One of the most common causes of divorce in the United States is finances. In fact, almost 40 percent of married or partnered couples say that money causes heavy stress in their relationships. While money problems can contribute to divorce, they can also be one of the reasons why unhappy couples stay together. The thought of going from a two-income household to a one-income household can be daunting, as can the thought of dividing up assets, property, and marital debt.

While divorce can result in some financial issues that an individual may need to adjust to, there are several areas where your financial situation may actually get a boost following a divorce. If you are considering a divorce but are concerned about how you will be financially impacted, a Kane County divorce attorney can help.

Financial Independence

Financial planning is always a smart decision, but during a divorce, financial planning can become critical. Developing a financial plan can become an extremely important piece of ensuring your financial health after the divorce. You have likely heard of the old adage that “knowledge is power,” but that is especially true when it comes to a divorce. 

Understanding the “In Spouse” and “Out Spouse”

In many cohabiting couples, there is usually a spouse who is more financially savvy and knowledgeable about the household’s finances than the other. This spouse is typically referred to as the “in spouse” because they are the ones who are in the financial loop. The other spouse, referred to as the “out spouse,” usually has little to no knowledge of how the household’s finances are handled. The “in spouse” may handle every aspect of the finances, such as paying the bills every month, keeping track of bank accounts, making investments, and creating and maintaining a budget. Naturally, the “in spouse” would have a bit of an advantage over the “out spouse,” who has not really been involved in the monetary aspect of the divorce. In some cases, the “in spouse” may be controlling or secretive about the family’s finances, making it difficult for the “out spouse” to get an accurate understanding of what they are working with. 

There are two things that people are usually the most concerned about when they get divorced: their money and their kids. If you or your spouse has filed for divorce, a lot of time and effort may be spent worrying about finances during your divorce proceedings -- but that does not stop mistakes from happening. The money decisions you make throughout the legal process of ending your marriage not only affect the outcome of the divorce, but they can also affect the rest of your life. Here are a few common financial mistakes that are easy to make during your divorce and how you can avoid them:

Not Understanding the Difference Between Marital and Non-Marital Property

One of the first things you must do in your divorce is to determine what assets are and are not subject to division. In the state of Illinois, certain property is considered to be non-marital property, which is typically not divided in a divorce. These can be items or assets that you or your spouse each bought or received as gifts before your wedding. 

As much as marriage is an emotional and cultural bond, it is also very much a legal and financial partnership. When you are married, as far as the state of Illinois is concerned, what is yours is also your spouse’s, and vice versa. Although keeping finances completely separate is not impossible during a marriage, it is somewhat rare. When you get a divorce, untangling your finances can be a huge headache for both you and your spouse. For some people, divorce can even be the beginning of financial downfall -- but it does not have to be. Below are a few tips you can follow to help yourself maintain a sense of financial stability during and after your Illinois divorce.

Create a Post-Divorce Budget and Manage Your Expenses

One of the first things you should do is create a rudimentary budget to use after your divorce. If you are still early in the divorce process, you may not know exactly what all of your expenses or income will be after your divorce, but you do know that you should expect some changes. Keep in mind that you will have to budget for one income only, and you will probably have to determine new living expenses. This is also a good time to look at your spending habits and see where you can cut back. 

Getting a divorce turns your entire life upside down. The asset division process can prove to be especially cumbersome for some couples, as it requires you to take every single asset and debt into consideration when making decisions. Most couples argue over the house, bank accounts, and vehicles. While these high-value assets are important, it is also important not to overlook one of your most important assets -- retirement funds. It is easy to forget about retirement when it is 15 or 20 years away, but planning for it now can save you a big headache in the future. When it comes to retirement plans, one of the most important tools in your toolbox is a QDRO, which is a commonly used acronym for a qualified domestic relations order. QDROs can be extremely beneficial when divvying up retirement plans during a divorce and can take some of the uncertainty out of your future. What Is a QDRO? In the state of Illinois, all pension benefits, including individual retirement accounts (IRA’s) and defined contribution plans and accounts, are presumed to be marital property and must be divided in “just proportions.” This is where a QDRO comes in. A QDRO is a legal document that designates an alternate payee’s right to receive all or a portion of the benefits held in certain types of retirement accounts. What Is Included in a QDRO?

QDRO’s are just as legally enforceable as an order for alimony or child support and must be approved by the court. Basically, a QDRO will allow both payees to draw from the retirement plan when the time comes. Most of the time, the named payees will be both spouses, but in certain situations, the alternate payee can be a child or another dependant. For a QDRO to be valid, it must contain:

• The plan owner’s name and mailing address;
• The alternate payee’s name and mailing address;
• The percentage of the plan that will be going to the alternate payee;
• How that percentage will be determined;
• The number of payments included in the order; and
• How those payments will be made to each payee.

Consult with a Kendall County Asset Division Attorney Today