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Avoid these common financial mistakes in an Illinois divorce

Divorce is a stressful time in a person's life and it can make a person not think very clearly when making decisions. However, going through a divorce forces people to make serious financial choices at a time when they might not be at their best. Many people make financial mistakes that come back to haunt them after divorce. People can avoid these mistakes by taking a few simple precautions.

Lacking information

In many families, it is not uncommon for one of the spouses to handle the family's finances. In such cases, it is easy for the spouse who deals with the money to take advantage of the other spouse's lack of knowledge about the extent of the family's assets to negotiate an unfair property settlement.

It is important for both spouses to have an accurate picture of all of the assets the family holds, such as:

  • Real estate
  • Retirement accounts and pensions
  • Stocks and bonds
  • Mutual funds
  • Art, antiques or other collectibles
  • Vehicles

People should also know how much debt the family carries and to whom they owe money. Furthermore, it is critical that each spouse know the family's total monthly income and expenses to determine whether a spouse is attempting to hide assets.

People should also understand the difference between marital and non-marital property, so they will have an idea of what will and will not be included in the property division. At the basic level, non-marital property is the property that each spouse had prior to the marriage and any gifts or inheritances that the spouse received during the marriage. However, determining what is and is not marital property can be complex. Appreciation in value of non-marital property can sometimes be marital property and sometimes spouses mingle marital and non-marital property.

Not budgeting

Many people are accustomed to living on two incomes, so the transition to living on one income can be difficult. It is imperative that people develop budgets and stick to them so that they do not dig themselves into financial holes after divorce. Those who are unused to dealing with financial matters should seek help in creating a budget.

People should plan what their monthly expenses will be after divorce and compare that with what their incomes will be - including all forms of income such as wages, spousal support, child support and interest from investments. People can then make adjustment to expenses if they exceed income.

Not planning for the long-term

Many people want to get the unpleasantness of divorce over as soon as possible. However, in their haste to finish the matter, they may agree to property divisions that jeopardize their financial futures. People should analyze the financial and tax implications of all of the assets involved in the property division. Additionally, people should understand the costs of keeping some assets - particularly houses. People may not be able to maintain the marital home on one income. Furthermore, a person should consider an asset's liquidity and his or her need for ready cash.

Finally, people need to not only consider their immediate financial needs when negotiating property divisions, but also plan for long-term needs after retirement.

Property division is a highly fact-sensitive process and outcomes vary based on each couple's circumstances. Those considering divorce should seek the assistance of an experienced family law attorney who can help ensure they get fair property settlements.

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