Financial missteps during a divorce can have long-term effects if not properly thought through. Along with the emotional turmoil of divorce, financial mistakes can be even more devastating. This is especially important when it comes to property division in California.
Keeping the family home may seem like the best option during property division at first. During a divorce settlement at a time where emotions are running deep, one less change may seem like the right thing. Experts agree that managing the upkeep and long-term maintenance of the family home after divorce may not be sustainable. It is also important to take into consideration that the household income will now be reduced to one.
Another costly mistake may be liquid assets. Before agreeing to take the 401(k) in lieu of the checking account, experts advise divorcing couples to consider the tax consequences. On the surface, $100,000 in both accounts may seem fair, but high penalty withdrawals and taxes may make the 401(k) a bad choice. Not all accounts are taxed the same. It would be advisable to have a financial adviser and attorney look at the complete picture.
Taxes and penalties are huge liabilities, and a life insurance policy on the ex-spouse may be advisable if alimony and child support play a big role in the monthly income. In California, the advice of a dedicated attorney is important for both parties involved, and when settling property division, it is imperative to have someone to advocate and understand the implications. What looks good on paper may not necessarily be the best deal.
Source: USA Today, “When it comes to divorce, not all assets are equal”, Sarah O’Brien, Sept. 25, 2017