Ending a marriage in New Jersey can be costly in terms of the emotional impact and the time that’s involved in making life adjustments. However, divorce can also be literally more costly than anticipated if significant financial mistakes are made. While every situation is unique, there are some common financial oversights that tend to occur more frequently than others.
Retail therapy during the divorce process, for example, may be a good thing if it involves minor indulgences. However, major investments like a new car or home can present some problems since the resulting bills will no longer be shared jointly.
Solving short-term money woes with 401(k) distributions could result in a sizable tax bill that’s coupled with an IRS penalty for early withdraw. Obtaining a qualified domestic relations order (QDRO) can be a smart way for a former spouse to get some of their ex’s retirement account assets. However, taking these funds as cash could result in more tax payments. If funds are placed in an IRA, however, taxes can be deferred.
In some cases, ex-partners fight over assets such as a house. The marital home isn’t always worth fighting for, especially if a newly divorced individual can’t afford to keep it up. Even if one ex gets to keep the home, they may have to buy out the other’s share of equity.
When a divorce settlement is being negotiated, a lawyer can advise a client about financial implications they may want to consider. For instance, it may be better for some ex-spouses to let certain assets go to avoid being saddled with taxes and other expenses. With a high-asset divorce, the division of marital assets and property becomes even more important. Legal counsel could help a client fight for a fair settlement.