of divorce is underway.
“Do your homework,” she said. “Find the right team to walk you through the technical financial aspects, along with managing the emotional side.”
Howard told CNBC that ideally, your team would include both a family law attorney and a financial advisor. (Many people also enlist the services of a therapist well versed in divorce issues.)
Appearances can be deceiving
Among the money matters emphasized in the CNBC report is the importance of understanding that not all assets are equal in value – even though they can appear to be of equal value.
“A hundred dollars in cash is different from (a stock) valued at $100,” said Lili Vasileff, a certified divorce financial analyst who is also president of Wealth Protection Management. “Selling that stock has a tax impact.”
The profit made on an asset such as a share of stock can be taxed as a capital gain.
“Subtract those taxes from the value if you’re really going to do an equitable division,” said CPA Sallie Mullins Thompson, who’s also a certified divorce financial analyst.
A $100,000 CD is worth $100,000. A $100,000 IRA or 401K is not worth the same in that the money in these accounts is pre-tax.
For instance, if you have a traditional 401(k) account, withdrawals are taxed at ordinary income tax rates and a penalty can be assessed on withdrawals if you are under age 59 and a half. Both possibilities should be discussed with your lawyer and financial advisor.
Orange County Divorce Lawyers
Consult with one of our 18 respected Orange County divorce lawyers to help you analyze the tax consequences of asset division and the difference between pre-tax and post-tax assets.