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Divorce decisions have long-term financial consequences
Divorce decisions are often the most expensive decisions people make. Just as a person may work hard over the years to build assets and achieve a healthy financial situation, it is important for an individual to tackle property and asset division during divorce strategically, thinking about the big picture. A few tips may help people in Illinois to make divorce-related decisions, while taking into consideration the financial consequences of those decisions.
In general, divorce usually cuts wealth that has been accumulated over the years in half. At the same time, a divorcing individual may notice that his or her expenses are magnified by a huge margin. This may particularly have a big impact on one's retirement planning goals.
It is wise to enter a divorce with the assumption that marital assets will be divided roughly equally. It is also important to note that any property that was acquired during the marriage is subject to division, since it will likely be considered a marital asset. Types of property subject to division include bank accounts, vehicles, real property, investment accounts, 401(k) plans and traditional pensions. Any property that ended up being commingled, even though it was initially separate, will also likely be treated as a marital asset. Even incomes earned during the marriage are considered marital assets.
Illinois divorce can have impact on retirement goals
A divorce can dramatically affect a person's finances both in the short term and the long term. Coupled with the emotional challenges of divorce, this type of family law proceeding can be complicated and overwhelming for individuals in Illinois. A few tips may help people going through a divorce make wise financial choices in order to protect themselves during and after a split.
A married couple has the benefit of splitting their living expenses and pooling their investment assets, which includes retirement accounts. However, after a marriage has been dissolved, it may be hard for the newly single individuals, who now have separate households, to stay on track with their retirement. The choices a person makes during a divorce when dividing joint retirement assets with a soon-to-be-ex has a direct impact on an individual's ability to reach his or her retirement goals.
When negotiating the split of retirement assets, it may be wise to enlist the help of a finance professional. These individuals can offer advice related to retirement, estates, taxes and investments. It is also important for a divorcing person to create a new budget based solely on his or her income and develop a practical strategy to save for retirement based on his or her new budget.
Finances can be a complicated aspect of divorce
When a person begins the process of divorce, it is natural for him or her to be overwhelmed by all of the details that must be handled. The person not only has to juggle the emotional side of the process but also the financial side. A few tips may help people going through divorce in Illinois to feel in control during the process.
Several big-picture matters must be tackled during a divorce. However, it may be easier to start out focusing solely on one's immediate needs. For instance, people may want to first ensure that they can cover their everyday expenses, that they have medical insurance coverage and that they are prepared to discuss child custody, if applicable.
The division of assets is often one of the most confusing parts of the divorce process. In some cases, one spouse may attempt to hide assets, making the help of forensic accountants and other financial professionals necessary. When divorces are contentious, completing an expense analysis may be a helpful way for both parties to stay focused on the numbers instead of approaching the financial planning from an emotional viewpoint. Regarding health insurance, it is worth noting that medical insurance may be included in a divorce settlement to make sure that one's children and former spouse remain covered.
Business asset can complicate divorce in Illinois
Deciding which spouse will get the family home and other valuable assets during a divorce is not easy when two divorcing individuals cannot see eye-to-eye on the matter. Having a business asset only complicates matters in Illinois. A few tips may help business owners to safeguard their interests during a divorce proceeding.
First, if a business has more than one owner, it would be wise to ensure that the operating agreement for the partnership includes provisions protecting both oneself and one's business partners in the event that one partner gets divorced. One of these provisions can state that unmarried shareholders are required to provide the business with a prenup. A prenup, or prenuptial agreement, is a legally binding contract that spells out which spouse would get to keep which assets if the two were to get divorced.
It is also expedient for this operating agreement to prohibit business shares from being transferred without the partners' approval. The agreement can also prohibit transfers of shares without providing the partners with the chance to buy these shares first. This type of agreement can be used as proof of two married people's intent to keep the disruption of a business to a minimum in a divorce situation.
Children's best interest should be at the center of divorce
During a divorce, it is not uncommon for two individuals to fight over major marital assets, such as their home. However, some of the biggest feuds in Illinois erupt over the children, and many are centered on the parents' interests instead of the children's best interest. A few tips may help people going through the divorce process to ensure that their children are not negatively impacted by the process.
Research shows that when a co-parenting relationship following divorce is negative, a child's mental health may suffer. It can also affect the young person's performance in school, as well as his or her future relationships. However, one strategy that can help the outcome to be positive is for the two parents to come to an agreement on how they will explain to the kids why the divorce is happening. If the two parents can behave in a united way, this can reassure the kids that they will be able to maintain relationships with both of them.
