The Effects of Taxes and Inflation in Divorce
A divorce financial planner or tax accountant can reduce the total taxes a spouse pays during separation and after divorce. The spouses can share this money (and both should remember that their divorce will make them poorer for a while). Both spouses are liable for taxes due as a result of audits on joint returns, so it is in their best interest to work together and minimize possible tax liabilities.
Disregarding the impact of taxes in a divorce settlement can be costly. After the divorce is final, a party may get taxed on the marital assets received in the settlement. The only way to know if a settlement is a fair deal is to determine the value of the investments on an after-tax basis. A tax professional can advise about the impact of any proposed property division.
At the same time, sometime people forget about the effects of Inflation, which erodes buying power. A college education or retirement years in the future can be profoundly affected by inflation. The Rule of 72 means that prices double in 24 years (72/3=24) when inflation in 3 percent and at 5% inflation double in 14.4 years (72/5=14.4).
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