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Common Property Division Mistakes

The division of assets and liabilities, also known is property division, is one of the most complex (and often, one of the most contentious) processes you'll go through in your divorce.

The outcome of your property division case can impact your finances for the rest of your life. Understanding common property division mistakes can help you avoid those pitfalls and set you up for success moving forward.

Failing to Think About Taxes

For many people, tax season is already one of the most dreaded times of the year—doubly so during a divorce. But how your property division case shakes out can significantly affect your taxes, so preparing for the post-divorce tax season is vital.

The marital home is often one of the biggest culprits of an unexpected tax hit. If you sell your house, you and your ex may have to pay a capital gains tax. You should consult your realtor to see if you need to worry about a capital gains tax.

If you choose to keep the home, you may end up paying an estate tax depending on how much property you own. If that's the case, think about whether you can realistically afford to pay for the estate tax by yourself post-divorce.

Not Accounting for Post-Divorce Expenses

Many divorcees underestimate how much money they'll need to shell out for various expenses post-divorce.

You'll may need to put a downpayment on a new house or apartment. You might have to refinance your car loan or even purchase a new vehicle. Then, there are all the furnishings and incidental expenses—new tools, cleaning supplies and other essential items, a mattress, furniture, etc.

If you have children, these costs will probably increase exponentially. You'll need a bigger house or apartment to host your kids, in addition to more of every essential items. You may also need to buy various items for your children (a computer for schoolwork, for example), and child support probably won't pay for all of that.

Post-divorce expenses can easily amount to thousands of dollars. It may be worth liquidating certain assets you have during the property division process to help pay for other costs during and after your divorce.

Not Understanding How Different Assets Are Valued

A thousand dollars' worth of stocks in an investment account is different than a thousand dollars in paper bills.

Consider bringing on a financial professional, like a certified public accountant (CPA) who specializes in asset valuation to help you figure out how much all of your assets are worth.

If you have to pay significant taxes on certain assets (like stocks) that have the potential to increase in value later down the line, for example, you may not want to liquidate those assets to pay for divorce-related expenses.

Talk with your accountant or a similar financial professional and figure out how much your assets will be worth in five or ten years. That can help you make better decisions when you're figuring out what to keep, and what to liquidate in the short-term.

Property division is one of the most complex divorce-related processes. Being proactive can help you set yourself up for financial stability later down the line and avoid making choices you regret during your divorce.

For help with your property division case, contact us online or via phone at (731) 256-0023.