Divorce Lawyers Tips:
Five Mistakes to Avoid When Getting a Divorce (Part 2)
Making the decision to file for divorce is extremely stressful and complicated. Generally speaking, the factors that lead to the divorce are emotionally charged, and it is easy to succumb to your feelings when making decisions that have long lasting ramifications.
This two part article highlights five common mistakes people make in the process of divorcing a spouse.
CLICK HERE for PART 1 of Mistakes to Avoid During Divorce
#4. Ignoring the Tax Consequences of Divorce
Tax Consequences of Investments
The change in value over time of investments, property, retirement accounts and other assets may trigger different tax treatments, which can dramatically affect how much they’re worth in the future.
For example, a Roth IRA’s value is higher than a traditional IRA with the same balance, because taxes are paid up front with Roth IRAs. Traditional IRAs are taxed at the point of withdrawal. Similarly, if stock or another investment has significantly increased in value, additional taxes may result that would reduce the investment’s ultimate value.
Tax Consequences of Selling a Home
And then there is the family home. Married couples can exclude up to $500,000 of profits from the sale of a home from their taxes; however, a single person can only avoid tax on $250,000. It is therefore important in your negotiations to consider carefully the long-term picture, including the potential future, after-tax value of any assets.
2019 Tax Reforms Affect Spousal Support
In the past, alimony, or spousal support, used to be taxable to the recipient, and tax-deductible to the person who paid it. As a result of the 2019 tax reforms, that is no longer the case. Divorce agreements made this year reflect the new law: recipients no longer owe taxes on spousal support, and those who pay it can no longer deduct it. These changes have made spousal support agreements more difficult to negotiate.
#5. Assuming Battling in Divorce Court is Necessary
A common misconception about divorce is that issues must always be battled out in divorce court before a judge. However, there may be a better solution for resolving disputes. One such option is mediation. Mediation is an alternative dispute resolution process that takes place in front of a neutral third party to help formulate an agreement.
During mediation proceedings, each spouse may be represented by an attorney who is trained in the collaborative process. The goal of a medication is to negotiate a settlement that is fair to both parties. In addition to being far less contentious, mediation can save quite a bit of money compared with the cost of litigation in a traditional divorce proceeding.
Of course, mediation works best when there is level of cooperation and transparency, especially in terms of finances. However, the benefits of mediation may still be an option even when the relationship is more antagonistic. This is because the benefits of avoiding expensive litigation may be attractive even in contentious situations.
Both parties may agree on at least one thing – that avoiding expensive adversarial court proceedings as much as possible through meditation makes far better financial sense.
CLICK HERE to Read More About Divorce Mediation
Attorneys Can Help You Avoid Mistakes When Getting a Divorce
The process of divorce is extremely complicated. As you can see from just these few examples, the consequences of a bad or uninformed decision can be devastating – and negatively affect your life for years to come. But knowing your legal rights, and obtaining sound legal advice from an experienced Michigan divorce attorney, can help you avoid costly mistakes.
Starla Zehr is an experienced Michigan family law attorney. She is happy to consult with you, and can help you make wise decisions that will put you in a good position to start your new life on a strong emotional and financial footing.