| Divorce is something no one hopes will happen to | | | | child reaches 18. |
| them when they get married. Unfortunately, almost half | | | | 5. Failure to specify who can claim the kids on the tax |
| of all marriages end in divorce. Since few people have | | | | return. The divorce should specify who will be entitled |
| pre-nuptial agreements, most divorces involve often | | | | to claim the children. Also, Form 8332 Release of |
| bitter tangles over children, money, and assets. When it | | | | Claim may need to be filed with IRS in some |
| comes to the tax and financial implications of divorce, | | | | circumstances. |
| often your divorce attorney is not the only one you | | | | 6. Lack of planning with regard to life insurance. Life |
| should rely on for advice. | | | | insurance should be reviewed in the event of divorce. |
| I have found ten very common mistakes that people | | | | You may want to take your ex off of your policy as |
| make in the divorce process. A tax or financial pro can | | | | beneficiary, but do you really want to make your |
| help you avoid them. | | | | children beneficiaries? Unless they are over 18, this can |
| 1. Don't let emotions guide you in determining the | | | | be a big mistake as the funds may go to a trustee until |
| divorce settlement. Divorce is about a lot of things, but | | | | the kids reach majority. Consult with your attorney on |
| is caused mainly by emotional issues or financial | | | | how to style your life insurance to best provide for the |
| problems in the marriage. You may love or hate your | | | | kids. If you are the person getting alimony or child |
| soon-to-be ex, but you cannot rely on your "gut" | | | | support, it is a very good idea to carry a life insurance |
| feelings that they will do right by you or the children. | | | | policy on your ex in the event of death. Otherwise the |
| You must make the settlement using reason and | | | | money stops coming and you may end up homeless. |
| planning for the unexpected. He or she may want to | | | | 7. No income modeling done in the calculation of |
| pay a large alimony and a small amount in child support | | | | alimony. Your spouse may be a corporate executive |
| by telling you they want to see you are "taken care | | | | and have great future earning potential. He or she may |
| of." That may result in less tax for them, a lot more | | | | have stock options. An income model should be made |
| taxes for you and destitute children should you die | | | | to determine the potential they have and how it can |
| before they reach 18. Financial planning is critical. | | | | affect your claim in the divorce. |
| 2. Get a good family law attorney, but don't forget to | | | | 8. Failure to secure a Qualified Domestic Relations |
| hire a financial professional to assist in evaluating | | | | Order (Quadro) in the event of a 401K or other tax |
| assets and financial strategies. It may cost extra fees, | | | | impacted investment that is divided in the divorce. If |
| but it will result in a far better settlement for you in | | | | you don't do the right thing, huge tax penalties can be |
| most cases. A Certified Public Accountant (CPA), | | | | imposed on taking money out of IRAs, 401Ks, or |
| Certified Financial Planner (CFP), or an Enrolled Agent | | | | Annuities. A good family law attorney can help with |
| (EA) can be of invaluable help. What is the house | | | | this but your Uncle Joe who handles bad check |
| really worth? If a business is involved, what are the | | | | defense may not be the guy you want to do your |
| consequences of its disposition or the true value of it in | | | | divorce. He or she may not be familiar with a Quadro. |
| the divorce settlement? Your spouse might tell you | | | | 9. Failure to have assets professionally appraised. If |
| their business is losing money or has no assets; you | | | | you have rent houses, oil and gas investments, etc. |
| need to know the truth! | | | | Get a professional valuation or you may be cheated in |
| 3. Getting the house in the divorce is not always a | | | | the divorce settlement. The spouse who handles these |
| good deal. Women often want the house in the | | | | investments may not be honest with you on the |
| divorce because they are raising a family in it or have | | | | values. Just because he or she loves the kids or was |
| decorated it and are emotionally attached to the | | | | married to you for thirty years does not mean you can |
| property. If it has a mortgage attached to it, think long | | | | trust them. |
| and hard about the house. It might be better to sell it | | | | 10. Lack of faith in yourself and your future. Divorce is |
| and split the equity. If you aren't working and are raising | | | | bad but it is not the end of the world! You may have |
| kids, do you really want a big mortgage payment? | | | | some tough times but your life will go on and it may be |
| 4. Failing to fight for the most child support you can get! | | | | a blessed life. You don't know what tomorrow brings. It |
| Large alimony and low child support payments are | | | | may bring love and happiness. You must have faith in |
| generally not a good deal to the spouse getting the | | | | yourself so that you can take care of the kids and be |
| payments. Alimony is tax deductible to the party | | | | successful in whatever you choose to do. Money is |
| paying but taxable to the party who receives it. A | | | | not everything, but if you don't have faith in God and |
| large payment is a large tax deduction for one party | | | | yourself, you won't be financially successful. |
| and a big tax burden to the person getting it. Child | | | | Well that is my list and it is my prayer that it has |
| support is tax free to the recipient and not deductible | | | | helped you in some way. Be strong and be forceful. |
| to the payer. Also, alimony may terminate upon | | | | Don't get walked on! |
| marriage or death, but Child Support continues until the | | | | |