When a marriage is going well, two people can amicably share assets; their financial situation can be likened to a rose, while their assets can be likened to rose petals. However, during the divorce process, that’s when people begin to feel the thorns attached to the rose. Being unable to agree on how to split assets, or making decisions that can have negative long-term effects on one’s personal finances, can cause heartache during this type of family law proceeding in Florida.
It’s important to understand that liquidating an asset such as a 401(k) during a divorce can result in hefty tax consequences. For instance, the two individuals may not be financially prepared to cover this type of tax bill. Liquidating an asset is best seen as a last resort in many divorce situations because liquidation results in an event that is considered taxable. Rather, trading assets between spouses is non-taxable.
In addition, two people sometimes agree to keep their marital home; however, this may be a mistake. If an individual has to refinance a mortgage in order to remove his or her spouse from the loan, the person might find that he or she can’t qualify for this new mortgage after all legal costs are accounted for. If a person does decide to sell an asset, it’s wise to make sure that one gets a price that is fair.
Understanding laws that apply to distributing property and assets during a divorce is paramount for making sure that one strives for a divorce settlement that will cause more financial good than harm. If two parties can’t figure out how to achieve their goals without the help of the court, the court will have to decide the final outcome in an equitable manner. Both people have the right to fight for what they believe they deserve during this type of family law proceeding in Florida.
Source: cnbc.com, “Not always a rose: Avoiding thorny asset-liquidation issues in divorce“, Deborah Nason, June 14, 2014