A divorce can have a significant effect on a person’s finances, and it is important to take steps during the process to understand and protect assets. A San Jose resident who has not been involved much in the family finances should be sure to get a full accounting of what their assets are as a couple and as individuals. The person should also know how to access those assets.
Once the divorce is final, each person may want to remove the ex-spouse as beneficiary on any accounts. However, prior to that, there are several other important precautions. For example, people should be fully aware of the rules and penalties involved in selling or dividing certain assets. There could be penalties associated with leaving annuities, and selling securities may incur a capital gains tax.
Couples who share a brokerage account might need to write a letter that requests the closing of the account and the opening of new accounts. If there is an IRA that needs to be divided, the couple may need a divorce decree. The distributions will have to be rolled into new IRAs to avoid taxes. To split a 401(k) or a 403(b), it is necessary to have a document called a qualified domestic relations order.
Property division may become even more complicated if one person is a business owner. If that person has business partners, they might have to buy out the divorcing spouse. One spouse may need to pay the other a portion of the company’s value. Dealing with a home can also be complex. People often want to keep it for sentimental reasons, but they do not consider the costs of a mortgage on a single income or the upkeep and taxes. However, selling a home can take time, and the house may need repairs beforehand.