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Divorce 401(k) division mistakes you should avoid

When you are getting divorced, your focus may be drawn to your largest and most significant assets. You might be very concerned about what will happen with this property in the divorce, and what this will mean for your future.

For many divorcing couples, retirement accounts number among their largest assets. There are many different types of retirement accounts out there. One very common variety is the 401(k) workplace retirement plan. So, many divorces here in Pennsylvania involve property division issues related to these retirement assets. When 401(k) plans are among the marital assets in your divorce, what happens related to the division of such accounts can have lasting impacts. So, avoiding common mistakes when it comes to 401(k) division can be very important when you are going through a divorce. Here are examples of some mistakes to steer clear of.

How does the new tax law affect my spousal support payments?

If you are a divorced Pennsylvania resident who pays or receives spousal support, you should know how the Tax Cuts and Jobs Act passed by Congress late last year and signed into law by President Trump on Dec. 22, 2017, affects your payments. As Market Watch explains, this new law eliminated the alimony deduction, a staple of divorce negotiations since the World War II era.

Under the old law, if you paid alimony; i.e., spousal support, to your ex-spouse, you could deduct the amount of these payments from your federal income taxes. If you received alimony, you had to declare it as income on your federal income tax return and pay taxes on it. Under the new law, both of these situations are now just the opposite.

Custody for dads in Pennsylvania

Among the many societal shifts in recent decades that have occurred include the increasing role of fathers in their children's lives. Many dads in Pennsylvania today might indicate that they are more active in their kids' daily lives than their own fathers were with them when they were children. This positive change has opened the door to some change when it comes to assigning custody of children in a divorce.

The Pennsylvania General Assembly indicates that an award made by a court for the custody of one or more children in a divorce case should not factor in the gender of either parent. Instead the focus should be on which parent may provide the best environment for the children in question regardless of whether that parent is male or female. In some cases, this may result in an award for joint custody.

What expenses are not factored into child support?

Child support payments are a primary concern for divorcing parents as the income used to maintain one household will now be used to finance two homes. Child support is a source of income for many families; the funds are used to pay for basic necessities such as food and clothing. However, child support is meant to cover a broad range of expenses not necessarily factored in to the basic calculation.


Pet custody during a divorce

If you and your spouse have pets, you are like most families in America. Dogs and cats are the most common type of pets that people have and, especially when it comes to dogs humans tend to develop very strong ties to these animals. When you are faced with a divorce that means you could also be faced with the prospect of losing your beloved pet. Just how is pet custody handled in a divorce?

As explained by Forbes, in most divorce proceedings a dog is treated like any other asset or piece of property. When making the decision about where the dog will live after a marital split, a few things can and should come into play. One factor to consider is what is truly in the best interest of the dog. If one person works long hours and maybe even travels frequently for work while the other has a more steady routine and is home more of the time, that may well direct your decision.

Paying alimony with 401K account funds

The financial impact of a divorce is one that may be felt in many way by people in Pennsylvania. Every day life gets more expensive as all of a sudden the same income has to support two homes instead of just one. On top of that, one spouse might be required to pay alimony to the other. 

Some people have had to resort to using their retirement money in order to satisfy spousal support awards. As explained by the United States Department of Labor, this can be done legally with the use of a qualified domestic relations order. The QDRO allows the spouse who does not own the 401K account to be identified as an alternate payee on the account. Once this is established, that person may be paid directly from the funds.

Spousal support to undergo tax change

Dividing assets and debts when getting divorced can be one of the hardest parts of coming to an agreement during a divorce for couples in Pennsylvania. This is in part related to how hard it can be to part with hard-earned assets but it may also be challenging as the decisions made may have serious tax implications for one or both parties. When it comes to evaluating the possibility of one person making spousal support payments to the other, these tax implications are about to change dramatically.

As explained by the Internal Revenue Service, under the current tax law, a person who receives alimony payments must claim the money as income on their tax return and then pay federal income tax on that money. The person who makes alimony payments is able to deduct the money paid from their taxable income.

Does mediation help with asset division?

When Pennsylvanian couples decide to split up, Palange, Endres & Marks, P.C., is here to help you through the legal hassles associated with divorce. One area of possible contention is asset division. In scenarios like that, it helps to have professionals on your side.

A divorcing couple will always have a chance to figure out their own asset division first. However, it can be hard to come to an agreement regarding equitable assets when you don't feel as though you're on negotiating terms with one another. This is where legal assistance can come in handy, such as mediators. A mediator exists to help you both reach an agreement that everyone is able to find fair and amenable. This is especially useful for couples who have a lot of high value assets.

Reasons to consult an attorney in an uncontested divorce

Not all divorces are full of contention and spite. You and your soon-to-be-ex may have mutually agreed not to stay together, or you might decide to cooperate long enough to get the divorce over with and move on with your lives. If this is the case, then an uncontested divorce option like mediation or collaborative law might be ideal for you. Even so, our team at Palange & Endres, P.C., knows that amicable divorces in Pennsylvania are not always without complications, which is why it may be beneficial to have an attorney.

An uncontested divorce can come with numerous benefits you would not likely encounter if you took your disputes to court. For example, states the American Bar Association, mediation or collaboration keeps your issues private, rather than a matter of public record. There is less chance of conflict and contention when you resolve issues outside the courtroom. You and your spouse may learn ways to communicate and cooperate with each other, which can be helpful if you have children. Uncontested divorce is also usually more affordable and less time-consuming than litigation.

Can you live off of your alimony payments?

As half of a divorcing Pennsylvanian couple, you may have some questions about alimony payments. Just how long do these payments last? How much money will you be receiving? Will you be able to securely live off of it?

The Legal Dictionary states that alimony payments aim to eliminate the possibility of one spouse financially suffering because of the decision to divorce. Essentially, these payments act as a crutch during a "rehabilitative period". After a divorce, you're busy trying to get back on your feet and readjust to life with only one source of income. Perhaps you're even aiming to become employed for the first time since you got married. Alimony payments are there to ensure that you won't be left without any financial safety net.

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