Common Financial Mistakes in Divorce

Common financial mistakes to avoid when going through a divorce include:

  • Not communicating with your spouse.woman black hair MP900401857
  • Not knowing what your after tax cash flow will be after paying/receiving alimony and child support.
  • Not recognizing that most retirement plans are pre-tax money and should not be counted the same as other post-tax assets
  • Not getting QDROs completed correctly and submitted to the Plan Administrator. Particularly important with PERA since they are due 90 days after the date of your divorce decree.
  • Excessive front loading of maintenance can mean a loss of tax deduction.
  • Not understanding the tax link between child support and maintenance which can mean loss of tax deduction if the IRS believes you have claimed payments to be alimony instead of child support.
  • Not obtaining life insurance to cover maintenance and child support obligations.
  • Not re-establishing yourself with the life insurance company as beneficiary on life insurance (or having it stated clearly in your separation agreement) since there is an automatic revocation of former spouse as beneficiary under Colorado Law.
  • Not considering the tax basis in property, including real estate and investment accounts.
  • Not getting credit for carry forwards on tax returns.
  • Not understanding the complexities of military and government pensions.

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