An article last month in the Wall Street Journal titled “Don’t Let Divorce Leave You Illiquid” explored what one expert says is one of the biggest financial mistakes he sees during a typical divorce. The problem has to do with the division of assets and the tendency for one spouse to be left with large but illiquid assets.
What does liquid/illiquid mean?
Liquid assets are those that can most quickly be converted into cash and then used to pay bills or cover other expenses. Examples of relatively liquid assets include bank accounts, money market accounts, and even retirement accounts. Illiquid assets, on the other hand, are those that are much harder to convert into cash.
How does one get left with a large illiquid asset?
The most common example of a party being left with an illiquid asset following a divorce involves the marital residence. Given the large value of a typical home, it is often the case that after one party gets the house and the other party is given an equivalent share of the remaining assets (bank accounts, retirement accounts, stocks, bonds, etc.) there is little left. For example, a wife who walks away with a $250,000 home will likely have to hand over an equivalent amount in other assets to her husband (or buy out his share of the home some other way). The same thing can happen in relationships where there is a small business. In order for one person to leave with the full share of the business, the other person will likely get the lion’s share of other, more liquid assets.
So what’s the problem with illiquidity?
The financial expert interviewed in the WSJ article notes that while it can feel like a victory to walk away with the marital home or a small business, the problem is that you can be left in a precarious financial position. When times get tight or you encounter a sudden or unexpected expense, it could put you in a very bad place where you have little if any access to hard currency. For example, if a woman decides to keep the house and gets little else and then experiences a delay in receiving alimony payments, loses her job, or encounters an expensive repair, it can leave her stranded with few resources to cover her new expenses. In these cases, being illiquid can result in a costly fire sale of assets, with desperate sellers willing to take steep reductions in price just to get some cash in their pocket.
Given the troubles that can result from taking large and illiquid assets, it is critical to weigh your options carefully when divorcing and seek the services of an experienced family law attorney. Contact Donna Wagner to set up a consultation and discuss a plan whereby you can make equitable decisions as it relates to finances and divorce.
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Best decision I ever made in the midst of a divorce, from someone who asked for the divorce, was to hire Donna Wagner. I was facing an attorney who was representing my spouse, thinking all I had to do was sign the papers. No, they were attempting to get money out of me. Keep in mind we didn’t have any kids. Anyhow, Donna came in and shut it all down. I was due in court in a week and she got that continued. After going back and forth with the opposing attorney, Donna was able to not only get them to settle the case without going to court but have everything ruled in my favor. I am finally divorced and can breathe easy. Thank you Donna Wagner!
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I know for certain that If I am needing an attorney again in the future, I will be using Donna Wagner. There are so many great things to say about Donna. However, I believe what I appreciated most was how Donna handles special situations, and I assure you, my circumstances were just that! Donna was very thorough during my entire case. She was able to address my unique case but also do so with legal basis even though the courts may not always allow for such situations. Donna was very thorough each step of the way and was certain to not leave any stone un-turned. One thing I really liked about Donna was her fire. When situations arose, she can be more than passionate about her job and serving justice to those who deserve it. I also want Donna’s clients to know that she was very timely with me in her communications with me. Whether by email or phone, she was always just a call or a message away. When being in a legal situation, I know from previous experience, being able to reach your attorney means everything. I am more than pleased with the results that I recieved from Donna Wagner, and I assure you my case turned out better than I had imagined and even for a fair price. Donna Wagner rocks!
I obtained Mrs. Donna Wagner’s services in 2012 to help with my charge of driving under the influence. I first called several other attorneys, but none of them were willing to listen to my case. Mrs. Wagner not only took the time to listen but went out of her way to be sensitive to my issues, respond quickly to my questions, and help me understand this unfamiliar process. It was clear to me from the beginning that she knew the system well and was very thorough in her exploration into my case. With her experience and knowledge of the Mt. Juiliet court system, combined with her adept use of the evidence at hand, she was able to get my charges significantly reduced. I could not be more happy with my choice of attorney. I am certain that I would not have had such a successful outcome without her guidance and skill.
