On behalf of Schlueter Ecklund & Davitt posted in family law on Monday, November 5, 2018.
People in Illinois who are getting a divorce should make sure they avoid common financial errors. For example, it is important to take taxes into account when dividing some assets. A document called a qualified domestic relations order is necessary when dividing a 401(k), and a distribution must then be rolled into an IRA. This prevents taxes and penalties. People should also be aware that if they sell some assets to pay bills, there could be taxes on the sale.
However, there will no longer be taxes on alimony for people who receive it, and alimony will not be tax-deductible for people who pay it in divorces that are finalized starting in 2019. This could result in less money for both people. People who expect to pay alimony should not quit their job in order to avoid it as this will only lead to more financial problems over time.
Another action that can cause financial problems is going on a spending spree for emotional reasons. This may feel good in the short term, but there will be bills to pay later. Making a financial plan can help people better prepare for the divorce and the time after the divorce. It might also help them avoid mistakes such as keeping the home without enough money to pay for a costly mortgage.
Divorce can be difficult, and if people are not careful about how property is divided, they may find themselves struggling financially after the divorce. Therefore, it is important to understand the marital finances and have a plan. For example, before going into divorce negotiations, people might want to think what points they are willing to concede and which ones they will not compromise on. An attorney may be able to help a person prioritize and negotiate effectively. Negotiation may be preferable to litigation.