Divorce can be difficult for everyone involved. After you make the decision to divorce, you will want to be sure you will have the financial resources you need after completing the divorce process. During the divorce proceedings, you might be tempted to “rip it off like a Band-Aid” and get things over with as soon as possible. While this may seem like an easy strategy, it will not necessarily benefit you, and making decisions too quickly could result in significant financial difficulties in the future. Below are two important tips to keep in mind as you complete the process of dividing marital assets during your divorce.

Know the Liquidity of Your Assets

Liquid assets are assets that can be easily obtained and assessed, such as bank accounts, retirement funds, 401(k)s, etc. Other types of property, like a home or a car, are called illiquid assets, because while their value may be high, it can be a difficult process to sell that property at its actual cash value.

Marital property may be divided in a way in which one party receives liquid assets, while the other receives illiquid assets. However, for the party who received illiquid assets, such as the house, complications can arise. If the assets are tied up in the value of the house, they may struggle to pay expenses such as utility bills and property taxes. During the process of marital property division, it is important to make sure both parties have liquid assets, or else one party may need to sell their home in order to cover their basic living expenses.

Ending a marriage has the potential to make things a little tighter financially, at least for a little while. Trying to maintain the same lifestyle after a divorce can be more challenging, since the individual has only one income to draw from instead of two. Recent changes in tax law can also affect strategy for individuals during property division in divorce. Individuals in Illinois who are contemplating ending a marriage may also want to consider how their long-term retirement needs will be affected.

Households that have been through a divorce face a higher risk of being unable to maintain their current standard of living in retirement. The reason is simple: sharing household expenses makes life more affordable. However, careful planning and management of assets can aid individual households after divorce.

Divorces that are finalized after the new alimony rules take effect next year may see changes. Since the lower earning spouse may find him or herself in a much lower tax bracket due to not having to claim alimony as income, it may be to his or her advantage to receive investment assets rather than the marital home during the settlement of the divorce. These assets, if they come as traditional retirement assets, may be more easily converted into a Roth IRA that can offer additional tax benefits.

There are a number of matters to settle during a divorce. This time can also be challenging emotionally, and some people struggle to deal with the details of divorce and the feelings that come up. Luckily, experts are more than willing to share their best strategies for family law topics like property division, and individuals in Illinois are welcomed to review the tips to see how they fit into their own marital dissolution plans.

For some, tax issues will come up during and after the divorce. During a marriage, both assets and debts are shared, so any tax liabilities from returns filed jointly will be the responsibility of both spouses, even if one spouse did not earn income. The IRS does have a type of relief called "innocent spouse" relief, so if a person believes that he or she should not be responsible for a tax debt, he or she can choose to file for this relief.

Having a team can help a person settle other matters of the divorce as well, and can encourage the person to ask the right questions and gather the proper information. Some people, once they become overwhelmed, feel tempted to go for the first offer during a divorce. However, this could let them lose out on assets and property that they deserve.

Going through a divorce is hard for anyone. Especially in cases where you and your spouse can't seem to see eye-to-eye, the stress can feel unbearable. This said, even in cases where everything is going amicably, you will no doubt still have questions and concerns about just how assets are going to be divided among two people.

One thing that can help reduce the overall stress - and simply get a handle on what is even out there to divide - is to create a checklist.

Creating a checklist

Married couples sometimes build assets together as they attempt to reach a common goal of a comfortable retirement. When these couples divorce, they will face the property division process. This process includes splitting accounts like IRAs and 401(k)s. Illinois residents may not be aware of the correct process for dividing these accounts, but without the proper attention, some individuals could face penalties.

For many couples, retirement funds make up the most significant portion of marital assets. These accounts have various rules and taxes associated with them. During a divorce, if certain procedures are followed, individuals may be able to avoid the tax penalties and fees of early withdrawal.

For example, a workplace retirement plan like a 401(k) should be split using a Qualified Domestic Relations Order, or QRDO. This order is filed in accordance with the specifications of the divorce decree. Individuals should review the document and ensure that it is drafted correctly and the proper steps are followed. Other accounts like IRAs can be split by filing a copy of the divorce decree and other paperwork with the IRA custodian. Utilizing a trustee-to-trustee transfer method can help eliminate taxable events.