Millions of Americans, including Alabama residents, get divorced every year, and many of them make serious financial mistakes. For starters, some separating spouses will agree that one person can keep the marital home after a divorce. However, for many people, it takes two incomes to make monthly mortgage payments, and people who keep a marital home after a separation may find it challenging to pay off the bills. These people can wind up diverting funds from other important sources, such as for their kids’ college funds, in order to make the payments.
There can also be problems for individuals who decide to sell off a marital house in order to split the assets, as they do not always anticipate what the tax consequences will be for the sale of the house. Another issue arises when couples sell their securities, as this triggers capital gains taxes. According to Fidelity Investments, some people wind up making less than the sale price of their securities after taxes are paid.
Another thing people may not think about while going through a divorce is their estate plan trustees. If a former spouse is designated as a beneficiary for a retirement account or is included in a will or trust, the person with the estate documents may want to make a change sooner rather than later.
When going into a divorce, it is a good idea for individuals to make financial budgets for themselves that take into account what their income and expenses will be after separation. Doing this early on can help someone determine how much he or she can afford to spend on a family law attorney, and it may also show that it is not in the person’s best financial interest to engage in a long protracted fight over the division of debts and assets.