Disputes over money are some of the most common areas of contention for married couples, and that financial discord typically continues when spouses decide they can’t stay together.
It’s advisable to work with an experienced family law attorney to advocate for the best possible outcome when divorcing in North Carolina. Still, it’s crucial that you understand the implications of all money-related decisions.
Handle these financial areas with care
While a knowledgeable lawyer, with help from a financial advisor in some cases, will aggressively fight for your interests, it’s essential to understand and avoid common mistakes involving:
The family home: Some divorcing couples decide to sell their house and divide the proceeds according to their agreement. However, in many cases, one spouse wants to remain. If your soon-to-be-ex is no longer a joint owner or responsible for the mortgage:
- Refinance the loan to make sure you qualify for a new mortgage under your name
- Get an accurate appraisal to set the current value
- Remember, if you sell later on, you’ll be responsible for capital gains taxes if the profit exceeds $250,000
Retirement accounts: When a spouse has a 401(k) or other retirement assets, their former spouse is likely entitled to a share. Be careful in splitting those funds:
- Taking money from the account and giving it to a spouse comes with a 20% tax withholding and a 10% penalty if the account holder is younger than 59 ½
- Have an attorney draft a qualified domestic relations order (QDRO) to avoid taxes and penalties
- Separate QDROs are needed for each qualified retirement plan to be divided
- QDROs are not necessary for splitting IRAs, which are not qualified plans
- Divide IRAs through a trustee-to-trustee rollover, avoiding tax consequences
Other tax liabilities: Dividing complex property can be tricky, and remember that not all assets are equal. For instance:
- Receiving $10,000 in cash is different from getting $10k in stock
- Selling stock has tax ramifications for short-term or long-term capital gains
- Dividing stock equitably requires subtracting taxes from the overall value
Dividing a family business can also be a complex process. First, determine the company’s value by getting an independent appraisal. Spouses typically have three options: one spouse keeps the business and buys the other out, both spouses remain as co-owners or they sell the company and split the earnings.