When couples in Pennsylvania make the decision to divorce, there can be serious, immediate financial concerns that follow. However, the financial impacts of divorce are not only those that occur immediately after the end of a marriage. It can be particularly important to handle important matters relating to retirement funds, life insurance policies and other accounts with beneficiaries.
Dividing a 401(k) or a pension plan in a divorce can be costly for couples in Pennsylvania if they do not get a court order known as a qualified domestic relations order. With a QDRO, it is possible to make distributions from this type of retirement plan without having to pay penalties and taxes.
Pennsylvania couples who are getting a divorce may need to divide assets and debts, and for some, bitcoins may be among the assets. The currency has increased in value and become better-known in the process, and it might increasingly feature in divorce cases.
When people in Pennsylvania get a divorce after 10 or more years of marriage, a lower-earning spouse may be eligible to draw Social Security benefits based on the earnings of the higher-earning spouse. A former spouse who receives these benefits will lose them upon remarriage. In some cases, if that marriage ends in death or divorce, the person might be able to resume receiving the benefits.
In most states around the country, including Pennsylvania, divorce rates are decreasing with every age group except those over 50. In fact, one in four couples over 50 will go through what many call a gray divorce, and this age group has experienced a staggering 50 percent increase in divorce rates over the last 20 years. Often, these individuals are retired and have their own unique set of financial consequences of divorce to deal with.
Getting divorced can result in individuals having to rebuild their finances from scratch. However, there are some steps Pennsylvania residents can take to lessen the negative impact divorce can have on their financial future.
Pennsylvania couples who are getting divorced should be aware that making wrong decisions about how to divide retirement assets can be very costly in the long run. Legal and accounting professionals spend a lot of time rectifying the mistakes made by divorcing couples who mishandle their retirement accounts. It is important a legal agreement is in place to avoid having to pay a high tax bill or ending up with no retirement funds at all.
A divorce in Pennsylvania may become more contentious and complicated if one spouse believes the other is hiding assets. This was the case with a 61-year-old woman who was divorcing her spouse of 25 years. The woman had been the main support for a decade, but her husband wanted both the home and half of her 401(k) in the divorce. The woman also said that he was sharing financial information with her sister but not with her and her attorney.
Some people in Pennsylvania might wonder whether a spouse who does something unusual financially might be considering filing for divorce. One husband and wife sold their home and got $90,000 from it. They also both lost their jobs and got around $40,000 each. Without telling her husband, the woman opened an account in her name and put money from the house and from her job into it. The husband demanded that she put the money back into a joint account or add him to the account, but she did not.
Pennsylvania couples facing divorce should avoid a few common financial errors. One of those mistakes is not taking out a life insurance policy on an ex-spouse who is paying child or spousal support. This insurance can protect against loss of income in the event of the ex-spouse's death.