Going through a divorce is an emotionally taxing experience that can easily cloud your judgment when it comes to legal matters. In North Carolina, many couples focus on the obvious issues like child support, custody, and property division but overlook crucial details in their divorce agreements. Things often overlooked in divorce agreements can lead to complications down the line, affecting your financial stability and peace of mind.
In this blog, we’ll shed light on 7 common yet crucial elements often ignored in separation and divorce agreements.
1- Spousal Health Insurance Coverage
One aspect that often slips through the cracks during divorce negotiations in North Carolina is spousal health insurance coverage. Many people don’t realize that once the divorce is final, they may no longer be eligible for health insurance coverage under their spouse’s plan. This can be a significant issue, especially if you’ve been relying on your spouse’s employer-provided insurance and haven’t budgeted for your own coverage.
In North Carolina, some insurance plans or other resources, such as GoodRX, may offer a continuation of benefits for a limited period after the divorce. However, this often comes at a higher cost and may only be a temporary solution. It’s crucial to address this issue during the divorce negotiations rather than waiting for the final decree. You may need to explore options like purchasing a private plan or looking into state-provided health care programs.
Failing to account for health insurance can leave you financially vulnerable and without essential medical coverage. Therefore, it’s advisable to consult with your attorney to ensure you’re making informed decisions about your health insurance options during the divorce process.
2- Marital Assets Often Overlooked in North Carolina Divorces
When navigating a divorce in North Carolina, couples usually focus on the division of significant marital assets like homes, cars, and bank accounts. However, other marital assets often go unnoticed in divorce settlements, potentially leaving one or both parties financially disadvantaged. These can include everything from frequent flyer miles and club memberships to intellectual property and even digital assets like cryptocurrency.
In North Carolina, the principle of equitable distribution governs the division of marital assets. This means that all assets acquired during the marriage, regardless of who earned or purchased them, are generally subject to division. Overlooking less obvious assets can result in an unfair distribution of marital property that may affect your financial stability for years to come.
For instance, if one spouse has frequent flyer miles accumulated through work travel, those miles have value and should be considered in the asset division process. Similarly, if you or your spouse have written a book or developed software, the intellectual property rights are also marital assets that need division.
To ensure a fair and comprehensive division of all marital assets, it’s crucial to create an exhaustive inventory and consult with your divorce attorney beforehand about any assets that may not be immediately obvious. This will help you avoid any financial surprises and ensure you’re adequately compensated in the divorce settlement.
Identifying and evaluating all marital assets thoroughly can make a significant difference in your financial well-being post-divorce. Consult with professionals to make sure you’re not overlooking anything important.
3- Retirement Accounts and Pensions
Things often overlooked in divorce agreements include the division of retirement accounts and pensions. Many people focus on immediate concerns like the family home or monthly alimony, neglecting the long-term financial implications of their retirement savings. Retirement accounts, such as 401(k)s, IRAs, and pensions, are often subject to division during a divorce, depending on various factors like the length of the marriage and each spouse’s financial contributions.
In North Carolina, the equitable distribution law governs the division of marital assets, and personal property, including retirement accounts. However, splitting these accounts isn’t as straightforward as dividing other property types. Special legal procedures, like obtaining a Qualified Domestic Relations Order (QDRO), may be necessary to divide certain retirement accounts without incurring penalties or additional taxes.
Ignoring the division of retirement accounts can negatively affect your financial future. It’s essential to consult with your attorney to understand how your retirement savings will be affected and decide what steps you can take to secure your financial well-being post-divorce.
4- Parenting Time During Holidays and Special Occasions
Regarding child custody arrangements in North Carolina, most divorcing couples focus on the regular day-to-day schedule. However, they often overlook the importance of specifying parenting time during holidays, birthdays, and other special occasions. This oversight can lead to unnecessary stress and conflict, as both parents may assume they’ll have the children for significant events like Christmas, Thanksgiving, or even summer vacations.
In North Carolina, it’s advisable to include a detailed holiday schedule in your parenting plan. This schedule should outline which parent will have the children during each major holiday, alternating years if necessary, and specify the pickup and drop-off times. Including provisions for other significant days, such as the child’s birthday or family reunions is also a good idea.
