Divorce can be costly, but people in Washington may be able to keep the cost down by avoiding some common mistakes. For example, this is not the time go on a spending spree no matter how good it feels, because those bills will need to be paid eventually.
A financial plan may help people avoid this and similar errors. For example, such a plan may make it clear to a person that it is not possible to keep the family home because the mortgage and upkeep are too expensive. People should make sure to avoid unnecessary taxes and penalties. This means having the correct paperwork to make a distribution from a 401(k) and an IRA to roll it into. There could also be taxes from liquidating assets to pay for bills, so people should be aware of these before using this as a solution.
For divorces finalized after the end of 2018, payers of alimony will no longer be able to deduct payments and recipients will no longer pay taxes on the amount. It makes more financial sense to pay alimony than to go to extremes such as quitting a job to avoid it.
As part of the divorce process, couples will need to decide whether they can negotiate issues around property division, child custody, and support and alimony with one another or if they will need to go to court. Usually, couples prefer negotiation because it allows them more control over the agreement and is less costly both in financial and emotional terms. However, there are situations in which one person will not cooperate, or the case may need to go to litigation if a parent is seeking to block the other parent’s access to their children.
Source: Forbes, “Facing Divorce? 7 Common Costly Financial Mistakes To Avoid,” David Rae, 10/25/2018