What steps can you take to reduce financial risks during your Louisville divorce? What are the important financial decisions you may face during the course of your divorce and what are some effective strategies for making sound decisions? It is not uncommon for emotions to impact important issues in your divorce. The key is to manage those emotions and to genuinely consider all aspects of the decision at hand.
One example is the family home. Many divorces involve a battle over who will get the family home. This is actually a complex issue and requires extensive financial analysis. The equity in a home can be one of the largest and most valuable assets. It can also become a financial quagmire after a divorce if not managed correctly. As long as the existing mortgage remains in place you will be somewhat tied to your former spouse. If they stop paying their portion it can affect your credit and even possession of the house itself.
Retirement accounts and pensions are another important area of focus. Many approaching a divorce fail to realize the requirement to divide all marital assets, including retirement accounts and pensions. A single mistake in this area can result in the loss of tens of thousands or hundreds of thousands of dollars. There are substantial tax consequences to evaluate in these cases as well.
It is important to understand not all “assets” with the same monetary value are worth the same from the perspective of the divorce. For example, investments such as stocks and bonds or rental property should be carefully analyzed to ensure a fair and accurate valuation. However, it is important to not only consider the value of the asset, but the equity and tax implications as well.
For example, there might be two investment accounts and each is worth $50,000. However, one investment account has a basis of $10,000 and one has a basis of $35,000. Both are worth $50,000 but the net sale value of each after taxes is much different.
Have you begun to consider how you will approach these decisions while working to reduce financial risks during your Louisville divorce? The decisions you make during the divorce can have long-term implications.
The most important step you can take to ensure sound decision making in a divorce is to recognize the impact emotions will have, and develop a strategy to remove emotion from the equation as much and as often as possible.
Of course certain issues generate an emotional response. We’d be worried if it didn’t, right? However, decisions made based upon emotion or during an emotional moment are usually not good decisions from the perspective of the long term. Decisions may need to be reached in a fairly short period of time in some cases, however, there is always going to be enough time to separate the emotions associated with the matter hand from the genuine “advantages and disadvantages” associated with that issue. This is especially true when there is a monetary impact associated with the decision in question.
Informed financial analysis and the impact of taxation should be considered in many cases before a final settlement can be proposed or reached.
Another common example is an ownership interest in a business or professional practice. The spouse who owns the business wants the valuation of that asset to be as low as possible if it is considered to be a marital asset in whole or in part. The non-owner’s best interests lie in a much higher valuation. There are strategies a business owner may attempt to reduce that valuation or to manipulate income or value before or during the divorce. Many business owners will try to use a fictitious value established in the corporate documents of the entity itself.
One must consider how the division of assets or tapping into an existing asset such as a retirement account or 401(k) will impact the annualized income of that individual. However, it may be important for a business owner to offset their former spouse’s marital interest in the business with the value in other assets or retirement accounts.
Each case is unique and the experienced divorce and family law attorneys at Dodd & Dodd can help to protect your interests, advocate for what is most important and provide financial and tax insights into the decisions you may be required to make.
There are many steps can you take to reduce financial risks during your Louisville divorce and make good short and long-term decisions. Ask about proven strategies for managing communications, reducing the impact of emotion, asset valuation and the impact of taxation.
Our law firm was established in 1869, and is one of the oldest law firms in Kentucky. Your Dodd & Dodd team has decades of experience and a proven track record of protecting our client’s interests while accomplishing their important goals and objectives.
Money isn’t everything. However, one must consider several aspects of each decision in a divorce, including the short and long-term financial impact it will have. What is the best option for you?
We invite you to review the strong recommendations of our former clients and the legal industry and contact Dodd & Dodd or call 502-584-1108 to schedule an appointment with one of our attorneys.
