Getting a divorce is not just an emotional process, but a financially difficult one as well. Divorcing spouses risk taking a major hit to their financial health during a divorce, especially without proper legal guidance on their side. While you might be tempted to fixate on what went wrong in your marriage or on how to cope with this major change in your life, it is crucial to also try to limit the other effects your divorce will have on your life, so you can work toward minimizing the damage.
Below are some of the most common missteps spouses make during a divorce and some advice on how to avoid them:
- Missing money: It is crucial to take the time to examine your assets in order to make a thorough accounting of current accounts, non-cash assets, and future assets, such as pensions, business interests, or start-up stock options. You should also remember to include the income you earned prior to filing for divorce but received after. The cut-off date for asset valuation is the date of your divorce filing, so pay close attention to these details. If you are actively involved in managing the household’s finances, this might not be too daunting a task, but if not, your attorney can effectively help you fill in any gaps and reveal potentially hidden assets.
- Ignoring tax basis: If you want a fair settlement, do not forget your taxes. For example, the spouse who is awarded the marital home that is worth $500,000 will face a different set of tax circumstances when he or she sells the house for profit than the spouse who receives distributions later on from an individual retirement account that is worth the same amount.
- Staying connected: Remaining financially linked through joint accounts and beneficiary designations is a major liability once you begin the process of a divorce, especially if there is a lot of hostility with you and your soon-to-be former spouse. Open a new individual bank account to keep your future income separate and begin financially untangling yourself from your spouse. This could include calling your credit card issuers to remove authorized users, closing joint accounts, updating deeds and titles to reflect who was awarded what, and changing beneficiaries.
- Raiding retirement: Unless you are taking distributions from retirement for retirement purposes, tapping into these accounts to fund your divorce or to pay off joint debts is a big mistake. Barely half of all households have adequate savings for retirement, so dipping into them for your divorce is not going to improve your chances of a comfortable retirement for the future.
- Getting emotional: Some of your assets will likely have a lot of sentiment attached to them, but if you are not careful, the emotional value you place on them will inflate your idea of what they are truly worth, making a settlement unfair and dangerous to your future. For example, getting the house will not matter if you lack the liquid assets to keep up with the mortgage. Try not to let your feelings for certain assets get in the way of making the right decisions.
Divorce Attorneys in Illinois
If you and your spouse are moving forward with a divorce, you need to seek skilled legal assistance to ensure your financial future is not compromised by any mistakes. At Wakenight & Associates, P.C., our divorce attorneys in Illinois have the experience and knowledge that necessary to navigate you through this process while protecting your best interests and future.
Get started on your case today and contact us at any of our convenient locations to schedule your free consultation with a divorce attorney.