Divorce isn't easy, especially when it comes to dividing the considerable assets you've worked so hard to accumulate together. When you know you're divorcing, you have to protect those assets harder than ever.
There are a number of financial missteps you can take in a divorce. Here are some to guard against:
- The urge to spend. Don't make any big purchases, either, to make you feel better or because you want to spend some money so your spouse doesn't get part of it. You'll want to evaluate your finances after the divorce before buying something like a car, and your spouse also could claim you took money unjustly.
- Not considering how alimony affects your taxes. Remember that under the Trump tax plan, you don't get a tax break for paying spousal support.
- Selling stocks or taking money out of other investments to pay bills while you wait to finalize the divorce. You could face significant taxes.
- Taking money out of your 401(k). If you're under age 59 ½, you'll not only owe taxes on the money, you'll be hit with a penalty. It might seem like a good solution until your settlement is done, but it isn't.
- Changing jobs or quitting your job to avoid spousal support. Once you go back to work, you'll wind up in court again to come up with an alimony amount.
- Keeping the house if you can't afford it. The person who wants to keep the house will need to buy out the other spouse, and that might not be financially feasible on one income or with just alimony and child support to pay your expenses. Your grand, forever-home just might need to be sold.
- Failing to make a financial plan. Going through a divorce is the time to be financially prudent. That includes making a plan that reflects your new financial status.
Your divorce attorney and financial adviser undoubtedly will have other cautions for you. It's wise to listen to their advice. You'll want to enter the next phase of your life in the best financial situation possible.