Divorce is of course stressful emotionally, but also financially. Two households are more expensive than one, and the process itself can be very costly. There are many financial implications, which are not always fully understood by the divorcing couple.
It is incredibly important to carefully consider the financial issues at hand for several reasons:
- Divorce settlements are final. Occasionally, adjustments to support are made due to changes in income, but once the agreement is filed and accepted by the court, changes are rarely made.
- Poor planning can cost you. For example, it could cause loss of tax benefits like the real estate capital gains exclusion, or cost you an unnecessary early withdrawal penalty from a retirement account.
- There could be unintended consequences. An “equal” division of assets on the surface could be much less equal, after consideration of taxes and liquidity.
- Attorneys are not financial experts. Your attorney may be leading you through the process, but keep in mind that his or her specialty is the law. Attorneys are not financial experts and may be uncomfortable making financial recommendations.
Awareness of the issues can help couples reach the best settlement and avoid common mistakes. There are too many issues to cover in one blog post, so I have broken it up into several.
- Options in the Process
- What is Marital Property?
- Retirement Assets
- Real Estate
- How is Child Support Calculated?
- Alimony, Maintenance, Spousal Support
- Tax Issues
As a Certified Divorce Financial Analyst (CDFA), part of my business is providing financial advice to couples going through divorce. Couples are usually referred to me by their attorneys, mediators or accountants.
I actually really love this work because it’s good to feel needed! I know I have helped clients avoid financial mistakes at a difficult time, and move forward with a plan that provides some sense of order and security.
When reading this series, please keep in mind:
- I am not an attorney and I do not provide legal advice.
- I am not an accountant and I do not provide tax advice or prepare tax returns.
- I am based in New York, and any examples or links I provide may not apply in your state.
- While these concepts apply to same-sex couples, they have a few specific issues to consider, which I will cover in a separate post down the road.
If you or someone you know is considering divorce, please keep reading!
Please note, changes in tax laws may occur at any time and could have substantial impact upon each person’s situation. You should discuss tax or legal matters with the appropriate professional.
Please visit PowerOverDivorce to learn more about Divorce Financial Planning Services.