Divorce represents one of the most significant financial transitions a person can go through, and it can be easy to make costly mistakes if you are not careful. During your divorce, you may need to address shared assets, joint debts, child support, spousal support, and other significant financial matters. Making smart decisions during this time is essential for your financial well-being and your post-divorce future. Here are five common financial mistakes to avoid during your DuPage County Divorce.
Being Ignorant About the Household Finances
In some couples, one partner takes care of bill-paying and other financial responsibilities while the other spouse handles non-financial responsibilities. If you are unfamiliar with the family finances, now is a great time to learn. Gather as much information on your family’s finances and assets as possible, and make sure that you understand the full financial picture before making any decisions during divorce.
Ignoring the Tax Implications of Your Divorce
When you get divorced and divide your marital assets, it is important to understand the tax consequences of your decisions. Your tax filing status is determined by your marital status on December 31 of the filing year. Some divorcing couples wait to finalize their divorce until January in order to reduce their tax obligation. It is also important to consider the tax implications of spousal support and other asset divisions. There are not typically capital gains taxes on asset transfers during divorce, but there are exceptions to this general rule.
Not Understanding Your Retirement Accounts
If you have retirement accounts, such as IRAs and 401(k)s, it is important to understand the rules for division during divorce. Retirement assets are often divided by a Qualified Domestic Relations Order (QDRO) and must be divided in a specific manner. Early withdrawal penalties can be costly, so it is important to understand the rules and make sure that any division of assets takes into account taxes as well as any applicable penalties.
Keeping the Home When You Cannot Afford It
While it can be tempting to keep the home – especially if you have children – you need to make sure that it is financially feasible. Keeping the home can be a major financial obligation and may not always be in your best interest. If you cannot afford the mortgage payments or the upkeep of a home, it may be best to sell and split the proceeds instead.
Disregarding Spousal Maintenance
If you are a stay-at-home parent or were otherwise out of the workforce, you may be entitled to spousal support. In Illinois, spousal maintenance is decided on a case-by-case basis. The court will consider factors such as the length of the marriage, each spouse’s ability to work, and any other financial factors.
Contact our DuPage County Divorce Lawyer
Our Hinsdale divorce attorneys understand that divorce comes with significant legal and financial implications. We can help you make sound decisions throughout the divorce that set you up for the best post-divorce future possible. Call 630-920-8855 for a free consultation.