In our last post, we talked about the financial and emotional tolls people face after divorce. Although many people in Clark County expect to feel emotionally drained when they are getting divorced, fewer people know what to expect with regard to their finances.
Last week we talked about the financial impact of finding a new place to live, setting up a new household, and splitting all your bills. Today we'll talk about the impact of dividing financial assets during a divorce.
Many people work hard to build wealth in a few places. We like to build equity in our homes, build a cushion in our savings accounts, deposit money in our retirement funds, and invest in stocks and CDs.
Many financial assets are created with time periods in mind. For example, most people wouldn't put the majority of their savings in a 401(k) if they were planning to buy a house in a few years. However, we all know things don't always go according to plan.
If your savings are tied up in stocks and CDs, you may want that money to get adjusted once you are divorced. However, it's important to understand the tax consequences of cashing in investments. One financial planner said, "People are not often aware that there are consequences for taking out certain assets. Spouses may want to get the money or may need it for income, but the taxes can really add up."
If you need cash flow quickly following your divorce, you may think that your investments are the only option. However, before you cash in anything, talk with an experienced divorce attorney or financial advisor so you have a good idea of the short and long-term ramifications of your decision.
Source: mint life, "The Financial Impact of Divorce," Craig Guillot, June 14, 2012