Liquidity in Equitable Distribution

If you are contemplating or if you have started the process of  separation or divorce, you may have heard the term equitable distribution.   Simply put, this term is the concept of how assets and liabilities will be apportioned.  In this blog, we want you to be aware that not all assets are the same.  Cash or funds from bank accounts  are the most liquid; they do not have tax consequences; what you see is what you get; you can get at them immediately.  A house, other the hand, that is sold will have proceeds reduced by commission, closing costs, etc.  A house that is transferred has other transactional costs and carries with it the cost basis so that when it is sold in the future, any tax consequences may be figured.   Compare those assets to stock or investment accounts that have capital gain taxes when the asset is sold for cash.  Retirement accounts such as IRAs and 401ks not only have tax consequences but also have restrictions as to when they can be taken out of the account without additional penalties.  When considering divisions of assets in a separation or divorce, understanding the nature of your assets is important so that apples are divided with apples or other considerations are made for an apple and orange exchange.