Many people getting a divorce in North Carolina are aware that the process can present some challenges during the transition to a life without a significant other. There’s no getting around the fact that ending a marriage is often time-consuming and sometimes costly. However, some individuals remain unaware of the possible implications associated with certain financial mistakes that tend to be made during a divorce.
For starters, it’s typically advised that soon-to-be-former-spouses don’t ease their stress or celebrate their freedom by making significant purchases like a new vehicle or home, especially since related financial responsibilities will no longer be shared jointly. A financial advisor may steer clients away from cashing in on highly appreciated assets to pay current bills since doing so could result in substantial tax liabilities. The tax implications of alimony should also be considered because such payments will no longer result in tax breaks with divorces finalized after the end of 2018.
Using 401(k) distributions to solve short-term money woes can be problematic if taxes aren’t withheld. Withdrawing when under the age of 59.5 also means a 10 percent IRS penalty. If parts of a former spouse’s retirement accounts are obtained with a qualified domestic relations order, it’s advised that the money be placed in an IRA account; otherwise, taxes won’t be deferred. Fighting for the house at all costs and not considering mortgage and upkeep expenses, quitting a job to avoid paying alimony, and having no financial plan at all are additional mistakes sometimes made by newly single individuals.
A family law attorney may be able to do more than just help clients with the basics of ending a marriage. During the process of negotiating a settlement agreement, for instance, a lawyer might advise a soon-to-be-ex-spouse to carefully consider which assets they want to fight for or seek based on possible tax consequences and other related expenses. An attorney may strive to give clients a clean slate both personally and financially by offering suggestions that take the big picture into consideration rather than just immediate needs.