From a financial standpoint, getting divorced in Illinois is a complicated process. Not only do divorcing spouses have to go through property division, but they must also consider the ramifications of their change in marital status on their taxes and their future. Some spouses overlook important financial matters and pay the price later on. However, by keeping a few things in mind when preparing for divorce negotiations, people may end their marriage in better shape financially.
Everyone's financial situation is different. For spouses who have savings to live on, seeking a variety of assets in a divorce that might increase in value could be smart, but people with an urgent need for cash to live on will need to pursue liquid assets. However, this is not the only issue that divorcing spouses need to consider when developing a strategy. Some assets will have a lower value after taxes, such as traditional 401(k)s versus Roth 401(k)s that will yield tax-free growth. Looking over past tax returns could give insight into the true value of assets as well as reveal any tax assets, like charitable donations, that reduce taxes.
Often a large portion of a couple's wealth is tied up in a retirement account with only one spouse's name on it. This does not mean the other spouse cannot share in the benefits. A document called a qualified domestic relations order can transfer benefits tax-free from some retirement accounts. People should consider the value of their digital assets too. Liabilities are also a consideration. Paying off liabilities or putting them in one person's name instead of both parties releases joint responsibility.
Knowing which assets offer the most benefits for an individual increase the likelihood of ending a marriage with healthy finances. An attorney could assist a client with attempting to get the best possible divorce settlement by negotiating on their behalf. A smart negotiator knows when to compromise and when to stand firm, something that could be difficult for divorcing spouses who are going through an emotionally trying time.
Source: Forbes, "6 Money Matters Divorcing Spouses Often Overlook," Leslie Thompson, Aug. 19, 2014