Tax & Financial Impacts of Divorce: 10 Mistakes to Avoid

Divorce is something no one hopes will happen to them when they get married. Unfortunately, almost half of all marriages end in divorce. Since few people have pre-nuptial agreements, most divorces involve often bitter tangles over children, money, and assets. When it comes to the tax and financial implications of divorce, often your divorce attorney is not the only one you should rely on for advice.

I have found ten very common mistakes that people make in the divorce process. A tax or financial pro can help you avoid them.

1. Don't let emotions guide you in determining the divorce settlement. Divorce is about a lot of things, but is caused mainly by emotional issues or financial problems in the marriage. You may love or hate your soon-to-be ex, but you cannot rely on your "gut" feelings that they will do right by you or the children. You must make the settlement using reason and planning for the unexpected. He or she may want to pay a large alimony and a small amount in child support by telling you they want to see you are "taken care of." That may result in less tax for them, a lot more taxes for you and destitute children should you die before they reach 18. Financial planning is critical.

2. Get a good family law attorney, but don't forget to hire a financial professional to assist in evaluating assets and financial strategies. It may cost extra fees, but it will result in a far better settlement for you in most cases. A Certified Public Accountant (CPA), Certified Financial Planner (CFP), or an Enrolled Agent (EA) can be of invaluable help. What is the house really worth? If a business is involved, what are the consequences of its disposition or the true value of it in the divorce settlement? Your spouse might tell you their business is losing money or has no assets; you need to know the truth!

3. Getting the house in the divorce is not always a good deal. Women often want the house in the divorce because they are raising a family in it or have decorated it and are emotionally attached to the property. If it has a mortgage attached to it, think long and hard about the house. It might be better to sell it and split the equity. If you aren't working and are raising kids, do you really want a big mortgage payment?

4. Failing to fight for the most child support you can get! Large alimony and low child support payments are generally not a good deal to the spouse getting the payments. Alimony is tax deductible to the party paying but taxable to the party who receives it. A large payment is a large tax deduction for one party and a big tax burden to the person getting it. Child support is tax free to the recipient and not deductible to the payer. Also, alimony may terminate upon marriage or death, but Child Support continues until the child reaches 18.

5. Failure to specify who can claim the kids on the tax return. The divorce should specify who will be entitled to claim the children. Also, Form 8332 Release of Claim may need to be filed with IRS in some circumstances.

6. Lack of planning with regard to life insurance. Life insurance should be reviewed in the event of divorce. You may want to take your ex off of your policy as beneficiary, but do you really want to make your children beneficiaries? Unless they are over 18, this can be a big mistake as the funds may go to a trustee until the kids reach majority. Consult with your attorney on how to style your life insurance to best provide for the kids. If you are the person getting alimony or child support, it is a very good idea to carry a life insurance policy on your ex in the event of death. Otherwise the money stops coming and you may end up homeless.

7. No income modeling done in the calculation of alimony. Your spouse may be a corporate executive and have great future earning potential. He or she may have stock options. An income model should be made to determine the potential they have and how it can affect your claim in the divorce.

8. Failure to secure a Qualified Domestic Relations Order (Quadro) in the event of a 401K or other tax impacted investment that is divided in the divorce. If you don't do the right thing, huge tax penalties can be imposed on taking money out of IRAs, 401Ks, or Annuities. A good family law attorney can help with this but your Uncle Joe who handles bad check defense may not be the guy you want to do your divorce. He or she may not be familiar with a Quadro.

9. Failure to have assets professionally appraised. If you have rent houses, oil and gas investments, etc. Get a professional valuation or you may be cheated in the divorce settlement. The spouse who handles these investments may not be honest with you on the values. Just because he or she loves the kids or was married to you for thirty years does not mean you can trust them.

10. Lack of faith in yourself and your future. Divorce is bad but it is not the end of the world! You may have some tough times but your life will go on and it may be a blessed life. You don't know what tomorrow brings. It may bring love and happiness. You must have faith in yourself so that you can take care of the kids and be successful in whatever you choose to do. Money is not everything, but if you don't have faith in God and yourself, you won't be financially successful.

