Once a marriage falls apart, couples have to make important decisions about the division of assets and debts that they have accumulated during their marriage. In Tennessee, an equitable division state, divorcing spouses are each entitled to a share of the marital estate. But, equitable division does not necessarily mean an equal split of the assets.
In addition to physical property such as a house and motor vehicles, couples typically make investments during marriage, and these are also part of the asset division process. A couple entering divorce should consider three main points when contemplating the process of dividing investments.
First, couples should list all investment holdings such as jointly held bank accounts, retirement accounts, employee benefits, stock and bonds and insurance policies, and determine their value. Couples should also have some idea of what their living expenses and immediate bills are and the details of long-term savings plans.
Second, couples can divorce and leave money in their individual retirement accounts or 401(k) plans – and they can also transfer some assets out of any account that will have an immediate tax liability or penalty. To do so, a qualified domestic relations order is usually required to divide these assets.
Third, after the divorce is final, both spouses should check whether every detail pertaining to the division of assets has been executed properly so that large sums of money are not lost. They should also be sure to update the names of beneficiaries so that the money ends up in the right hands after the person dies.
Any couple divorcing in Tennessee should remember that property division can have sudden and sometimes big tax liabilities for individuals. For this reason alone, people in this situation should understand the applicable laws. In addition, they may want to consult an attorney who is experienced in taxation and who can guide them through the property division process and ensure that an equitable division takes place.
Source: The Wall Street Journal, “If Divorcing, Divide Investments With Care,” Lisa Ward, April 6, 2014