Every divorce involves some amount of stress for both parties. Of the different stressors, finances are one of the most common and severe for divorcing couples. As you head towards divorce, there are various moves you can make to help ease the financial burden.
Understanding the impact of your financial decisions can help you avoid potential mistakes.
Assess the consequences of accessing your retirement account
When you divorce with a retirement account, your ex may have a right to part of your account. If you are under 59 and a half, you may receive a penalty for accessing the account early. To access your accounts without a penalty, you need to have a qualified domestic relations order. When approved, the court sends the QDRO to your retirement plan administrator.
Discuss different solutions for dividing the family home
You have a few different options when it comes to the family home. You and your spouse could sell the house and split the proceeds or you or your spouse can remain in the home. However, if one of you decides to keep it, the person must be able to afford it alone. The one who stays will have to refinance the loan and qualify for it alone.
If you think you may sell the home later, you may not want to do it as a single person. Married people have a higher tax exclusion than single people.
When it comes to dividing your finances, make sure that you consider the different values of your assets and how those assets may change over time.