Mistakes Made When Dividing Marital Assets
Dividing marital assets during divorce can be one of the most challenging and convoluted aspects of your divorce. It isn’t as simple as “I want the car, you keep the house.” Few people take into consideration the cash value of an “asset” and in the end, end up with a liability instead of something of value.
Carrie and Ed are getting a divorce, they are both age 54. They have two assets to divide, a money market account valued at $120,000 and a 401K valued at $120,000. Carrie has been out of the work force for a few decades and is interested in the 401K fund believing that it will mean more security at the time of her retirement.
Their divorce is finalized, Carrie gets the 401K and Ed gets the money market account. Eighteen months later Carrie decides she wants to buy a home. Carrie plans to use money from the 401K as a down payment on her new home.
The problem? There is a penalty for early withdrawal from the retirement plan. Any withdrawal she makes will impact the principal Carrie was counting on at age of retirement.
Ed and Carried walked away from the marriage with assets that were valued the same BUT the money from Ed’s asset can be used without penalty or loss of principal. Meaning his asset, in the long run was more valuable than the asset Carrie chose.
Something Carrie and her attorney should have taken into consideration when splitting marital assets such as money market accounts and retirement funds.