Pennsylvania couples who are ending their marriage often have to deal with different types of stress. Not only is it emotionally difficult, but it can wreak havoc on their finances. However, there are steps they can take to avoid common money mistakes and come through the divorce process in good financial shape.
One of the biggest financial mistakes divorcing people make is trying to keep a house that they can no longer afford. While it may be comforting to hold on to a familiar home, it may be financially unfeasible. Even if one spouse is offered the house in exchange for other assets, such as a retirement account, it may be a bad deal due to the expense of maintaining the property. Experts also advise divorcing individuals to carefully consider taxes as they divide assets. For example, a $50,000 401(k) account is not equal to a $50,000 bank account because there are tax ramifications when money is withdrawn from a retirement account.
Some people facing divorce fail to get a court order to access their ex-spouse’s retirement plan. A qualified domestic relations order is necessary when an employer-sponsored plan is being divided. Also, some people also fail to place a life insurance policy on a former spouse who is paying child support or alimony, which can lead to financial disaster if the payer passes away.
Many divorcing individuals choose to work with an attorney as they go through the divorce process. Legal counsel could help protect their client’s interests and negotiate fair agreements on child custody, child support, visitation, alimony, asset division and other important divorce legal issues.
Source: CNBC, “When it comes to divorce, not all assets are equal“, Sarah O’Brien, Sept. 22, 2017