Among the reasons given for divorce, disputes over money are consistently near the top of the list. 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.
“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 – 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.
For instance, if you have a traditional 401(k) account, withdrawals can be 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.