Using Financial Advisors In Your Divorce
Separating finances in the wake of divorce is one of the most difficult and complex aspects of this transition. It can be tempting to try to handle property distribution matters on one’s own, but this approach is not necessarily practical or advisable. The distribution of property is a central issue in many divorce proceedings, and can linger beyond the final divorce judgment until all required transfers are completed. Specifically, once a settlement is reached or a court decides how marital property should be distributed, the process of moving assets to the appropriate party must begin, with the knowledge that there is commonly a deadline by which assets must be transferred. Further, transferring an asset may not be a straightforward process, and in some cases, doing it incorrectly can result in costly and unnecessary tax penalties. Thus, it is not a matter that a party should take shortcuts to address. Depending on the amount and type of assets the parties own, the disentanglement of property could greatly benefit from the oversight of outside professionals to ensure assets are evaluated properly and transactions are executed correctly. Financial advisors can provide important advice and services both during and after the divorce, and parties with a large amount of holdings or family businesses would particularly benefit from an advisor’s input. However, even couples with less complex assets to divide can benefit from working with a financial advisor. A discussion of the role financial advisors can play in the divorce process will follow below.
Divorce Settlements
Wealthy couples typically have a team of financial advisors when they enter the divorce process, but there are a lot of couples that do not fit within this group, but still need assistance with evaluating the assets they own. Financial advisors have a firm grasp on the intricacies of the rules and regulations governing financial accounts, and can use this knowledge to structure divorce settlements that minimize negative tax consequences, which can easily translate into savings of thousands of dollars. For example, individual retirement accounts (IRAs) are a part of many couples’ long-term financial planning, but depending on which type a spouse owns, Roth or Traditional, the value of an account when dividing property in divorce requires more than just looking at the amount of money in each account, as the tax liability differs for each. By bringing in a financial advisor, it limits the possibility of one party agreeing to a settlement that leaves him/her with less money in the long-run.
Retirement Benefits
Outside of the marital home, a person’s retirement benefits are one of the most valuable assets he/she owns, and Florida law specifically provides for the division of these benefits in divorce. Financial advisors can counsel on the effect of proposed settlements, which is particularly important for non-vested retirement benefits, and help divorcing parties understand what assets they can keep or need to liquidate in order to remain solvent. Further, dividing retirement benefits with a former spouse requires the preparation of a Qualified Domestic Relations Order (QDRO) that directs the retirement plan’s administrator to make payments. However, if prepared improperly, or without consideration of a party’s planned use of the funds, a person could be hit with early withdrawal penalties, or be taxed at a higher rate if the transfer is improperly structured. A financial advisor will know how to avoid unnecessary taxation, and maximize the potential payout of future benefits. Working with both an experienced divorce attorney and financial advisor can put a party in a much stronger position to exit the divorce process with a property settlement that promotes the highest possible level of financial security.
Talk to a Florida Divorce Attorney
Going through a divorce is never easy, but putting together a solid team of legal and financial professionals will allow you to make the most informed decisions on issues affecting divorce, especially financial considerations. The Tampa law firm of Bubley & Bubley, P.A. understands how difficult a divorce is, and strives to make the legal process as smooth and efficient as possible for their clients. Contact us to schedule a consultation.
Resource:
leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0000-0099/0061/Sections/0061.075.html