Saturday, May 4, 2013

How to handle divorce settlement

It is not a certainty but a possibility that you and your spouse may get divorced some day. You would then have to plan the divorce settlement. Divorce settlements are different thus divorce advice and guide also differ. Some of the divorces come in the form of alimony installment payments for some period of time and some in the form of lump sum. Some involve real estate, some involve retirement accounts. No matter what form the divorce settlement takes, it is wise to consult a financial planner before you sign on the settlement papers.

"Non-financial" spouse:

More often women become the non financial spouse. Prevent this situation and you can do this by having at least a minimum knowledge of the family assets, their value and where they are. You need to familiarize with the family income and joint tax returns. It is okay to be a non financial spouse but do not be too oblivious of the financial matters.

Surprisingly, a lot of women do not make rough calculations or back-of-the envelope calculations to value the assets during divorce proceedings. Get serious, and consider using professional method to value items like art collections, real estate and jewelery. Do not guess because knowledge is power.

Before the divorce; a prelude:

Letting assets disappear before divorce is a common blunder. For one of the spouses divorce comes as a shocker. He or she is clueless of the finance at that point of time. The spouse who plans a surprise divorce starts to funnel joint assets into separate accounts. With this step, assets that have got divided just disappear. Keeping a track of these hidden assets is difficult. If your marriage is on the rocks beware of sudden financial habits by your spouse.

Logical settlement:

Many women prefer to keep the house during the settlement and do not realize that they have insufficient cash flow to maintain the home. Do not end up with a home and no cash.

Do not forget taxes:

Consider tax implications of selling and distributing assets. Before you sell or take funds out of the pension or retirement plan, confirm on the tax effects and penalties. Base all the numbers on net amounts.


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