Financial Specialist FAQs
What are the common financial pitfalls of divorce?
The first revolves around a lack of information. Too often, couples fail to do their financial homework when going through divorce. It is absolutely critical to know what you have AND know what you need.
Another pitfall is neglecting to consider the future effects of a financial settlement. Being short-sighted and ignoring the long-term implications of a proposed settlement agreement can be a recipe for disaster. Sometimes what appears to be reasonable at face value is far from practical.
Finally, one of the more common and costly pitfalls occurs when a divorcing couple fails to separate emotions from finances. Too many times couples spend countless hours arguing over their interpretation of what is “fair”. In their quest for winning the battle, they lose the war by lining the pockets of the professionals they engaged instead of coming to some middle ground and keeping the money for themselves. Allowing emotions to influence your financial decisions can lead to poor choices and have long term implications. Keeping your emotions in check will save you both time and money, and you may even preserve your dignity along the way!
Can I receive a portion of my ex-spouse’s Social Security benefits?
Generally, the most you can expect to receive is one-half of your former spouse’s benefit. However, age, length of marriage, and current marital status all play a part in determining whether you would qualify.
Does it matter how assets are divided– aren’t all assets the same?
First of all, assets can be taxed very differently. Some retirement assets are taxed as ordinary income when withdrawn, while others can be withdrawn completely tax-free. Non-retirement assets can also be taxed differently. While some may not be taxed at all, others may have built-in capital gains that will be taxed when sold.
Second, some assets are more easily converted to cash than others. Retirement plans, for example, typically cannot be withdrawn prior to age 59 ½ without penalty and taxes. Houses are another example of an asset that cannot be easily converted to cash. Sure you can always tap into the equity of a home through a loan, but don’t count on that. Banks aren’t too keen on lending money if you are in financial distress.
To schedule a confidential consultation and learn more, contact a professional with Collaborative Law Professionals of Southeastern Pennsylvania.