How to Plan for Divorce Illinois
The future is looking rosy for those contemplating divorce. Experts report that anecdotal evidence suggests an improving economy and a strong U.S. stock market are making the costs of getting a divorce more manageable compared to leaner years. If you are among those considering divorce in pursuit of an independent life, you should understand the risks. Careful planning can help you avoid costly mistakes.
Dividing Marital Assets – 401ks, IRA’s, Household Items
The importance of knowing what your family’s assets and liabilities are cannot be stressed enough. Oftentimes, couples split responsibilities such as managing the finances, leaving the other spouse in the dark. If you don’t already have a good handle on the financial picture, you will have to do some catching up.
Make sure you have access to tax returns, statements from investment and retirement accounts, household bills and any other important records. Take an inventory of valuable property, carefully detailing larger property such as shared real estate, down to collectibles, furniture and the like – supporting documentation showing purchase specifics and title may help in settlement negotiations.
For retirement assets such as 401K’s, look into obtaining a qualified domestic relations order, or QDRO, a legal document that spells out how you and your spouse will divide certain retirement assets.
Secure the help of a valuation expert or forensic accountant for hard-to-value assets in the family, such as a privately held business, a share of a professional partnership or stock options. Although, this service may be costly, it may be worth the expense to ensure you get what you are entitled to.
Marital Debt – Still on the Hook
Keep track of shared debts, too. If you and your spouse have joint loans or credit cards, paying them off before the divorce becomes final is advisable. Even if your spouse agrees to make payments in the settlement agreement, there are no guarantees he or she will follow through. Lenders will hold both parties responsible regardless of what is decided in court regarding the settlement.
Should I Keep the House?
As for the house…be careful what you wish for. Keeping the house may be tempting, especially when there are children involved. However, a household that took two people to run may be far too expensive for one. Maintenance, taxes, utilities and other expenses add up quickly. Postponing an ‘inevitable’ move may drain your cash flow and eat into your savings and, ultimately, stick you with the expense and headaches of preparing your house for market long after your ex has moved on. Making an informed decision with regard to the family home is crucial. However, if it is important for you to keep the home, including anticipated expenses in the settlement calculation may offset some of the burden.
Adjusting Expenses for Life After Divorce
Beyond the house, think about your expenses and what adjustments have to be made. Be aggressive when you project your post-divorce cost of living. Consider the basics such as food, gas, clothing and work your way out to health insurance and other necessary expenses compared to discretionary spending that can be reduced. Plan as if there were no safety net, such as child support or alimony, in the event your spouse loses their job or doesn’t fulfill their promises otherwise.
Tax Man Knocking
Some asset division looks great on the surface, but be careful not to get stuck with a larger tax bill. Consider the tax treatment for different accounts. Some accounts are taxed at the front end, allowing the recipient to withdraw funds tax free, while other accounts are taxed at the time of withdrawal only. Another consideration is capital gains . How much of an investment account is growth that will be taxed as opposed to original investment? To get a fair shake, looking beyond the face value and getting down to the after tax value matters.
Get Experienced Legal Help
Getting a favorable divorce settlement usually is a result of sound legal representation. There are many considerations and experience goes a long way in avoiding costly pitfalls. The legal team of Schlesinger & Strauss, LLC can help you through the process efficiently and effectively so you can move on. We are proud to serve our Lake County Illinois clients now and in the future and are pleased with the positive reviews we have received. Please give us a call if you have questions regarding divorce, child support or custody, property division or other family law issues. We are here to help!
Source: Wall Street Journal, “Divorce and Money: Six Costly Mistakes”, accessed May 24, 2015.
