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Financial decisions in a divorce can be complicated

Property division in a high asset divorce in New Jersey involves complex decisions, which are hampered by the emotions and turmoil accompanying the end of a marriage. However, certain financial matters require especially objective and reasoned judgments.

For example, a spouse should create an independent credit identity by applying for their own accounts while joint income may be used to qualify. A spouse must review all accounts to determine whether they are individual or joint accounts and for identifying authorized users. A budget should be developed for income after the divorce to determine the amount of debt the spouse can deal with.

Credit card, car loans, personal loans and other existing accounts must be resolved. To end the possibility of a spouse running up debt, balances should be closed out and spouses removed as authorized users on individual accounts.

Joint accounts must be closed and authorized user privileges ended. Any remaining balance may be addressed by the spouses in their negotiations. Although this may prevent new charges, the decree does not bind creditors who may seek payment if the other spouse does not comply with debt agreements.

Property division of the home is also difficult. Refinancing the mortgage may not be an option because there may be a difference between the amount of the loan and the payments that can be made.

Determining the fair market value of the house, selling it and dividing the proceeds is an option, but spouses must overcome their attachment to the home. Continuing as co-owners requires an agreement that addresses taxes, repairs and financial problems after divorce.

The financial value of each investment and the impact of taxes and fees must be understood. Investment firms may charge additional fees for outgoing transfers, which may be avoided by opening separate accounts at that firm.

Spouses must decide whether they are going to hold more aggressive and riskier investments, which may have a higher capital gains tax after the divorce. A 401(k) or 403(b) plan, pensions or other qualified retirement plans may receive more favorable tax treatment. Dividing the assets of these plans as part of a qualified domestic relations order continues this treatment, if there is a direct transfer to a similar plan.

An attorney can provide important advice on these decisions. An attorney may also seek fair asset division in court or in negotiations.

Source: NerdWallet, "How to untangle your finances in a divorce," Bev O'Shea, Hal M. Bundrick and Dayana Yochim, June 23, 2017

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