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Common financial mistakes to avoid after ending a marriage

On Behalf of | Apr 17, 2020 | Firm News |

Research suggests that Illinois residents and others throughout the country have a 25% chance of seeing their marriages come to an end. While that is lower than the 50% figure that many have cited in the past, it still means that millions of people could get divorced in a given year. Therefore, it is important that you are prepared for any financial fallout that could occur before filing divorce paperwork.

You don’t need to keep the marital home

While you may have an emotional attachment to your current home, it is likely too expensive to keep on a single income. Furthermore, you may have to forego retirement contributions or contributions to other savings accounts in favor of making mortgage payments. In most cases, it is better to simply sell the home and split any equity with your former spouse.

Don’t forget to account for taxes

When you sell a marital home for a profit, you may need to pay capital gains taxes. You may also trigger a taxable event if you sell shares in a brokerage account as part of a divorce settlement. A financial adviser may be able to help you structure a final settlement in a way that helps you minimize taxes owed.

Create a realistic budget

There is a good chance that your budget is going to look significantly different after your marriage comes to an end. You may need to account for child support or spousal support payments in addition to paying rent and other expenses on your own. You’ll also want to be sure that you have money to pay phone and other utility bills each month. If you are proactive in updating your budget, it may be possible to make ends meet without relying on credit cards or personal loans.

If you are contemplating getting a divorce, an attorney may be able to help you obtain a favorable settlement. This may mean obtaining spousal support or the ability to retain assets that are likely to appreciate in the future.