February 2013

How to avoid complicating property division issues

For many Massachusetts spouses, the decision to end a marriage marks a stressful and emotional time. Making matters worse, it can be hard to project how one’s finances will shift as the divorce process moves forward, and many worry that they will run into financial trouble at some point before the final property division settlement is reached. To lessen these fears, many spouses set up a ‘secret’ bank account or cash to get them through the divorce. There are a number of benefits to having access to one’s own money while a divorce is pending. In some cases, the other spouse will react badly to the divorce, and may restrict access to shared bank accounts or other sources of family assets. This can leave the other spouse with little funding to pay for their legal needs or the cost of daily living. Other times, the decision to set aside some money provides a sense of security, even if that funding is never needed. However, there are risks associated with setting up a hidden savings account. One issue involves the risk that one’s spouse could make an accusation that the act of setting aside money is in effect hiding family assets. This could have negative effects on one’s divorce process, especially if the case goes before a judge. The best way to mitigate this risk is to simply fund the account with assets and income that is strictly your own property. This can come from assets that were brought into the

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Property division the second or third time around

When a Massachusetts marriage ends in divorce, some newly single people jump right back into the love game. For some, the end of their marriage left them feeling a bit defeated, and the urge is strong to get back out there and find love. For others, infidelity on the part of their former partner has left them in need of validation and vulnerable to entering into another bad relationship. However, it is important to realize that many second and third marriages also end in divorce, and issues such as property division become more complicated the second time around. Statistics show that the divorce rate for first marriages sits between 40 and 50 percent. For those in their second marriage, that number jumps to as high as 60 to 67 percent. And for unions in which at least one spouse is on their third try, the chance of divorce is a staggering 70 to 73 percent. By the time most spouses complete their first divorce, their net worth may be reduced due to alimony or child support obligations and the outcome of property division. This leaves individuals with less as they enter into their second marriage. If that union also ends in divorce, the resulting division of assets could be financially devastating. When considering a second or subsequent marriage, it is important to take a close look at the reasons for and results of one’s first divorce. Identifying the issues that led to the split can help to avoid making the

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Getting help with financial needs during divorce

Massachusetts couples who are in the beginning stages of divorce are often overwhelmed by the sheer volume of decisions that must be made. For many couples, issues surrounding finances are chief among their concerns. Understanding the budgetary fallout of a divorce and anticipating future financial needs is imperative to the future success of both spouses, and this is one area in which it makes sense to hire a professional to guide the process. One area if concern involves alimony, and the tax implications for both the paying and receiving spouse. Tax issues are further complicated by the division of shared assets. Liquidating certain types of assets can result in heavy tax penalties, and can reduce the value of an investment by as much as 50 percent. This is an area in which a financial advisor can assist by mapping out the projected tax consequences for each party under a variety of scenarios. For example, there may be instances in which it makes more financial sense to accept less alimony in exchange for retaining certain assets. This allows the asset to transfer hands without a tax hit. It can also minimize the tax burden associated with receiving alimony. On the flip side, a Massachusetts spouse who pays alimony will not pay taxes on that portion of their income. This should be taken into consideration when dividing assets, and it may make sense for that party to retain a greater share of the couple’s assets. While there are a wide range of

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Property division issues often rely on real estate appraisals

Massachusetts couples who are preparing for divorce have a number of issues to consider. For many, property division ranks high among the priorities, and rightfully so. The financial decisions made during divorce can have lasting repercussions for both parties and, therefore, must be made wisely. In determining how real property will be divided between spouses, it is important to understand how property appraisals can affect the process. Regardless of whether the family home will be sold or retained by one spouse, obtaining a real estate appraisal is an important step. A professional appraisal will look closely at recently sold properties in the same geographic area and of the same basic type and style. This data will be used to calculate an estimation of the value of the home in the current real estate market. Once the value has been determined, it can be easier to negotiate the terms of how real property will be divided in the divorce. For example, if the home is to be sold and it appears that the proceeds will not fully cover the cost of the sale, both parties will be able to plan around the eventual out-of-pocket expense of selling the home. In fact, it may make more sense for one party to remain in the home until the real estate market improves and a sale will net a profit instead of a loss. When considering the appraised value of a piece of real property, it is essential that both parties keep in mind

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