When a Massachusetts couple decide to split, the emotional toll on each party can be overwhelming. However, the effects of poor financial decisions made during the divorce process can be equally as daunting. To prevent a future lifestyle that no one envisioned, a divorcing couple would be wise to carefully consider their options in several financial areas, particularly if their finances are closely intertwined.
For most couples, the family home is one of the most significant assets for which they need to make financial decisions. Either individual may be tempted to stay in the home rather than make another major change during what is already a time of upheaval. As well, the house may be offered in exchange for liquid assets of comparable value – for example, a retirement fund. However, keeping the house is not always a wise decision, according to financial experts, as one will likely find the costs involved in maintaining a house difficult in light of the drop in overall household income.
Financial experts offer several other tips for making wise decisions during the divorce process. Individuals should consider the tax implications for various financial accounts; for example, a withdrawal from a 401(k) account incurs tax, while taking money from a checking account does not. As well, if one of the involved parties wishes to access his or her share of a 401(k), a qualified domestic relations order (QDRO) will allow them to avoid the early withdrawal penalty as well as immediate tax consequences. Finally, experts advise individuals who rely heavily on spousal or child support to obtain a life insurance policy on their ex-spouse to protect themselves against a potential loss of that income.
A divorce is typically a time of significant lifestyle upheaval, often accompanied by incredible emotional strain. Many divorcing Massachusetts residents have a lot of factors to consider, but they can help to avoid a financial mess later by carefully thinking about their financial decisions during the process. An experienced Massachusetts family law attorney can assist divorcing individuals in navigating this difficult time by providing knowledgeable legal counsel.