Divorcing California couples always have a lot of issues to resolve. There can be child support issues, alimony issues, child custody problems and others. People’s emotions tend to get heated and can make solving these common problems difficult. When a high net worth couple is involved in a divorce, these issues can be complicated by the division of assets. The distribution of property will be an important step in these cases since the property can determine how secure a person’s financial future will be.
One area is particularly important — dividing investments. This includes diving retirement accounts. In order to make sure that people have received a fair settlement, a lot of care must go into these property division issues. It is important for people to understand the type of investments they have and what they are worth before the division takes place.
Furthermore, people must understand that while two types of investments may have the same face value, the tax consequences can change depending on the type of investment which could change its real value significantly. Financial experts can be helpful in making sure that couples in a high asset divorce identify all their assets and their true value.
Once people have identified their assets, it is important for people to understand how to divide their assets to limit the tax consequences. Depending on the situation, a couple may choose not to split retirement accounts — but to each keep their own. However, if accounts are being split, it’s important that they are split according to a court order — specifically a Qualified Domestic Relations Order. A QDRO can help couples avoid tax penalties and other fees for transferring money.
Dividing investments is only one area that can be complicated during a high net worth divorce. Couples that have a lot of assets should make sure they protect themselves from the beginning of a divorce by knowing all their legal rights.
Source: The Wall Street Journal, “If Divorcing, Divide Investments With Care,” Lisa Ward, April 6, 2014