Divorce is common and about 40-50% of marriages end in one. While a divorce may be a necessity for some, the proceedings can cost a lot of money for both parties, aside from being a time-consuming and emotionally harrowing experience. It is never a pleasant undertaking, and along the way, certain mistakes must be avoided, especially when it comes to finances.
- Alimony Tax: Remember to take into account the tax implications when providing financial support or alimony. Because of the new Trump tax plan of 2018, the person paying the alimony is placed in a higher tax bracket and this means that the recipient also gets less money.
- 401k Tax: Most people are unaware of just how much fee they have to pay for their 401k or retirement plan. The fees are different for every individual, and this is something that must be learned early on. For divorcing couples, a qualified domestic relations order might be tempting to take all the money from the spouse’s retirement funds all at once and thus having to pay more taxes.
- Investments: For couples who have joint investments, divorce can mean that you are no longer taking part in the business side, thus dissolving them. It can be tempting to cash in these investments and use the money to pay the bills, but in the long run, it may not be the best idea. As these assets are no longer part of the investment, financial goals will definitely change, and keeping them safe for future use may be a wiser choice.
- Expenses: Lawyer fees and other proceedings can be expensive, and underestimating the expenses can be a danger to the financial stability of both parties. Some divorce processes may be completed quickly, but for some, the divorce can become drawn out and take more time than is ideal.
- The House: Fighting over who takes the house is common in divorces, but it is not often practical if the person who gets the house cannot afford to keep it. The property taxes and maintenance costs should be taken into account and if the recipient does not have enough money to cover these, the house becomes a liability.
Consulting with a divorce financial adviser or planner is the best course of action to secure a financial plan during and especially after a divorce. Planning out the years beyond the child support, alimony, and division of assets is highly important because there is no guarantee that things will remain the same in 10 or 20 years.
Choosing a divorce financial planner is another thing to worry about during the proceedings, but having one on your side will prove to be beneficial especially as you do the budget for the entire process. If you are lucky enough to walk away with secure assets, enlisting the help of a divorce financial planner will ensure that these assets remain that and not become a burden to you as you move on with your life. Blake Mortgage is more than just a mortgage broker and loan advisor. Blake Mortgage’s team of financial experts can help you plan out your financial life after the divorce.