4 financial missteps Minnesota spouses should beware of during divorce
Divorcing spouses in Minnesota should take care to avoid common mistakes involving retirement assets, taxes, legal costs and disadvantageous settlements.
For most people getting divorced in Lakeville, maintaining financial stability after the separation is finalized poses a significant concern. Divorce can be costly, and living off one income afterward can also be challenging. Unfortunately, many people may unwittingly exacerbate these issues by making preventable financial mistakes during their divorces. It’s important for spouses in Minnesota to be familiar with some of these common missteps as well as strategies for avoiding them.
1. Overlooking tax consequences
According to The Wall Street Journal, many spouses forget to consider divorce tax issues when dividing property. Spouses often look only at the current or projected value of an asset, without assessing how future tax liability may decrease that value. After taxes are factored in, the worth of stocks or retirement savings vehicles with apparently similar values may vary greatly. Therefore, when valuating these assets, spouses should always remember to factor in any capital gains taxes or withdrawal penalties that will be assessed in the future.
2. Dividing retirement funds incorrectly
The improper division of retirement funds is also a common mistake during divorce. According to Forbes, spouses should be careful to avoid the following missteps when considering these valuable assets:
• Assuming that they are not entitled to any of the other spouse’s retirement assets. In reality, retirement funds that accumulated during marriage are in most cases considered marital property that belongs to both spouses.
• Dividing retirement assets without a Qualified Domestic Relations Order. Some assets, such as pension plans, cannot be divided with a divorce decree alone. Instead, spouses must obtain a special legal document that orders the pension plan administrator to pay the stipulated share of benefits to the non-employee spouse.
• Trusting that the pension plan administrator will accept the QDRO. A QDRO may be rejected on various grounds. Consequently, spouses should always submit the QDRO and confirm its approval before the divorce is over.
Spouses should remember that the issue of property division can’t be revisited after a divorce is finalized. Therefore, spouses should take care to ensure that no retirement assets have been forgotten or incorrectly divided.
3. Creating unnecessary expenses
The Wall Street Journal states that spouses may directly harm their own financial prospects by taking an overly aggressive or combative approach to divorce. Spouses should be ready to protect their rights and seek an appropriate settlement. However, spouses should not use divorce as an opportunity to seek revenge or enter into further conflict. Spouses should bear in mind that a prolonged, high-conflict divorce is more likely to financially hurt their own interests.
4. Not seeking a fair settlement
According to Forbes, spouses may also suffer financially if they fail to understand their state’s laws and pursue what they are entitled to under those laws. People in Minnesota, for example, might not be aware that all marital property is subject to equitable distribution between spouses. This means that spouses may be entitled to an award of more than half of their marital property based on various factors, such as personal age, health, employability and financial needs.
To reduce the risk of mistakes based on limited legal knowledge, spouses may benefit from seeking the assistance of a family law attorney. An attorney may be able to offer advice on relevant state laws, the feasibility of a spouse’s goals and potential strategies for securing a more financially favorable settlement.