Offices in San Francisco and Santa Rosa CA

415.439.8811

Divorce Financial Planning With A Certified Divorce Financial Analyst

Common Financial Mistakes Made in a Divorce

     

1. Thinking short term
You will have to make financial decisions that will last a lifetime.  These need to be made during
a period of extreme stress and emotion.  You owe it to yourself and your family to look at the
long term impact of different proposals over 5, 10, or even 30 years.  
       
2.  Tax implications of spousal support  

The tax law changed in 2018 and spousal support is no longer tax deductible by the payor or 

taxable income to the recipient as of 2019.  If you have a pre-2019 divorce agreement and are

receiving spousal support, it is important to check with your accountant to determine if you need

to make estimated tax payments.  As of early 2019, California has not conformed with Federal law

and spousal support is still deductible to the payor and taxable income to the recipient.    

 

3.  Social Security
You may be entitled to a portion of your ex-spouse's Social Security benefits if you were
married 10 years or longer.
 

4.  Retirement plan withdrawals

You may be able to withdraw money from an ERISA qualified retirement plan that's been

transferred to you without the 10% premature withdrawal penalty if you are younger than
age 59 1/2.  Check with your accountant to see if IRS Rule 72(t)(2)(C) applies to your situation.
 

5.  Qualified Domestic Relations Order
A QDRO is required to split assets from an ERISA qualified retirement plan such as a 401(k).  

Not all plans allow this and it is critical that your QDRO is drafted properly.


6.  Not all assets are equal

A savings account is not the same as a brokerage or retirement account.  A brokerage account 

may have unrealized gains or losses and a retirement account, other than a Roth, is pre-tax.


7.  Not getting help if needed

Often people think their situation is simple and they can do it themselves.  That may be so

but often they encounter questions about the paperwork, timing, division of property,

support, timeshare and a parenting plan, separate property, etc.  Divorce is a legal process 

and many attorneys offer hourly consultations as do many financial and mental health

professionals.  
 


              

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