3 Steps for Divorce in 2025…That Are Not What You Think
When preparing for divorce, most people focus on the obvious: gathering financial documents, hiring an attorney, and making decisions about custody and living arrangements. These steps are important, of course. But there are other overlooked actions that are often just as make or break for your divorce.
If you’re thinking about divorce—or already in the process—here are three surprising steps that can help you avoid costly mistakes and set yourself up for a more secure financial future.
1. Put Major Financial Decisions on Hold
Divorce represents a dividing line in life, and this can make it tempting to shake things up—whether it’s buying a new car, selling off assets, or making big investments. However tempting it can be to get to the “fresh start” part of this time of transition, you need to be aware that moving money around during a divorce can complicate asset division and even trigger legal consequences.
For example, if you invest in a new business or commercial real estate, you might think this activity is safe from divorce asset division if the venture was entered into after you filed for divorce. However, where did the investment money come from? If it was pulled from a joint account or asset, your spouse could claim that the new investment is still a marital asset—meaning they may be entitled to a share. Even if the asset is titled in your name only, the court may not see it that way.
Additionally, the courts may scrutinize large financial transactions during divorce proceedings to ensure one spouse isn’t attempting to hide marital assets. That means selling property, shifting money into new accounts, or making significant purchases could raise red flags. Notoriously, large online purchases that have no trace in the real world are sometimes smokescreens for hidden cryptocurrency activity. Even if your large financial transactions are completely above board, it can add to the cost of divorce to spend time and money to disprove accusations about your finances.
What should you do instead? Maintain financial stability. Avoid making any major financial moves without first consulting both your financial planner and your divorce attorney to understand any potential consequences. They can guide you on what’s best for your situation while ensuring you don’t accidentally create more headaches—or legal trouble—down the line.
2. Don’t Underestimate the Tax Implications of Divorce
Income taxes may not be top of mind as you enter into a divorce, but overlooking them could leave you with an unexpected financial burden this same time next year. The way assets are divided, how alimony is structured, and even who claims the children for tax purposes can all have long-term tax consequences.
Here are some key tax considerations:
- Alimony & Taxes: Due to federal tax changes, new alimony orders are no longer deductible for the payer, and the recipient doesn’t owe taxes on it. This shift can impact how support is negotiated, so make sure you understand the financial impact and pros and cons. Some spouses are moving to “lump sum” payments as a way to reduce alimony’s impact on annual taxes.
- Dividing Retirement Accounts Without Penalties: If you’re splitting a 401(k) or pension, be aware that you’ll need a separate Qualified Domestic Relations Order (QDRO) to avoid income taxes and early withdrawal penalties. Without this, you could lose a significant portion of your retirement savings to taxes.
- Filing Status & Tax Brackets: Your tax filing status can change depending on when your divorce is finalized. If you’re divorced by December 31, you’ll be considered single for that entire tax year. Be prepared by running your taxes beforehand and consider negotiating any issues that could help improve your tax situation.
- Who Claims the Kids? Be aware that only one parent can claim each child as a dependent. Your divorce settlement should clearly state who will claim the children for tax purposes and whether you’ll alternate years. This decision affects eligibility for the Child Tax Credit and Earned Income Tax Credit (EITC)—which can significantly impact your tax bill. Start thinking about this early.
Working with a tax professional during your divorce can help you navigate these issues and structure your settlement in a tax-smart way.
3. Update Your Estate Plan & Beneficiary Designations
After a divorce, many people forget to update their estate plan—a mistake that could mean your ex-spouse remains the beneficiary of your assets. If you want to ensure your estate is distributed according to your current wishes, you’ll need to update these documents immediately:
- Your Will & Trust: Revise your will and any trusts to remove your ex-spouse (if applicable) and update heirs or guardians for minor children.
- Beneficiary Designations: Life insurance policies, retirement accounts, and bank accounts with payable-on-death designations don’t pass through your will. If your ex is still listed, they may inherit those funds—even if your will says otherwise.
- Power of Attorney & Healthcare Proxy: If your ex was named as your financial or medical power of attorney, update these documents so someone else can make decisions on your behalf if needed.
Your divorce attorney can guide you through the process, ensuring all necessary updates are made.
Move Forward With Confidence
Divorce is an emotional and financial turning point—but taking the right steps now can set you up for a smoother transition.
Need guidance about your impending divorce? Weinberger Divorce & Family Law Group is here to help. Our experienced attorneys can help you navigate the complexities of divorce, protect your assets, and plan for a stable financial future. Call us at 888-888-0919 to schedule a consultation today.
