Things to Consider During Divorce
When it comes to dividing property in a divorce, the initial division itself isn't taxable, but you should be aware that the disposition or sale of certain properties may incur taxes. For example, if you've been awarded investments or highly depreciated rental properties, selling these assets could result in capital gains taxes. If you're unsure of potential tax liabilities, consult with a tax advisor to avoid any surprises.
Joint credit cards are another area to be cautious about during a divorce. It's in your best interest to pay off and close these accounts if possible. Leaving joint accounts open exposes you to the risk of your spouse running up charges, leaving you responsible for the debt. If paying off isn't feasible, reach out to your credit card company about freezing the account to prevent any new charges.
Regarding debt responsibility, do not remove your name from the title of any asset (like a vehicle or a house) until the associated debt is fully paid off or legally transferred to your ex-spouse. You could find yourself in a situation where you no longer legally own an asset but are still financially responsible for its associated debt.
Indemnification clauses in your divorce agreement can protect you against future credit and tax liability from your ex-spouse. However, be aware that these clauses do not indemnify you against creditors. If your ex-spouse defaults on a joint debt, creditors can still come after you for payment.
If you've brought separate property into the marriage, you should trace its origins to confirm it is indeed separate, and not marital property. For example, if you owned a house before getting married and kept it separate from marital funds, it should remain your separate property. You may need to provide proof, such as documentation or witness testimony, to confirm its separate status.
Finally, if you're making payments post-separation that benefit your spouse – like paying the mortgage on a home your spouse is living in – keep a record and negotiate for reimbursement. These expenses can often be factored into your final divorce settlement. Make sure to consult with your attorney or a financial advisor to ensure you're fully aware of your rights and responsibilities.
In all of these financial aspects of divorce, it's crucial to have knowledgeable and trustworthy professionals by your side. Divorce can have long-lasting financial implications, so it's essential to make informed decisions.