California couples who are getting a divorce should be aware that there are some common financial pitfalls to be avoided. One of these is trying to keep the family home on a single income. A person who does this may find that it is not possible to do the necessary upkeep.
This can also be a factor if a person decides to keep the home in exchange for a more liquid asset of roughly equal value. For example, the spouse might get the retirement or checking account. However, even though the values look equal, this might be a poor deal for the person who gets the home because of the expenses associated with it.
Some people may have decided on an arrangement like this because of concerns about splitting a 401(k). In order to split a 401(k) without penalties, it is necessary to prepare and file a document called a qualified domestic relations order. The 401(k) must also be rolled over into an individual retirement account within a certain time frame. People should also keep in mind that if they take the retirement account while the other party takes the checking account, they will be unable to access the retirement account without penalty before a certain age. Finally, people receiving alimony or child support should take out a life insurance policy on the payer.
In California, a community property state, assets and debts that are shared marital property are supposed to be divided 50/50. However, there is still room to negotiate some of the types of arrangements mentioned above, and these are not necessarily poor decisions in every case as long as the financial implications are understood. For example, a person might easily be able to afford upkeep on the home and may decide keeping it is the best choice to provide stability for children.