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Reviewing assets in divorce

The end of marriage in Texas could mean significant changes to people's finances as one household gets split into two. Assets and liabilities must be divided, but how people go about property division typically leaves room for many mistakes. Failing to be smart about money matters in divorce could lead to problems, including unnecessary taxes and assets that are less valuable than the ones given to a spouse.

Spouses need to understand the real value of assets before negotiating a settlement agreement. One common mistake is looking the current value of an asset without considering takes or liquidity. Certain assets, like property, could change in value significantly and are not as liquid as cash, which can be an issue for people who need money to pay bills and handle other immediate expenses.

In addition, some assets are subject to taxes. For example, a Roth IRA comprises pre-taxed funds while a standard IRA will be taxed. Retirement benefits can be transferred tax-free with a decree called a qualified domestic relations order. Some assets, like digital assets, get overlooked completely. Movies, music and apps have value too, and some people should make sure their settlement addresses those properties.

Assets are not the only concern during a divorce. Liabilities, such as mortgages and credit card debt, must also be taken care of because a divorce does not automatically relieve a person of a joint financial burden. Paying off liabilities is the best option for freeing both partners from financial responsibility. When that is not possible, spouses could still work together to transfer debt into one person's name.

The more assets people own, the more complicated a divorce can be, and financial matters that are handled wisely might protect one's financial future. An attorney working with someone involved in a divorce could negotiate for a desirable settlement or push for a fair division of property in a divorce trial.

Source: Forbes, "6 Money Matters Divorcing Spouses Often Overlook", August 19, 2014

Source: Forbes, "6 Money Matters Divorcing Spouses Often Overlook", August 19, 2014

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