Asset’s price tag isn’t the only factor to consider in divorce

During a divorce in Texas, the couple’s assets must be divided. Those that are determined to be separate property of one spouse will go with that spouse, but what about the community property acquired during the marriage? A big step in the process of dividing assets is determining value, but current monetary or market value isn’t the only factor that should be considered.

Future value may be another factor to take into consideration. For example, a Roth IRA and a 401(k) have different tax consequences for the withdrawal of benefits. A family-owned business may require a discussion about whether it should be sold or retained under a joint agreement. Liquidity of assets is yet another aspect that shouldn’t be forgotten.

A spouse may get their equal share of assets in a high-net worth divorce, but what if only a small percentage of those assets are liquid? Each spouse still needs to pay for everyday expenses and be prepared for unexpected complications like job loss, market changes such as the recent recession, medical issues or even the nonpayment of support obligations.

Having the big house may not be as beneficial anymore, leaving the spouse in a tough financial spot. Those retirement accounts mentioned above can have early withdrawal penalties, a consequence that an individual may not want to be subjected to.

This doesn’t mean that a spouse shouldn’t want to keep the home or other less liquid assets, but the lesson here is that spouses should have a discussion with their Fort Worth divorce attorney about both the short-term and the long-term benefits and consequences of a particular settlement plan.

Source: The Wall Street Journal, “ The Biggest Financial Mistakes Divorcing Couples Make,” Ted Jenkin, April 24, 2014