Separating finances that have been intertwined for years can be very tricky. The best thing a person can do to protect his or her finances during a divorce is to work with a financial planner and an accountant, in addition to working with an attorney. It can be very easy for a spouse to make financial decisions that can have disastrous financial consequences.
It’s critical that during your divorce you make a list of all of your assets, which is required as part of the divorce process anyway. If you forget about an asset, obviously it cannot be fairly divided, which could result in your spouse keeping it. An investigator can also pay off in some cases – a large number of people hide bank accounts and other assets from their spouse.
While dividing assets, it’s important that you think about the tax consequences of dividing each asset. For example, taking a house in the settlement has very different tax consequences than taking a retirement account. Assets that may appear to be equal could actually be very unequal once taxes are factored in. Also, it’s important that as part of the divorce process, you actually divide your assets. Do not keep joint bank accounts or joint credit cards. You also need to update the beneficiary forms on assets like life insurance policies and IRAs.
Many experts caution against dipping into retirement assets as part of the divorce process. The tax consequences can be very bad, and you can leave yourself unprepared for your retirement. Finally, try to avoid allowing emotion to enter into the division of your assets. Do not overstate the value of an asset because of its sentimental value to you, or refuse to give up one asset to your spouse just so you can have the upper hand – in the long run, those types of behaviors will cost you money in legal fees.