When a couple decides that they are going to get divorced the decision is usually never easy. It can be mixed with intense emotions and financial wrangling. Regardless of the outcome, the divorced couple’s lives are bound to bring a host of changes to your life, not all of which are easy.
Nationwide Debt Reduction sincerely hopes that these 6 tips regarding divorce and money can help divorced or divorcing couples with some sound financial advice as your marriage ends. In addition, we hope to show you how to position yourself today for the future.
1.) Stay well-informed
It is estimated that over 50% of all divorces in the United States today involve money. During the marriage, it is assumed that both spouses had a good understanding of their overall financial situation. However, during divorce proceedings, knowledge of these details can become murky to say the least. That is why it is vital that both parties stay well informed of the finances.
a.) Who holds the passwords to the bank and credit card accounts and who is going to be responsible for the upkeep of those bills.
b.) If you own a house, how is the house, or other joint property, titled?
c.) Who keeps the records of all the retirement, college savings plans, stocks, bonds or other financial instruments and where are they located.
If you do not know this information and do not have access to this information you need to. Bank accounts, credit cards, mortgage payments and all other financial documents need to be “on the table” for both parties and/or attorneys to review for an amiable separation.
2.) What Laws Cover Your State
Most people when they get married “bring some financial asset to the table.” There are now nine (9) community property states in the United States (California, Arizona, Louisiana, Idaho, Nevada, New Mexico, Texas Washington and Wisconsin) where the law states; “A community property state is one in which all marital property is divided equally between spouses in a divorce. Each spouse has an automatic half-interest in the property and debts acquired during the marriage, with the exception of anything received by way of an inheritance. Assets acquired before the date of marriage or after the date of separation are not considered included in this calculation.”
Common law states are different than community property states in that the legal system determines spousal ownership of property acquired during marriage. In contrast to the community property system, the common law property system states that property acquired by one member of a married couple belongs solely to that person unless the property is specifically put in the names of both spouses. Therefore, knowing your states laws are going to be critical.
3.) Protection of Assets
Protection of child support, alimony and retirement income are probably the most important aspects of any divorce from a financial standpoint. Therefore, if children are involved, child support and even spousal maintenance is going to be critical.
4.) Ensure Your Budget in Updated
If it possible, even before you decide as a couple to divorce, it is always advisable to know what your budget numbers are. As we mentioned earlier, divorce is bound to bring about major changes to your life. Most likely your expenses are going to increase, as there will now be two households, additional health insurance premiums, loss of discounts enjoyed through combined insurance, cell phone plans and the like and even extra driving to say the least. You may have to make hard choices and restructure your spending patterns to make things work.
“Your home may seem like a big prize in the divorce proceedings, but if it — or anything else — comes with bills you can’t afford, your financial future could be in jeopardy.”
5.) Do Not Forget About Your Retirement Plan
You may think that “getting the house” is the prize in your divorce proceedings, however if you cannot afford to pay the bills that go along with home ownership in addition to your other bills, you could be setting yourself up for failure from the start.
Going back to the community property states, retirement funds amassed during a marriage may be divided between the spouses, regardless of who earned the money. In addition, a spouse’s military retirement paycheck, a corporate pension check or even Social Security disability or retirement benefits can also be considered part of a divorce settlement.
Finally, it will be vital for you to know what the tax treatment of whatever assets you acquire are going to be. Do not be afraid to ask your tax advisor or CPA assist you along with your attorney, to be cognizant of what the taxes you will have to pay.
6.) Once the Divorce is Final
Once the divorce is over and a final decree has been entered, it is best to just make a clean break and move on. If the divorce decree will allow you, FFT recommends that you close or split joint accounts, such as mortgages, car loans or credit cards. If you cannot refinance separately, you are probably better off with selling that asset. You definitely do not want your former spouse’s failure to make payments on time to affect your credit rating, which happens all too often in today’s day and age.
If your final decree allows you to do so, update beneficiary designations in your retirement plan and insurance policies. Do not be afraid to talk with your attorney about changes to your will, powers of attorney and other legal documents. You want these documents to reflect your current wishes as to who will make decisions if you are unable to.
Nationwide Debt Reduction, Inc. is a Christian debt settlement company helping individuals and family’s get out of debt through negotiation. Call us today toll free at 1-800-890-6658.