Investments require attention during divorce

In some situations involving a marital split-up in Massachusetts, the spouses may anticipate going through a relatively amicable divorce process. In other situations, the emotional upheaval caused by the divorce will make an amicable split highly unlikely. In either situation, understanding the financial aspect of the divorce is paramount for protecting one’s best interests.

One particular financial area that is important to understand is investments — particularly, the nature of every investment. After all, fees and taxes may end up making the true value of a particular asset much lower than what it appears to be on paper. Knowing the real value of an asset is critical before agreeing to any asset division.

When it comes to dividing assets, selling before diving an investment account is generally better than selling after the fact. Liquidating after dividing an account means one could end up bearing the full tax impact, with the capital gains taxes potentially taking out a large chunk of the funds. Another important consideration when dividing investments is the kind of account being split. Assets in qualified retirement plans, such as a pension plan, 403(b) or 401(k), receive preferential tax treatment. These funds can easily be split by using a qualified domestic relations order, which enables one to maintain the tax-favored status if a direct transfer is initiated.

When the division of finances is complicated, going through collaborative divorce or mediation may offer some advantages. Both parties can work through their disputes and strive to achieve a settlement that satisfies both sides. An attorney in Massachusetts can help to make sure that one’s best interests are pursued at each stage of such a process.

Source: nerdwallet.com, “How to Untangle Your Finances in a Divorce“, Bev O’Shea, Hal Bundrick and Dayana Yochim, June 23, 2017