Illinois couples who are getting a divorce should be aware of several common mistakes people make when it comes to property division. For many, one of those is keeping the family home. People often underestimate the expense of the upkeep that will be required on a single income.
Keeping the home can also be a mistake when it is in exchange for another asset. For example, a couple might have a brokerage or retirement account that has the same worth as the house, so this may seem like a fair split. However, this does not take into account that the liquid assets will not have the maintenance costs of a home.
There are potential pitfalls with more liquid assets as well. If a 401(k) is going to be divided, a document known as a qualified domestic relations order must be created so that the funds can be removed without a tax penalty. A couple may decide to avoid this and have one keep the retirement account while the other takes the bank account of equal value, but this puts the person with the retirement account at a disadvantage. The person may be taxed and penalized for an early withdrawal.
There are a number of reasons people may make financial errors in a divorce besides a lack of knowledge about the implications of a decision. For example, some people may be trying to rush through the divorce because of feeling guilty or upset and might agree to the other person’s unreasonable demands in order to get it over with quickly. Making a plan ahead of time with an attorney may help a person better navigate negotiations.