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Divorcing at the beginning of the year? What you should know

It's a lesser known fact that divorce filings tend to spike around the beginning of the New Year. It seems that getting out of a marriage is on the list of things that people add to their new year's resolutions. According to a study that analyzed divorce filings in the U.S. from 2008 through 2011, divorce filings experience a huge spike in January, continue to rise though the following month of February and peak out in March. A typical divorce proceeding can take anywhere from six months to well over a year from beginning to end.

While the normal divorce can be a high stress situation for all involved, a high asset divorce can add on additional challenges of its own. Typically the family home is the biggest asset in a divorce and careful thought has to be put into how to go about divvying it up between the couple.

Each situation is unique but the options are usually either to have one person get the house with all the financial responsibilities that entails such as any owed mortgage, property taxes, monthly utilities and such, or sell the house and divide the proceeds from the sale between the owners.

If the house is going to be sold regardless of who ends up owning it then it is usually advisable to sell it before the divorce is finalized. When it comes to stocks it's a different matter entirely. If one of the couple makes significantly less than the other and therefore falls into a lower tax bracket then it is recommended that they be awarded the major portion of any stock that has to be divvyed between the couple. They will end up owing a much smaller amount in long-term capital gains when they have to start filing their federal taxes separately after the divorce is completed.

It is also better for a divorcing couple to pay off any marriage debts, and close any jointly held accounts. It may not occur to many to consider an alternative dispute resolution process to resolves their family law issues. But, medication or a collaborative divorce process will not only cost less but also give parties a sense of the control. However, in some cases due to domestic violence and abuse an ADR process may not work.

Source: Investment News, "Consider these tax consequences when splitting assets in a divorce," Liz Skinner, Dec. 30, 2014

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