Three Financial Concerns to Be Aware of in Your Illinois Divorce

 Posted on February 28, 2022 in Divorce

Often, the emotional and personal fallout caused by the split gets the lion’s share of attention during divorce. However, divorcing spouses must also consider the financial consequences of the split. Divorce can dramatically impact your personal finances. Furthermore, mistakes during the process can lead to avoidable financial losses and extra stress for both parties. If you are getting divorced, make sure you consider the following financial concerns.

Marital Debt Can Haunt Spouses Long After the Split

When you get divorced, you and your spouse will need to address your shared property as well as your shared debts. Per Illinois’s equitable distribution laws, most debts accumulated by either spouse during the marriage are marital debts for which both parties are responsible. Those financial obligations do not terminate when the couple divorces. Spouses who divide joint debt between each other may still be pursued by creditors if the other spouse fails to make his or her payments on time – even after the divorce is finalized. This is why many financial experts encourage divorcing spouses to pay off debts during the divorce by selling other assets.

Taxes Can Heavily Influence Property Division

Spouses must consider the tax consequences of their financial decisions during divorce. There may be tax-related advantages and disadvantages associated with different property division arrangements. Most property transfers during divorce are non-taxable events, however, this is not always the case. Receiving $20,000 from a checking account during the divorce and receiving $20,000 from a retirement account do not have the same tax consequences. The spouse who received the retirement funds may need to pay income tax on the distributions he or she received. There may also be penalties associated with accessing the retirement funds early.

Retirement Accounts Are Often Considered Marital Assets

Retirement assets are an especially crucial component of a divorce, especially if spouses are nearing retirement age. Retirement funds that a spouse earned during the marriage are marital property. This means that the other spouse is entitled to an equitable share of these funds. In some cases, it makes better financial sense to avoid dividing retirement funds between the spouses. Instead, retirement assets are assigned to one spouse while the other spouse receives assets of equal value. Spouses may also be able to use a qualified domestic relations order (QDRO) to instruct the plan administrator to split the funds between the spouses.

Contact a Rolling Meadows Divorce Attorney

Arlington Heights divorce lawyer Donald J. Cosley has represented spouses in a range of divorce and family law cases for over two decades. He can help you evaluate the financial advantages and disadvantages of different divorce strategies and help you take the appropriate action. Call our office at 847-253-3100 for a confidential consultation.

Source:

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm