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Money mistakes to avoid in high-asset divorce cases

One of the reasons why divorce settlements can be messy is because of the properties and assets involved. In general, those that you have accumulated during the marriage are considered marital assets that should be equally divided, while those that were there even before you got married are counted as individual assets. Even the smallest details can make a huge difference in the asset and property division of high-asset divorce cases.

For instance, in dividing pensions between a divorced couple, the annual cost of living adjustments should be taken into consideration. Doing so will ensure that every time there is a cost of living increase in the pension of one half of the divorced couple, the other half will also receive an increase to cover the compound interest effect. If this is not considered, the huge difference between the pensions of these two people will be felt after several years, with one of them receiving more than the other.

In IRA and 401(k) accounts, there is such a thing known as active and passive appreciation of your money. The money that you put in your accounts regularly accounts for active appreciation of your retirement fund, while the dividends that you receive count for passive appreciation. The latter should also be accounted for, especially for retirement plans that existed even before the couple’s marriage. Otherwise, you could lose the money that was earned passively in your retirement plan.

In case of spousal support, the paying spouse is not obligated to pay the taxes connected with it. The tax might seem negligible to the paying spouse at first, but in a high-asset divorce, it could add up and cost you a lot of money.

Individuals who are going through a divorce in New Jersey should look into the details of pensions, retirement accounts, alimony and other financial matters in order to make sure that they won’t be left on the losing end in the long run. Having a knowledgeable attorney on your side can help.

Source: The Huffington Post, “Three Costly Divorce Settlement Mistakes and How to Avoid Them,” Christian Denmon, Jan. 21, 2014

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