September 25, 2014

Many of us have a picture of what we think our life will be like, where we'll go, and exactly how it will progress. Yet, as a financial advisor, I have the opportunity to appreciate the many pivotal moments where each of us realizes that life is never quite what we expect, and does not happen in the exact ways of which we imagined.

There are many major life changes that can occur, during which, it is important to seek the advice of a financial advisor and a tax professional; life events such as marriage, having children, retirement, and death of a family member, to name a few.

However, one of the major life changes where it is critical to seek advice from your financial and tax professional is divorce and settlement negotiations. A recent article states six key reasons of that should be considered for each respective party, and why:

  1. Cash flow needs- You should work with your advisor to outline and understand what you need and what you hold, and what is reasonable to liquefy, based on your new lifestyle needs.
  2. Joint liabilities- Review your mortgages and their potential for refinancing. You should also review outstanding joint liabilities on tax returns and joint credit cards, prior to settlement.
  3. Taxes on assets- Consult a tax professional on the tax impact of your investments (including the sale of your home), as many may have different implications based on type and timeframe.
  4. Past tax returns- Consult a tax professional about the last few years of your joint returns to review income as well as tax assets, such as charitable contributions and net operating losses, which may need to be considered in your negotiations.
  5. Division of retirement assets- Usually, these are the largest portion of couples' net worth and need to be carefully handled from a tax perspective to ensure any transfers are tax-free.
  6. Digital assets- Pictures and videos, while they may not have high financial value, they may have emotional value; so ability to access them should be maintained.

The short and sweet version is: work with your financial advisor and your tax professional to ensure that the financial aspects of your divorce, or other life changing events, are handled properly so you have a plan and can move forward.

 

Caroline Hill, Financial Advisor

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(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).