Nancy L. Sponseller

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Money Issues Not to Ignore in Divorce

On behalf of Law Office of Nancy L. Sponseller posted on Saturday, August 30, 2014.

There are few times for Ohio spouses when the knowledge of finances is more important than during the divorce process. The spouse who has not handled finances or spent time educating himself or herself on finances is often at a weaker negotiating level during the divorce process than the spouse who has more knowledge about finances. Some spouses neglect to consider certain aspects when going through the divorce that can cost them for years to come.One area that some individuals fail to consider is their cash flow needs. Some spouses may choose to fight for the house when they need assets that are more liquid in order to meet their existing obligations. Stocks, bonds and mutual funds tend to be more liquid in nature than an asset that would take some time to sell. In addition to the liquidity of an asset, individuals should also consider the tax impact different assets have. For example, Roth IRAs are funded with after-tax funds, so future distributions are generally tax-free. However, traditional IRAs are funded with pre-tax dollars, so taxes will be due when distributions are made.

Another consideration for divorcing individuals is that of joint liabilities. While a couple may agree to split a debt equally, a divorce decree does not bind a creditor because family court does not have jurisdiction over the creditor. This truth may require individuals to have to refinance real property, quickly pay outstanding tax debt or settle their own credit card debts. Running a credit report before the divorce is finalized can help identify debts so that they can be paid off or transferred to one spouse who can take responsibility for them.

In order to get a clear picture on how different assets and debts can affect a spouse, a person considering divorce may discuss these issues with a family law lawyer. Such an attorney may be able to provide suggestions about how best to transition into the next phase of life.

Source: Forbes, “6 Money Matters Divorcing Spouses Often Overlook“, Leslie Thompson, Aug. 19, 2014