Dealing with the financial details of divorce

Wisconsin residents may be interested in a recent article that discusses how an individual’s finances are impacted during a divorce. There are many important issues to discuss with an attorney or finance professional when filing for a divorce, and many couples do not consider all of the variables without guidance.

One of the most important aspects of any divorce is property division. Absent an agreement between the spouses, courts in Wisconsin will use equitable distribution principles in dividing up marital assets. This does not always mean that the division is necessarily equal. Tax is an important consideration during property division, and it is something that many couples overlook. Income and expenditures can change dramatically after a divorce, and if one spouse is a much lower income earner, it may be advantageous for that spouse to get assets that will have a lower tax associated with them. If a spouse with a lower income ends up with the large family house, for example, they may end up with a tax burden on that property that they cannot afford.

Retirement accounts are also important to keep in mind during a divorce. These accounts are usually factored as part of the property to be divided when the court issues a qualified domestic relations order. Taxation is again a factor here. If one spouse is awarded part of the other spouse’s retirement benefits then they can withdraw that money from the account and roll it over into a new account without the normal early withdrawal penalty that would be applied.

A couple can continue to file their taxes using the joint return status until the actual divorce papers are signed and the order is issued. This can allow both spouses one final term of lower tax before they must file as single.

Source: Nerd Wallet, “Divorce: Making Sense of the Confusion“, J. Kevin Stophel, June 03, 2014