If you are in the midst of a contentious divorce, are you justified in scrutinizing your spouse's past tax returns looking for assets?
Absolutely, according to a chief financial officer for a Pittsburgh-based RIA firm. She added that the last five years' worth of tax returns can yield important financial information like itemized deductions, gambling winnings and capital gains.
Many couples mistakenly push for a 50/50 asset split, without taking into consideration the projected valuation of their assets. For instance, taking on the debt of the family home in a housing market gone bust could seem like a risky venture, but it could pay off handsomely 10 years hence.
What if you suspect your ex is hiding assets? Go over their business expense accounts, as bonuses can be stashed there that can significantly boost the income. Also note any sudden increase in expenses, as the figures could be grossly inflated to squirrel away resources.
Does your spouse have their name on a minor child's savings account or 529 plan? Make sure these funds are safeguarded before signing off on the divorce.
Complicated assets to be split between the parties like IRAs and pension plans usually have to be addressed in a special court order known as a qualified domestic relations order, or QDRO for short. Mediators or judges issue the orders for the division of any retirement assets, with the value of the pensions determined by a spouse's age and the number of years the couple were married.
It is vital not to walk away from valuable assets in a divorce just to get it over with. The divorce itself can be granted while the financial advisors and attorneys haggle over the property settlement. By working closely with your family law attorney, you can make sure your immediate and future financial needs will be met by the asset division.
Source: Financial Advisor, "Divorcing Spouses Warned To Search For Hidden Assets," Maureen Nevin Duffy and Karen DeMasters, accessed Dec. 18, 2015