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What divorcing couples should know about financial issues

Divorce can be a difficult time for Michigan residents who are going through the process. Many financial and family law issues, ranging from child custody to property division, can come up, which the parties will have to face head-on whether they like it or not. In some cases, the parties may earnestly consider negotiating a settlement agreement to make it easier. However, during such negotiations it is important to ensure that both sides are represented and that one party is not getting the short end of the stick.

There are a few things parties commonly overlook during the process of creating a divorce settlement agreement. First and foremost, it is essential for both sides to have a decent understanding of one's immediate cash needs and what can be done if cash flow is a concern.

It is important for the parties to examine any joint liabilities they may have, such as joint credit cards. If there are any joint credit cards, they should be cancelled. Furthermore, it is important to clear all jointly held debt before any settlement so that neither party is unfairly left with significant amounts of debt. Many divorcing couples may not think about taxes, but it is important to look at the tax implications, particularly on assets such as Roth IRA when dividing assets. It is also essential to closely review tax returns filed for the last three to five years.

When it comes to retirement assets, following the rules with regard to transfer of the funds is very important. The divorce decree should explicitly state how a retirement asset will be treated or transferred. In addition, divorcing couples should consider how to handle or deal with any digital assets, such as photos, videos and the like. Though a digital asset does not necessarily have a financial value, for most people there is an emotional attachment that should not be minimized or ignored during divorce settlement negotiations.

Source: Forbes, "6 Money Matter Divorcing Spouses Often Overlook," Leslie Thompson, Aug. 19, 2014

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