Fees for legal or financial advice only scratch the surface of divorce costs. When a couple in Maryland possesses assets, taxes and housing expenses can cut deeply into the value of a divorce settlement. People over the age of 50 experience higher long-term costs because they often have substantial assets and limited time to rebuild a retirement nest egg.
Taxes and early withdrawal fees could drain divided retirement accounts. For example, a husband wanting his half of an Individual Retirement Account holding $1.5 million would face a 10-percent penalty right off the top of the $750,000 if he was less than 59-1/2 years old and did not roll the money into another retirement plan. Federal and state agencies would also view the distribution as taxable income. Total tax rates could reach as high as 52 percent if the recipient wants the cash immediately. Savings within investment brokerage accounts fare badly as well. Withdrawals from investments could create a capital gains tax obligation up to 20 percent.
The value of the family home might not be as high as expected as fluctuating real estate markets could rapidly undermine equity. Someone who bargains away cash assets to keep a property might not be able to maintain it on a single income. Even if a divorcing couple chooses to sell a home and divide the proceeds, repairs and inspections could eat up 6 to 7 percent of a home's value.
Someone beginning a divorce should carefully consider the long-term financial results of the split. A family law attorney could provide insights about rights to certain assets and tax obligations. Negotiations led by an attorney might allow the person to reach compromises. When defending a claim to assets becomes essential, an attorney might advance the person's agenda in court.