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Financial factors people should address in a divorce

Getting a divorce in New York could put some spouses at a disadvantage if they did not follow the family finances during their marriage. This is why they need to understand their current and future financial needs and address a few elements during the process of resolving their divorce.

One of the first things couples need to know is their future cash flow needs because this helps them determine which property and assets will benefit them the most when the divorce is finalized. Assets that can be quickly and easily sold, such as mutual funds, stocks and bonds, could be the most valuable for immediate cash flow issues. Otherwise, long-term cash flow assets may include assets with a range of liquidity values. Also, some property that spouses may want to consider including in the agreement are phones, computers and other digital assets that have high emotional value.

As part of this, spouses need to be aware of how the tax on those assets impacts their financial standing. For example, taxes are due on traditional 401(k) contributions and growth, but no tax is owed on Roth 401(k) contributions and growth. The division of employer pension plans are subject to different rules. Spouses should also review the previous three to five years of their joint tax returns to educate themselves on assets that should be considered in the divorce negotiations.

In addition, spouses need to look over their joint liabilities and make arrangements to avoid incurring payments or penalties for unpaid liabilities. This might include refinancing mortgages, canceling joint credit card accounts and paying outstanding taxes on joint returns. In some divorces, the parties are able to come to an agreement on the division of assets. If they are unable to do so, the court will consider several factors in order to determine an equitable distribution.

Source: Forbes, "6 Money Matters Divorcing Spouses Often Overlook", August 19, 2014

Source: Forbes, "6 Money Matters Divorcing Spouses Often Overlook", August 19, 2014

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