The Dollars And Cents Of Divorce
No matter what the circumstances, a divorce can present a time of stress, emotional ups and downs and upheaval. While your finances may be the last thing on your mind, you should take care not to ignore the dollar and cents of your situation and how divorce can affect your bottom line. Mistakes made now, during your divorce process, can continue to affect you and your family long past the date of the final decree, so read on and learn how to get a grip on your wallet before it's too late.
Think Twice About Real Estate
When you have young children, it can be very beneficial to their sense of security during this time of changes for them to remain in a familiar location. While this is an important consideration, make sure that you are not just experiencing a knee-jerk reaction and asking for the home due to your own feelings. Just automatically desiring the family home could have you saddled with an expensive and too-large asset that becomes more of a burden than anything else.
You may have to pay the mortgage, the homeowner's insurance, the property taxes as well as the upkeep and repairs of that home, so don't ask for it without fully understanding what you will need to have available every month. One large home repair could cause financial disaster. For example, it can cost anywhere from $1,900 to $5,000 to have your air-conditioning and heating units replaced, and that price does not include the labor. Budget wisely if you are taking on this responsibility.
On the other hand, a second home or vacation home should not necessarily be the throw-away that it seems. These homes, if located in attractive areas, can mean a source of income through both long-term rentals and vacation rentals. In other words, don't just look at your marital assets as things, but as vehicles for producing more income down the road. The same can be said for family businesses and investment accounts.
Improve your retirement picture considerably
Tax and financial laws allow divorcing couples a major benefit that some people overlook entirely, but taking advantage of a qualified domestic relations order (QDRO) can mean a big boost in your retirement funds. This order, which must be signed by a judge before your divorce is final, lets you take money from your spouse's 401(k) (or other qualified retirement accounts) without having to pay the usual penalty fees. You will, however, have to declare it as income and pay taxes on it if you don't roll it into another qualified retirement account before tax day.
Talk to a family lawyer for more information.