As discussed in Part 1, divorce will probably result in a significant measure of financial loss for most ordinary people. If you are getting divorced, it is very important to seek both financial and legal advice. Part 2 will cover several more important ways that will mitigate the financial effects of divorce.
The core of a divorce support team should consist of a good lawyer and an expert financial adviser. Matters such as the division of assets, debt, and the children’s needs all need to be addressed. An accountant, child psychologist, and therapist may also be required to ease the painful process.
It is crucial to set aside anger and hurt as much as humanly possible. By minimizing conflicts, you shorten the ordeal and save on legal costs. The greatest factor on how costly a divorce will be is how long it takes to arrive at a resolution. Another benefit to being amicable is the fact that there will be future interactions with your ex-spouse if you have children. Goodwill will make events such as birthdays, graduations, and weddings easier for all parties involved.
Think of the Long Term
Think of the long term impact when making your divorce decisions. For example, asking for a larger share of the retirement account may be wiser than asking for the house. In some cases, selling the home is more advantageous. It would be wise to delay coming to an agreement until tax issues and financial implications for the foreseeable future are fully understood by your team.
Open your own personal bank accounts and secure credit cards under your name prior to separation when your combined household income is greater. This will help protect your credit scores. Ensure that the settlement sets forth who will pay for expensive items, such as the children’s tuition. If you will be the recipient of child support or alimony, make sure your ex-spouse has life insurance so payments continue even under unfortunate circumstances.
Taxes and Estates
Typically, only the parent who has custody may claim children as dependants. For the payer, alimony is deductible, while taxable for the payee; this should be considered when discussing the settlement. Regarding estate planning, your power of attorney, will, living will, and trust documents must all be revised.
Professional Guidance for Divorcing Individuals
John Faggio, CPA, CFP®, CDFA™, is a Financial Divorce Specialist. Faggio Financial helps divorcing individuals reach an equitable financial settlement in a professional, cost-effective, and expedient manner. Call (410) 988-7333 for professional guidance today.