Filing and going through a divorce is a very stressful situation. Because of this, it’s natural to let your emotions control your decisions. The problem though, is when your feelings begin to cloud your judgment; mistakes are more likely to be made. In the divorce process, this can have a detrimental impact on custody decisions, property division settlements, and child and spousal support matters. All too often, what’s left in the end is a financial disaster.
To prevent your divorce from wreaking havoc on your financial security, here are three common financial mistakes that someone may make when they are filing for a divorce.
Not Considering Pre-Marriage Assets
When you are going to file for a divorce, you will need to determine which assets you had before you were married and which were accumulated during the marriage. Assets you owned prior to being married are considered separate and yours to keep. The assets from your marriage are considered to be marital property and those are subject to division.
Depending on the circumstances, this could impact how all of the total assets are split. Even if you have assets that were acquired prior to marriage, they could be considered marital assets. If you and your spouse used marital assets to improve property from prior to marriage, the separate property could be considered "commingled" and thus would be marital property instead.
Determining how to classify your assets can be a difficult and tedious task, but it is in your best interest to correctly categorize your assets. By doing this, you will be able to get a better understanding of what you will own after your divorce is finalized. Working with a skilled Pensacola property division lawyer will help ensure your property is rightly accounted for.
Forgetting Tax Implications
One major detail you need to keep in mind during or after your divorce is how your taxes will be impacted. Married couples who file joint tax returns together often enjoy more tax deductions than those who do not. When you get divorced, your filing status will likely change to either single or head-of-household. It's important to note when your divorce is finalized when you select your status. Depending on this date, you may be able to still file a joint return.
Additionally, when a divorce is filed, it is common for one party to receive alimony, child support or both. If this is the case in your situation, you need to consider the tax implications to determine if the net amount received is sufficient. Alimony payments are made before taxes and alimony benefits are considered taxable income. Child support payments, on the other hand, are made after taxes and are not taxed for the recipient.
Cashing it All In
When some people go through a divorce, the natural instinct is to convert all assets to cash. However, this can prove to be a mistake. If you do decide to sell all of your stocks and investments, there will be a near-term tax implication that needs to be considered. Further, you may lose out on the future dividend income and asset appreciation that can come with holding the investments further.
Rather than doing this, consult with a skilled divorce attorney who has experience in handling property division matters. They will be able to provide you with resources to ensure you come up with the best plan that sets your finances up for success once your divorce is finalized.
We Are Here To Help
The process of filing for a divorce can be complicated, time-consuming and stressful. At Autumn Beck Blackledge, PLLC, our Pensacola divorce lawyers are here to provide you with sound legal guidance while you are going through a divorce. Our team will treat your case with respect, urgency, and competence while always protecting your best interests.
If you need a trusted advocate to help you through the divorce process, Call Autumn Beck Blackledge, PLLC today at (850) 404-7263 to set up a consultation.