It is always best to wait until you have a signed Marital Settlement Agreement before you sign anything else that changes ownership or obligations. The divorce law is much more complicated than most people realize so you need solid legal guidance to avoid major problems in the future.
Sometimes one person will push the other to sign over a house or car under the mistaken belief that it will somehow give them security or an advantage. They don’t understand that there are only two ways to ensure that financial matters are finally resolved: either by signing a Marital Settlement Agreement or having a Court issue an order.
Your Attorney-Mediator will guide you through the financial division decisions and then work with you to ensure that finances are fully divided when they can and should be. They always work toward dividing household budgets and implementing support payments as soon as practical to relieve the immediate financial pressure of joint budgets.
Everything else is usually divided within 30 days of the date the Marital Settlement Agreement is signed. Some things take longer, such as dividing some retirement plans that require a court order or dividing the proceeds of a house that is being sold.
It could quite literally cost you tens of thousands of dollars in additional taxes if they are not properly addressed. This is especially true when dividing retirement plans during divorce. For example, employee benefit or pension plans subject to ERISA (401K, 403B, defined benefit, etc.) require a Qualified Domestic Relations Order (QDRO) in order to transfer the money from one spouse to another spouse’s retirement without incurring income taxes or the 10% early distribution penalty.
There are also the missed tax savings by not properly structuring a tax plan that maximizes these savings. A proper plan can be designed only after running tax projections taking into account multiple factors to optimize the tax savings. It is critical that planning is pro-active and not re-active. Once the tax year is over, it is difficult to implement some of the necessary strategies. It is also important to note that the IRS does not rely on the information in the divorce decree, since a state court cannot determine a federal deduction. They have their own regulations that need to be satisfied.