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Making smart asset division decisions in divorce

When you're going through a divorce and dividing assets with your spouse, it's important to understand that what seems like an equal division of assets may not be. It's essential to look at what an asset is going to actually cost you in fees and taxes, for example.

Take the family home -- or better, maybe you shouldn't. You may want to keep the home rather than take the amount it's worth in liquid assets like investments, savings and retirement accounts. However, one certified financial planner notes that "many [people] keep their homes not realizing that upkeep costs are no longer sustainable."

Not all accounts are created equal either. For example, if you may need to access a large amount of money, taking a 401(k) account rather than a checking or savings account likely isn't wise. The 401(k) may be earning more than traditional bank accounts. However, there are significant tax implications and penalties if you withdraw money from it early.

If your spouse has a 401(k), however, you can access your share of it with a type of court order called a qualified domestic relations order (QDRO). With a QDRO, you can access the amount that's determined to be yours without paying that nasty 10 percent penalty for early withdrawal. However, you are required to roll over the amount you get within 60 days to an individual retirement account (IRA).

It's a sad irony that divorce is a time when making smart financial decisions is crucial, yet it's also a period when many people aren't thinking clearly or are putting emotions ahead of practicality. That's why it's essential to consult with experienced financial and tax professionals to supplement the guidance provided by your New York family law attorney.

Source: CNBC, "When it comes to divorce, not all assets are equal," Sarah O'Brien, accessed Nov. 02, 2017

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