Failing to have an institution to institution transfer of retirement funds and therefore having to pay taxes on those funds. Do you know how to correctly transfer funds to avoid taxes?
Not knowing when you can withdraw retirement funds from a retirement account without paying a 10% penalty if you are younger than age 59 1/2. Attorney fees are not the only costs of divorce. Financial missteps during divorce can easily overshadow the known costs.
Failing to realize that your alimony will be taxed. Forget this detail and you'll ask for too little alimony. You'll need to add your monthly alimony taxes into your monthly budget to understand how much alimony you really need to pay your bills each month. Are alimony taxes included in your monthly budget?
Failing to have tax credits/refunds or capital gains/losses carried forward as divisible assets listed in the MDA. Did you forget about those assets? You may unintentionally give your ex-spouse a parting gift. Paying attention to details is vital during divorce.
Not deducting your attorney fees that are attributable to receiving alimony or retirement funds, if you qualify. Do you know if you qualify? This information can potentially save you thousands of dollars.
Consult your tax advisor concerning the information addressed above to ensure that it applies to your unique situation.
Sandy Arons, MBA, CDFA™, CFDP, CDFS is the founder of Arons & Associates Divorce Planning, where they specialize in the financial and tax issues of divorce. They encourage you to take the time to understand the numbers before you sign the final divorce paperwork, educate you so you can make informed choices, and secure your future and your children's future. Don't just get a divorce. Get a smart divorce. They can be reached at (615) 376-8204.