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Tips to avoid financial mistakes during divorce

When Florida couples get a divorce, one party may pay alimony and child support to the other. They also need to divide property. However, there are a number of common financial mistakes people make at this time. For example, a recipient of alimony and child support might want to consider getting an insurance policy on the ex-spouse. This will provide protection against the loss of that income in the event of the payer's death.

Another thing to keep in mind is that when calculating the value of a 401(k) against an asset such as a checking account, the 401(k) incurs a tax penalty for withdrawals. This should be considered when deciding how these assets will be divided. People should also be aware that they will need a document known as a qualified domestic relations order to divide a 401(k) without a penalty. The money that is distributed from it must then be rolled over into an individual retirement account.

Keeping the family home can also be a financial error. People may calculate its worth as equal to a more liquid asset such as a brokerage or retirement account. However, in doing so, they might forget to account for the cost of maintenance. Furthermore, a person might struggle to maintain the home on a single income.

These financial matters are all things that should be taken into account during property division even if a person still makes the same final decision. For example, there may be other reasons to keep the family home including maintaining stability for children. However, it is important for a person to fully understand the financial implications of any decision made during divorce particularly since standards of living often drop after a divorce. An attorney might be able to help a client weigh the different factors during negotiations about division of assets.

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