Divorce may be a relationship issue, a family issue, but the reality is that it’s also a major financial issue. You have to consider the financial side of the split. You have to think about the long-term ramifications. Relationships may come and go, but the money-related decisions you make during your divorce — or the things that you overlook — could impact the rest of your life.
That may sound intimidating, but it shouldn’t. You just need to know what steps to take. Here are a few things to get you started:
1. Think about the taxes with alimony
If you’re paying alimony, or getting payments, you need to know how the taxes work. These laws have changed in recent years. It used to be that you could deduct alimony payments from your taxes, but you no longer can. Also, the person getting paid used to need to pay taxes as if they were getting income, but that burden has been lifted. Today, the payer also pays the taxes on their end and the person getting the payments does not have to worry about it at all.
2. Consider what your assets really mean
Splitting up assets gets tricky, and you do not want to make a mistake that keeps you from getting the fair division you thought you were getting. For instance, say you have a $300,000 house and $300,000 in retirement savings. You take the house, your ex takes the retirement account, and you think it’s equal. However, your ex’s savings will just increase in the years to come. Meanwhile, your house comes with maintenance costs, taxes and possible mortgage payments. Was that really an equal split?
3. Update your estate plan
One of the most important financial documents you have — in reality, a set of documents — is your estate plan. It determines what happens to your assets when you pass away. You absolutely need to update this after divorce. For one thing, your assets can change significantly. On top of that, some of your beneficiary designations — such as the one on your life insurance policy — may name your ex.
4. Consider your financial needs
The cost of living increases after divorce. Simply put, you and your ex shared costs like the mortgage and the utilities before. Now you both have to pay those on your own. As you divide assets, carefully consider your financial needs in the future and how you can address those things moving forward.
Your legal options
These four areas can get you started, but they’re not all you need to think about. Make sure you look into all of your legal options in Illinois for a secure financial future.