When people in Minnesota get a divorce, they may be prone to making a number of financial mistakes. Some of those errors could happen because of a lack of familiarity with tax law. For example, they may try to liquidate some assets to pay debts, but there could be a significant tax attached to that liquidation.
Another tax-related error is failing to get a qualified domestic relations order in order to take a distribution from a 401(k) if it must be divided as part of the divorce agreement. Without this and an IRA to roll the distribution into, there could be significant penalties and taxes. On the other hand, people should be aware that for divorces finalized after the end of 2018, alimony will no longer be tax-payable or tax-deductible. According to experts, this is likely to lead to less money for both recipient and payer.
It might be tempting to go out and spend a lot of money after the divorce or to fight for the home despite being unable to afford it. Another financial error is quitting work to avoid alimony since not working will be even more costly. People should consider meeting with a financial professional to create a financial plan that may help them avoid these mistakes and take a realistic approach to their finances.
An attorney may also help a person prepare financially for divorce. In this time of emotional turmoil, people may agree to unfavorable financial terms because they want the process over with quickly. Talking with an attorney may help a person prepare for negotiations and ensure that they remain financially stable after the divorce. Some couples might want to opt for mediation or another type of alternative dispute resolution method instead of going to litigation where they may have less control over the outcome.