It is also wise to emphasize to the kids that the divorce is not their fault. In addition, it is important for the parents to try to maintain consistency in the children's lives. For instance, the schedules at both parents' houses may need to stay the same for the sake of the kids. This can help the kids adjust to the "new normal" following their parents' divorce.
Retirement and college costs among issues to address in divorce
For people in Illinois who are getting divorced, money problems likely are a huge source of conflict during the divorce proceeding. This is true whether two people are part of the working class or are billionaires. A couple of areas that can be particularly contentious during divorce are financial matters concerning the kids and the issue of retirement.
In addition to disagreeing about who should have custody of the kids, the parents may not see eye-to-eye about how to fund the kids' college costs. The cost of college is particularly a concern because of today's rising education expenses; also, the parents must take into consideration that, when the time comes for the kids to go to college, they might have brand new families and financial responsibilities to tend to simultaneously. It helps if both parents can negotiate on how to handle this financial matter in a way that benefits both parties and ultimately helps their children.
Regarding retirement, the court might award one person a part of his or her soon-to-be ex's retirement plan. In this situation, it is wise to enter and present what is called a qualified domestic relations order to the sponsor of the retirement plan. This ensures the rights of the recipient.
Marital home often a major area of conflict during divorce
Going through a divorce can naturally present a variety of challenges, both emotional and financial. Unfortunately, when people are caught up in the emotions of the dissolution of a marriage, it can be difficult to approach a settlement from a logical standpoint. One common settlement pitfall during divorce in Illinois is deciding whether to keep the marital home.
The marital home is often one of a married couple's largest joint assets. Some people do not want to be uprooted from their home and are reluctant about inflicting change on their children, who might already be struggling to handle the divorce. Other people are simply attached to the family home after having lived there for many years.
Many people getting divorced, however, may find that it is difficult for them to keep making the house payments with just one income. It can also be challenging to maintain the house on their own. Another issue involves any potential tax consequences, particularly with regard to capital gains, if and when the home is sold. For these reasons, keeping the family home following a divorce may not ultimately be the best choice.
Financial aspect of divorce impacts one's future
Although the emotional aspect of divorce often receives great attention, the financial aspect is also extremely important for Illinois residents. This is particularly the case for divorcing individuals whose spouses were the chief breadwinners. A few tips can help those going through a divorce to take the steps needed to protect their financial futures.
First, it is wise to gather one's financial information. This includes collecting estate-planning documents, as well as information on insurance, balances on credit cards, investment and bank accounts, and outstanding property-related loans. This information is important when dealing with matters such as child support, spousal support, paying outstanding debts and dividing marital assets.
Second, it is imperative that a divorcing person establish his or her individual credit. The person would benefit from opening at least a single major credit card, immediately using it and closing any joint accounts that he or she has with a spouse. It is also wise to consider one's long- and short-term financial needs, including living expenses required each month and even college costs for one's children, as well as one's own future retirement needs.
Wealthy spouses may try to hide assets during divorce
The divorce process in Illinois and elsewhere can be stressful for people at all income levels, but those with high net worths may especially be concerned about what they may lose during their divorce proceedings. In almost every divorce case involving high-value assets, one person is usually more prepared than his or her spouse. The better prepared person might even attempt to protect certain assets, as well as mitigate family wealth estimations for his or her benefit.
There are standards that are generally accepted for protecting one's assets during a divorce. However, a wealthy spouse may try to employ tactics aimed at circumventing or obscuring the facts. For instance, wealthy individuals may hide or horde assets, particularly when income comes from a cash business.
The other spouse may benefit from taking advantage of forensic accounting efforts, which may help him or her locate any buried assets. Forensic accountants will search for anomalies or discrepancies, including unusual title transfers or even extraordinary transactions taking place between entities. These accountants may additionally help with valuing assets that are illiquid or are lightly traded.
Divorce process may be made easier with a prenup or postnup
Discussing money matters before getting married can sometimes feel awkward. However, if two individuals in Illinois wait to tackle money issues until they decide to get a divorce, the situation can be more challenging than they may have anticipated. Forming a prenuptial agreement before getting married — or a postnuptial agreement after saying their vows — can help the couple to protect their property in case the marriage subsequently ends.
Prenups and postnups can dictate exactly what assets or particular property will go to which spouse in the event that the two get divorced. If an asset will need to be divided, the agreements may also provide details concerning how it will be divided between the two. This is especially helpful for addressing large assets, such as the family home.
There are multiple benefits from creating and signing a prenup or postnup. For instance, those who own a business together and decide to get married can protect their individual interests by signing one of these types of agreements. Stay-at-home spouses, people who have recently become financially successful and those expecting to get an inheritance may also find some security in signing either of these agreements.
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