Are you considering divorce? If you are like most people your biggest concerns center around 1) child custody, and 2) the division of your assets – these are the two areas that people fight about the most during a divorce.
If you are planning on being the one to file the papers, it would be in your best interests to consult with a divorce attorney before you say or do anything. It’s not uncommon for bitter spouses to be emotional, and to make some financial mistakes that end up costing them dearly.
You want to avoid these mistakes if you’re getting a divorce:
- Not understanding your finances
- Not knowing what your spouse earns
- Not knowing about all of your spouse’s investments
- Keeping joint accounts open
- Agreeing to a poor settlement in haste
- Not changing your beneficiary designations
- Failing to do a post-divorce budget
- Failing to hire a financial advisor (for high-net-worth spouses)
- Keeping a house that is underwater
- Hiding assets from your spouse
- Not being honest with your attorney
- Failing to consider tax consequences
We get it, sometimes people are in a rush to get the divorce over with, but when it comes to the settlement process, this is not necessarily a good approach. When you are negotiating a fair settlement, it’s important that you consider the tax consequences of each option.
After all you have time, you must wait at least six months before you divorce in California.
As far as tax consequences are concerned, you want to think about spousal support and child support. Spousal support is tax deductible for the paying spouse, but the receiving spouse counts it as income.
Child support on the other hand, is neither deductible nor taxable. Also, be cautious of keeping too many illiquid assets as this can be an issue if you’re strapped for cash at a later date. These are just some of the things you need to address with your divorce lawyer.
If you’re divorcing, be sure to get the advice of our Encino divorce attorney before agreeing to any kind of settlement. For further information, contact our office for a consultation.