Texas couples who are seeking a divorce might want to have the process over with as fast as possible. However, they might also want to make sure they understand the possible consequences each of their financial decisions might have. This might help them avoid some mistakes that could have a deep impact on their financial stability after the divorce has been finalized.
To avoid losing child or spousal support in case of a payer’s death, recipients might take out life insurance on the payer and list themselves as beneficiaries. Another mistake that is often made is failing to get a qualified domestic relations order to ensure access to an ex-spouse’s 401(k). A QDRO provides the opportunity to withdraw money from a 401(k) without incurring the 10 percent early withdrawal penalty, as long as the recipient rolls it into an IRA within 60 days.
Forgetting to consider tax implications when it comes to division of assets in a divorce can also become expensive. For example, keeping a 401(k) that is worth $100,000 in exchange for a $100,000 checking account might seem like a fair division. However, this might not be when the parties remember that money withdrawn from the retirement account will be taxed as income, while the cash in the checking account can be used without any tax implications.
Keeping the family home due to emotional attachment or an attempt to keep some normal aspects of life going might end up as a costly mistake as well. Homes can depreciate in value quickly. They can also be lost if the person keeping it cannot afford the upkeep costs after the divorce. A family law attorney will take these and other issues into consideration when attempting to negotiate a settlement agreement on behalf of a client.