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Divorce Settlement Inherent Difficulty

Divorce Settlement Inherent Difficulty

One major factor many individuals forget to consider when devising their divorce settlements is the liquidity of certain assets.

For example, a checking account with any amount of funds is extremely liquid, meaning it can be quickly converted to cash on hand as need be.

On the other hand, something like a house is generally non-liquid considering the conversion to cash would be a lengthy or expensive endeavor.

Another major problem when considering a fair divorce settlement is the effect of capital gains. Capital gains refer to the positive change in value on certain possessions.

After the divorce settlement is devised, the individual receives an asset.

For example, a house or a car will be taxed on any capital gains; many will relinquish the possession of the house for this reason bringing the other to face taxes they did not expect when originally creating the divorce settlement.

Among several other important situations to consider when making divorce settlements in the proper execution of an Independent Retirement Account (IRA).

Oftentimes, this will need to be split in a divorce settlement.

The transfer of these funds to a non-IRA or special account made for transfer to an ex-spouse the original transfer will be taxed heavily bringing the expected amount from the divorce settlement notably lower.

A final consideration is the availability of hidden assets and many couples break up from mistrust and this fact does not end with the decision to divorce.

If a settlement fails to recognize any hidden assets and they are discovered at a later date, the divorce settlement will not change.

Divorce settlements aim to split all assets and funds evenly between the two parties. Individuals engaged in a marriage generally fail to imagine the possibility of divorce and try to work hand in hand on things in non-recognition of future divorce settlements that will boil everything down into dollars and cents.