While money may not be the root of all evil, financial matters are often at the heart of marital discord as well as the divorce process.
When a divorce becomes the best or only option, the first step is working with an attorney who understands how complex assets are divided in Washington and can protect your interests.
Three common concerns for dividing property
Even if you have an experienced lawyer and a financial advisor, it’s essential to do your homework on all money-related decisions. These issues include:
- Tax liability: Receiving $10,000 in cash is not the same as getting stock valued at $10,000. Tax consequences result when the stock is sold, either as a long-term or short-term capital gain, based on whether it was held for over or under a year. A fair and equitable division would be subtracting those taxes from the stock’s overall value.
- Retirement accounts: If your 401(k) has grown during your marriage, your soon-to-be-ex is likely entitled to a share. However, withdrawing funds to pay a spouse can result in tax consequences and a 10% penalty if you are under 59 ½ years old. Instead, have your attorney draft a qualified domestic relations order (QDRO) to avoid those unnecessary costs.
- The family home: Many divorcing couples sell their home and divide the proceeds. In some instances, one spouse remains. If you plan to stay put, make sure you can refinance the mortgage and qualify for a loan in your name only. Get an updated appraisal during the divorce process to determine an accurate value, and be aware that you will be responsible for capital gains taxes by yourself if you sell and the profit exceeds $250,000.
Protect yourself and your right to a fair outcome
Divorce can take a devastating emotional toll when choosing to end a once-loving relationship. However, it’s possible to ease some or much of the strain by avoiding unnecessary expenses and understanding how dividing assets will affect your financial situation down the road.