Addressing holidays and special occasion parenting time in your divorce agreement can prevent future misunderstandings and ensure a more harmonious co-parenting relationship. Make sure to consult with your attorney to include these details in your separation agreement and parenting plan so both you and your children can enjoy special times without any added tension.
5- Debt Division and Credit Score Impact
A commonly overlooked aspect in North Carolina divorces is the division of debt and its impact on your credit score. While couples quickly discuss the division of assets like homes and cars, they often neglect to consider who will be responsible for marital debts such as credit card balances, mortgages, and car loans. Failing to allocate these debts clearly can lead to financial complications and even legal disputes down the road.
In North Carolina, the equitable distribution law also applies to marital debts. Both parties are generally responsible for debts incurred during the marriage, regardless of whose name is on the account. However, when dividing debt, the court may consider various factors, such as each spouse’s earning potential and financial contributions.
It’s crucial to understand that even if the divorce decree assigns a particular debt to your spouse, creditors may still hold you responsible if your name is on the account. This can negatively affect your credit score if your ex-spouse fails to make timely payments. To protect your financial future, consult your attorney about how to handle debt division best and consider removing your name from joint accounts whenever possible.
Addressing debt division explicitly in your divorce agreement can save you from future financial headaches and help maintain your credit standing. Always consult your attorney to ensure you’re making informed decisions about this critical issue.
6- Updating Estate Plans and Beneficiaries
In the whirlwind of divorce proceedings, many people in North Carolina forget to update their estate plans and beneficiary designations. Wills, trusts, and other estate planning documents often name the spouse as the primary beneficiary or executor. Failing to update these can lead to unintended consequences, such as your ex-spouse inheriting your assets or making medical decisions for you in case of incapacity.
Similarly, life insurance policies, retirement accounts, and investment portfolios often require you to designate a beneficiary. If you don’t update these designations after your divorce, your ex-spouse could end up receiving these benefits, even if your divorce agreement states otherwise.
In North Carolina, some laws automatically revoke certain types of spousal rights upon divorce, but relying solely on these statutes is risky. It’s far safer to update your estate planning documents and beneficiary designations proactively. Consult your attorney and a financial advisor to review and revise your estate plan as part of your divorce process.
Taking the time to update your estate plans and beneficiaries can provide peace of mind and ensure that your wishes are carried out as you intend. Don’t overlook this crucial step in securing your financial and personal future post-divorce.
7- Tax Implications of Asset Division
One of the most overlooked aspects of divorce in North Carolina is the tax implications associated with dividing assets. Whether it’s real estate, investments, or even alimony payments, how you divide these assets can significantly impact your tax liability. Many people focus on the immediate value of assets without considering long-term tax consequences, which can be costly.
For example, if you keep the family home but sell it later, you may be responsible for capital gains tax. Similarly, withdrawing from retirement accounts early to settle divorce expenses can trigger penalties and additional taxes. Alimony payments also have tax implications; they are no longer deductible for the payer and are not considered income for the recipient under current federal tax laws.
In North Carolina, it’s crucial to consult your attorney to understand the tax ramifications of your divorce agreement. Making more informed decisions about asset division can potentially save you unexpected tax burdens in the future.
By seeing the tax implications of your asset division, you can avoid financial pitfalls benefiting your long-term financial health. Always consult legal professionals to ensure you cover all your bases during this complex process.
Our Experienced Family Law and Divorce Attorneys Can Help
At Plekan Law, we understand that divorce is more than just a legal process; it’s an emotional journey that can affect every aspect of your life. Our seasoned family law and divorce attorneys guide you through each step, ensuring you protect your interests. From the division of marital assets to child custody arrangements and beyond, we offer comprehensive legal support tailored to your unique situation.
We know every divorce case is different, and we take the time to understand your needs and concerns. Whether you’re worried about maintaining health insurance coverage, dividing retirement accounts, or navigating the complexities of parenting time during holidays, our team is here to help. We work closely with you, developing a strategy for the best possible outcome, considering the often-overlooked aspects that can impact your future.
Don’t navigate the complexities of divorce alone. Trust the knowledgeable team at Plekan Law to provide the legal expertise and compassionate support you need during this challenging time. Reach out to us today for a consultation and take the first step toward securing your future.