It is important for individuals in New Jersey and elsewhere to consider the financial ramifications of a divorce settlement. For instance, it may not be smart to keep the marital home as it can be expensive to maintain. Furthermore, property and mortgage interest deduction caps may limit the tax benefits of owning a home. It is also worth noting that capital gains exceptions are higher for married couples as opposed to single individuals.
Therefore, it may be best to sell the home prior to the divorce and split the proceeds. It can also be a good idea to buy long-term care or life insurance policies before a divorce is final. This is because individuals can buy them at lower rates and retain those rates after the marriage officially comes to an end. In many cases, it is necessary to review and make changes to an estate plan after a divorce.
Specifically, be sure to change the beneficiaries on trusts or any individual assets that have a designation attached to them. Individuals should also consider making updates to their power of attorney documents or any other directives. Otherwise, a former spouse may have control over a person’s finances or medical decisions if he or she were to become incapacitated. An attorney might be able to help review or edit an estate plan.
Generally speaking, marital property will be divided as part of a divorce settlement. In some cases, property is divided per the terms of a prenuptial or similar type of arrangement. In others, it will be divided per guidelines created by the state. Assets such as retirement accounts will typically need to be split using a QDRO or similar agreement to avoid triggering a tax bill now or in the near future.