During a divorce, emotions run high, and it can be difficult to get a clear picture of what life will be like once it’s over. Beyond the unpleasant points of contention that can boil to the surface during a divorce proceeding, it is important to see past settling old scores or winning a courtroom battle.
Your ability to move on and, where there are children, to take care of their needs, is dependent upon a realistic assessment of your financial situation. For residents of Bloomfield Hills and Southeastern Michigan, an experienced divorce attorney who can delve into complex property division issues can be the most valuable asset that you have during the process.
Property division in Michigan
Michigan state laws are guided by the legal theory of the equitable division of property in divorce. When it comes to creating an inventory of assets and liabilities of the marital estate, property is divided into marital or separate property.
A judge will consider several factors when determining the equitable division of all marital property, including the spouses’ relative individual wealth and future earning capacity, if one will be the custodial parent, if one spouse has more responsibility for existing debt or whether one is to blame for ending the marriage.
Assessing financial assets and debt in a divorce
When trying to untangle the web of financial assets from marital property that includes cash, savings, checking or money-market accounts, stocks and bonds, and real estate investment trusts (REITs), it is important to realize that not all assets have the same tax consequences.
For example, if the spouses decide to split two assets of equal value, one a retirement account and the other a money-market account, the first spouse’s asset will be devalued over time, as he will have to pay taxes on its distributions.
Whether the house, vacation properties, rental or business property are divided between the spouses or sold, it is important to decide how they will split the proceeds or pay off a joint debt. Settling credit card debt should be included in the divorce settlement.
Understanding the tax implications of divorce when negotiating a settlement is also important. If the spouses are filing jointly, one will be filing as single and therefor paying a higher tax rate. If there are minor children, the custodial parent will benefit from filing as the head of the household
When couples split, most report a dip in their standard of living. There is no doubt that divorce is expensive, so it makes sense to start planning early in order to preserve your financial security for the future.