Divorce Financial Pitfalls That Can Surprise You
It's possible for a divorce to leave you without much money when everything is finished. While some reasons for this are inevitable, some reasons can be avoided. Here are 3 of those avoidable reasons.
Giving Away Assets
A common mistake you can make during a divorce is giving your spouse assets that you do not care about. This could be from having an emotional association with the item from that marriage, and simply not wanting to be reminded of it by having that item after the divorce. The reason this is a mistake is because every asset has a value attached to it, and that should be used as a negotiation tactic. Assets can always be sold, so by giving them away because you don't want to deal with them, you are losing out on money.
Always assign a monetary value to everything that needs to be split during a divorce, and negotiate under the assumption that assets can be sold for cash if you do not want them.
Ignoring The Tax Implications
There are potential tax complications with marital assets you're fighting over, and many people don't think about them until it is too late. For instance, you may be offered alimony as a lump sum or as a monthly payment. If the lump sum of alimony bumps up your tax bracket, you could end up paying more taxes on that money now than if you distributed it as monthly payments.
Selling a home can also have unforeseen tax implications with capital gain taxes. As a single person, the tax threshold for earnings made from the sale of a home drops from $500,000 to $250,000. If you win the home in the divorce and decide to sell it, you may now have to pay capital gains taxes that you would not have had to pay as a married couple.
Fighting For Things That Don't Matter
While a divorce is very emotional, you must remember to not let emotions get in the way of determining the final settlement. It's possible that you will feel a bit vindictive towards your spouse and want to fight to get more than you deserve. You'll be spending more money on legal costs to intentionally hurt your spouse, and may not see any financial gains from it.
For more info about the potential financial pitfalls from a divorce, work with a divorce attorney in your area. They can help guide you through the entire process so that mistakes are not made.