New York State laws require dividing marital properties fairly between both spouses. Common setbacks include splitting assets that may result in debts or capital gains taxes that an unmarried individual may not afford.
A couple’s residence, for example, typically reflects their most valuable asset. Some divorcing couples sell their homes and share the proceeds after taxes. As noted by Mortgage Professional America, if one spouse wishes to keep the property, he or she may apply for a new home loan.
Dividing a couple’s residence
A mortgage may require refinancing to remove a spouse from the note and title. The spouse that keeps the title, however, may need to show he or she can afford the payments. In some cases when a single individual’s earnings cannot meet mortgage obligations, the court may award financial maintenance.
An individual keeping the property may also need to pay an ex-spouse his or her fair share of the home’s current equity value. Some couples may decide to “trade” home equity for ownership of other shared assets.
Cashing out a retirement plan
The Empire State’s laws view marital income, earnings and contributions made to a retirement fund as belonging to both spouses. As noted by Kiplinger’s Personal Finance, a pension fund may continue to pay an ex-spouse even after a divorce.
With a Qualified Domestic Relations Order, a non-working spouse may receive a lump sum payout from a working spouse’s 401(k) plan. If he or she has not yet reached the age of 59½, a rollover into an IRA may prevent early withdrawal penalties or capital gains taxes.
Careful consideration of a couple’s financial matters may reduce debts or liabilities when dividing assets. Retirement accounts may also require splitting even if one spouse did not work or contribute to it financially.