Monday, January 25, 2016
Getting divorced has a significant impact on your finances — and some missteps can make it even more costly.
Divorce is an issue plenty of Americans will find themselves navigating. In 2014, divorces and annulments occurred at a rate of 3.2 per 1,000 people, according to provisional data from the Centers for Disease Control. At least anecdotally, lawyers say, the number of filings and proceedings initiated tends to pick up in January — leading to the nickname Divorce Month.
"We definitely see an uptick," said Joslin Davis, president of the American Academy of Matrimonial Lawyers. "People just really don't want to do anything during the holidays — for emotional reasons, primarily." The new year seems like the ideal time for a fresh start, she said.
As much as you might want to get the process over with as soon as possible, moving quickly through a divorce can be a mistake. Take time to consult with a financial advisor and accountant, as well as your attorney.
"There are a lot of financial 'gotcha' nuances that people aren't aware of, because they aren't your day-to-day," said certified public accountant Tracy Stewart, a member of the American Institute of Certified Public Accountants' personal financial planning executive committee.
"Everything matters in a divorce," she said. "Pay attention."
Moves made without due consideration could mean you give up more than you need to or don't get your fair share. Worse, some aren't fixable, or they initiate a domino effect of problems — like an acquaintance of Stewart's who (without asking for professional advice first) dipped into his IRA early to pay off joint debt during his divorce. Not only did that affect his retirement prospects, but it also more immediately triggered penalties and a taxable-income increase that phased him out of valuable deductions.
Read more here.