Sandy Swanson Discusses Money Mistakes to Avoid When Getting Divorced with Real Simple
Going through a divorce is difficult enough. The last thing you want is for it to destroy your financial future. Unfortunately, this happens time and time again for many individuals, no matter how much they had in the bank. To help divorcing couples avoid costly financial mistakes, Real Simple spoke with Potentia Wealth Private Wealth Advisor Sandy Swanson for insight on one frequent oversight: assuming you know the value of a dollar.
“A dollar does not always equal a dollar,” says Swanson. “In many divorce cases, one member of the couple has been planning this divorce consciously or subconsciously for a while. In preparation, some of the combined assets may have been re-titled or moved to cash, so as not to be considered community property in the negotiation.”
For individuals going through this process, Swanson recommends looking at the value of each asset in after-tax dollars. “A dollar value on paper today can be a very different value after taxes,” she cautions. It is important to note, however, that not all assets will be taxed the same. Some assets, such as retirement accounts, are taxed as income while others, such as real estate and stocks held for more than a year, are taxed as capital gains.
In a similar vein, it is also imperative for those getting divorced to understand the true cost of their debts. For example, $60,000 on credit cards is a larger amount of debt than a $60,000 mortgage since its interest rates are typically higher.
Swanson tells the publication that many people in the middle of a divorce may think that they understand these points, but it is always better to be safe than sorry. Unless you are a trained professional in these processes, Swanson cautions against being your own appraiser or accountant and instead recommends teaming up with someone who is trained to help you properly weigh the true value of assets and debts against interest rates, inflation and fair-market-value.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Potentia, Potentia Wealth and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation.