For many people in New York going through a divorce, one of their biggest challenges is setting aside their emotions when the time comes. Divorce is an emotional thing. It is natural for you to feel depressed, angry, worried, relieved, hopeful or impatient at different times of the divorce process.
But when it comes to things like dividing up your marital assets, you need to be as objective and rational as possible — if you want things to go as smoothly and cordially as possible, and you want to avoid these common errors.
- Forgetting about taxes. Two marital assets can seem to be worth the same, but things can change when you factor in taxes. For example, $1,000 in cash and $1,000 in stock have the same value. But when you sell the stock, you must pay capital gains tax on the profit earned on the initial investment. You and your divorce attorney should take taxes into account when negotiating your property settlement.
- Dividing your 401(k) carelessly. Speaking of taxes, if you and your ex simply withdraw part of the 401(k) you built up together, the withdrawn funds will be subject to a 20 percent tax withholding. If the account holder is under 59 1/2, there could also be a 10 percent early withdrawal penalty. Using a qualified domestic relations order (QDRO) can help both of you avoid these expensive taxes and penalties.
- Not planning long-term for how you handle the family home. When it comes to the family home, the basic choices are to sell the house and split the proceeds or for one ex to keep the house. Either way, it’s important to get the house appraised, so everyone knows what the property is worth. If one spouse keeps the house, generally, they will refinance the mortgage so that the other spouse is no longer responsible for it. However, this could also mean that the spouse who kept the house would be solely responsible for taxes on the proceeds when they later sell it. This and other tax complications should be part of your negotiation process.
As these examples show, there is more to the division of assets than cutting everything in half. But with the proper information and strategy, you can receive a fair portion of the marital property with a minimum of mental anguish and delay.