Well that is my list and it is my prayer that it has helped you in some way. Be strong and be forceful. Don't get walked on!

J.R. Coleman, E.A., A.T.A.

James Robert Coleman, E.A., A.T.A.
Enrolled Agent & Accredited Tax Advisor
Member: National Association of Enrolled Agents
Former IRS Revenue Officer, GS-11

In The News:

Huffington Post

Divorce standoff at million-dollar home ends
LAKEVIEW, Texas — A bizarre months-long standoff in an upscale Texas subdivision is finally over. Sharafat Khan, 69, had been camped out in his own front yard in Taylor Lake Shores since his wife kicked him out of the house about five months ago.
Man In Bitter Divorce Battle Sleeps On Front Lawn For Over 6 MonthsHuffington Post
Texas man accused of spousal abuse protests wife's divorce by camping out in ...New York Daily News
Bitter divorce leaves man stranded in the front yard of his million dollar homeKHOU -Click2Houston
all 100 news articles »

Hollywood Life

Josh Duggar 'Flipping Out' That Anna Considering Divorce: 'Begging Her Not To ...
Hollywood Life
“When Josh heard that Anna was contemplating divorce, he flipped out,” a source EXCLUSIVELY tells Since Anna moved out of her home with Josh, “they don't speak on a regular basis.” However, ever since this talk of divorce, “he's been ...
Anna and Josh Duggar Divorce Rumors: Anna's Family Advice Her to LeaveDispatch Times
Anna and Josh Duggar Divorce Rumors: Anna's Family Pushing Her to ForgetLedger Gazette
Anna Duggar reportedly considering divorcing Josh while '19 Kids and Counting ...ChristianToday
all 38 news articles »


German Archbishop Says The Catholic Church's Stance On Divorce Makes People ...
A German archbishop is calling on the Catholic Church to reconsider its practice of barring parishioners who have divorced and remarried from receiving communion, saying the practice makes people “doubt God.” According to the National Catholic Reporter ...

and more »

How to Keep Divorce Focused on the Needs of the Children
Huffington Post
Placing children first should be the primary goal of every divorce, but sometimes there is a real lack of guidance and knowledge for parents who are trying to navigate this challenging experience and make informed decisions. As a result, the American ...


Couples that thought they were divorced, still married thanks to fake divorce ...
Some people in New Jersey who think they're divorced might actually still be married, if they fell victim to a fake lawyer. Prosecutors say 29-year-old Anastasya Varvaryuk sold invalid divorce judgments and forged a judge's signature on them. She ...
Fake Divorce Attorney Accused of Handing Out Invalid Divorce Judgments: OfficialsNBC New York
Prosecutors: Elmwood Park, N.J. Woman Sold Fake Divorce PapersCBS Local
Bergen Woman Arrested For Selling Fraudulent Divorce Judgements:

all 7 news articles »

German archbishop: Church's stance on divorce makes people 'doubt God'
National Catholic Reporter
One of Germany's representatives at the worldwide meeting of Catholic prelates on family has pointedly told the gathering that church teaching preventing divorced and remarried persons from receiving the Eucharist makes people “doubt God.”.

Christian Post

Brad Pitt and Angelina Jolie Divorce Ultimatum Report Slammed Down
Christian Post
Divorce rumors are very common among Hollywood married couples. It's like every now and then, tabloids release headlines about celebrities ending their marriage. The latest to be hit by the divorce rumor plague are top couple Brad Pitt and Angelina ...
Brad Pitt's 'Divorce Ultimatum' To Angelina Jolie 'Completely Untrue': ReportInternational Business Times
Brad Pitt To Divorce Angelina Jolie If She Doesn't Go Into Rehab!Times Gazette
Brad Pitt Divorce Ultimatum To Angelina Jolie Being Too Skinny - "Get Help"Realty Today
Gossip Cop -Softpedia News -Food World News
all 70 news articles »


