There are several financial mistakes that people in Illinois should be sure to avoid during a divorce. For example, they should not spend on big-ticket items during the split. The bills for this behavior can add up quickly.
Another mistake is selling assets in order to pay bills. What people who do this may be unprepared for is the hefty tax burden that could accompany such sales. Another area in which people should be mindful of taxes is with 401(k)s. Making distributions from a 401(k) during divorce without a document called a qualified domestic relations order and an IRA to roll the distribution into will result in taxes and penalties on the distribution.
On the other hand, alimony will no longer be taxed for divorces that are finalized starting in 2019. This means that it will not be tax-deductible for those who pay it. It is anticipated that in many cases, this will leave both the payer and recipient with less money. Some people may be tempted to quit working in order to avoid alimony payments, but this will only cause more financial problems in the long run.
People may want to work with a professional to make a financial plan. This could help them avoid errors such as keeping the marital home without being able to afford the mortgage. This financial plan may also be helpful when negotiating property division.
People who are considering divorce might want to talk to an attorney before embarking on the process to get a sense of how property might be divided. They may want to bring documents such as tax returns and investment records to this meeting. Since some people may struggle financially after getting a divorce, it is important for people to protect themselves in negotiations or during litigation.