Illinois residents who are going through a divorce or contemplating one might be interested in learning about some of the worst financial mistakes someone going through a divorce can make. To start, any spouse who does not keep track of the family finances may be at a disadvantage. However, it is important for both spouses to understand their past and current financial positions in order to make an easier transition.
The assets a spouse seeks in a divorce might depend on their cash flow needs post-divorce. Some assets are liquid and easily converted into cash such as stocks and bonds, yielding potential cash flow if one spouse requires immediate financial assistance after their settlement. It is also important to understand what taxes will be due before dividing assets and which spouse is expected to assume responsibility for any outstanding debts.
A creditor does not have to honor a couple's decision as to whom will pay a debt and can pursue either of them to collect. Therefore, it is important to settle any liabilities before a divorce. This can include refinancing the mortgage on a home when possible or cancelling any joint credit cards.
The division of retirement assets in a divorce is also important to keep track of, as this typically reflects a great deal of the couple's net worth. Under some circumstances, the transfer may be tax-free if IRA is specified as a transfer incident to divorce within the decree.
Before entering the process of a divorce, it may be beneficial for a spouse to consult with a family law attorney familiar with the aspects of asset division. An attorney may also be able to ensure that financial documentation is filed properly and any confusion regarding tax law is cleared up.
Source: MarketWatch, "Divorce? The 6 worst money mistakes", September 23, 2014