When couples decide to get a divorce in California, they may be particularly concerned about the financial implications. Many spouses recognize that the financial repercussions of a separation can be longer lasting than the emotional and practical changes. In order to prepare for divorce, it can be helpful for people to review their financial situations and gain a greater understanding of the process to come.
One of the most important parts of preparing for a divorce is undertaking a realistic valuation of personal and real property, especially marital financial assets. These include bank accounts, cash on hand, retirement funds, investment accounts, real estate trusts and more. These types of assets are particularly fungible and may be important to each spouse, especially if one person needs to access them to cover living expenses. When going through the property division process, it is also important to include the impact of taxation when valuing an asset. For example, a bank account with $100,000 is not equivalent to $100,000 in an IRA because withdrawals from the IRA made later on will be subject to income tax.
The distribution of retirement funds can be one of the more complex and also financially critical aspects of a divorce. A proper court order, called a Qualified Domestic Relations Order, is necessary to divide certain types of accounts. In addition, defined-benefit plans like pensions will also need to be allocated during the divorce, and the former spouse may need to be named as the recipient of survivor’s benefits.
An individual who is concerned about the financial implications of divorce can also assess their real estate holdings, debts and other financial priorities. A family law attorney can work with a divorcing spouse to protect key funds and achieve a fair settlement on issues such as property division and spousal support.