Nicole Kidman Talks Divorce After Keith Urban Breakup and Pregnancy Rumors
Nicole Kidman and her husband, country music superstar, Keith Urban have been plagued with a lot of rumors lately. Some tabloids will tell you that the couple are on the verge of breakup, while another might say that Kidman is pregnant in a desperate ...

and more »

Jay And Bey Divorce Rumors: End Of 'Sham Marriage' Reportedly Put On Hold To ...
If you live long enough, you'll likely hear about Jay and Bey divorce rumors. The latest celebrity gossip says Beyonce and Jay-Z are putting a hold on their "sham marriage" to prove the media wrong. Tipsters close to the couple say pride and egos are ...
Hollywood Divorces Explode!The National Enquirer

all 2 news articles »

Hollywood Life

Jennifer Garner & Ben Affleck Expecting Baby No. 4
Hollywood Life
The rumors are true — Ben Affleck and Jennifer Garner are expecting another child! Even though they're going through a divorce, Jen is pregnant for the fourth time, has EXCLUSIVELY learned. Will the baby save the marriage?
Ben & J.Lo Affair Amid Jennifer Garner Divorce? Reportedly, Exclusive 'Home
Ben Affleck and Jennifer Garner Looking to Sell Home for $45 MillionArchitectural Digest
Matt Damon Backs Jennifer Garner, Ben Affleck Divorce; Believes 'BVS' Star ...Parent Herald
Guardian Liberty Voice
all 47 news articles »
Google News

Divorce--How to Beat the System

Of course you want to get your Judgment--that's the goal... Read More

Divorce Roadmap: The Route Around the Legal System

Let's look at how a divorce case works so you... Read More

Five Christmas Survival Tips For The Divorced & Single Parent

For the over 50% of marriages that end in divorce,... Read More

How Thinking About An Uncontested Divorce Figures Into Your Decision About Divorce

An uncontested divorce is the most common type of divorce.... Read More

An In-Depth Look at Army Divorce Rates

Raleigh, NC-The largest divorce firm in the state, Rosen Law... Read More

Dating Tips for Divorced and Widowed Moms

Dating is tough for just about everybody, but it's even... Read More

Divorce Makes Us Stronger

My friends call me the "Divorce Poster Child".At the age... Read More

Top 5 To Dos Before Saying ?I Do?

1. DO allow yourself enough time to make one of... Read More

Anatomy of a Divorce: How it Really Works

The legal divorce vs. your real divorce The legal... Read More

5 Ways To Ensure You Will Have a Happy Life After Divorce

Life after divorce is something that most people who are... Read More

Seven Sets of Documents You Need For Your Divorce

Even if you believe your case will ultimately be agreed... Read More

How Can Collaborative Law Be Beneficial In Your Texas Divorce?

Collaborative law is based on the realization that the commitment... Read More

Surviving Divorce: What To Think About To Ensure Surviving Divorce

Surviving divorce can be a valid fear if you're contemplating... Read More

How To Protect Your Life Insurance Policy While Going Through A Divorce

Life insurance, more than most things you buy, relates to... Read More

Guide To Reducing The Cost Of Divorce

Seven Tips to help you keep more of your money... Read More

Divorce -Is It Lawful?

The question of divorce and its lawfulness is of long... Read More

Effects of Divorce on Children

When a couple decides their marriage is over, a tremendous... Read More


Being marriage means being fully committed to your husband as... Read More

Choosing Your Divorce Method

The biggest mistake that people make when getting divorced is... Read More

What Are You Waiting For?

So, you've decided that you're no longer "a couple", but... Read More

Divorce Online Sevice - Why Should We Lose Money And Time Applying For Divorce?

Attempts to use the worldwide Web as an effective means... Read More

10 Ways to Keep Divorce Lawyers From Ruining Your Life

Everyone has heard the story (from friends, co-workers, and family... Read More

Joint Bank Accounts and Divorce

Here are some useful tips on joint bank accounts and... Read More

Houston Divorce Lawyer - West Houston Attorney Answers Common Questions About Mediation

If you are reading this, then you are probably either... Read More

5 Things To Do Before You Even Think About Getting A Divorce

There are many steps to take to protect yourself in... Read More