Divorce may be a stressful process, but people in Arizona can make it somewhat less difficult by avoiding some common financial mistakes. One of the best ways to do this is to make a financial plan. This can be done with the assistance of a financial professional.
A common error is overspending during or after the divorce. While buying new things is temporarily satisfying, the bills will still have to be paid. Another mistake is selling assets to pay for bills without accounting for the fact that the sale could incur taxes.
There could be taxes associated with dividing some assets. For a 401(k), a document called a qualified domestic relations order is needed, and the distribution should be rolled into an IRA. This will prevent having to pay taxes and penalties on the distribution. People should also keep the cost associated with assets in mind such as whether they can afford the mortgage on the marital home.
If one person is likely to need to pay alimony, it is important to keep in mind that if the divorce is finalized after the end of 2018, those payments will not be tax-deductible. The person who receives the payments will not be required to pay taxes on them. Some people will go to great lengths to avoid paying alimony, including quitting their job, which is also a mistake.
The process of negotiating property division and other elements of divorce can be stressful, but going into it prepared may help. A divorcing spouse may want to talk to their attorney about their financial goals and the points on which they are and are not willing to compromise. If there are children, parents will need to agree on custody, visitation and child support as well. If people are unable to reach an agreement through negotiation, they will have to go to litigation.