One of the biggest tasks couples going through divorce must complete is the dissolution of their finances. As challenging as it may seem to separate their lives now that their relationship is over, it is often more challenging for them to overcome the financial disparities that become painfully obvious during the divorce.
Of course, the legal process of separating is not without its financial challenges. Disagreements over property division, child custody, visitation, parenting arrangements and other family law complications can create monetary issues that lead to instability and a significantly lesser standard of life post-divorce. To improve the odds of getting a divorce settlement that works financially in your favor, consider the following tips.
- Get organized
To get an accurate and realistic idea of what is on the table in your divorce, you will need to gather up documents and information on all aspects of your finances. This includes any shared debts, credit and bank accounts and financial assets. You and your partner will also need to account for all real estate, cars and other physical assets you own. The courts may also require an accounting of your retirement accounts, life insurance policies and investments.
Divorce means those items must be separated and, in some cases, change ownership. If you and your spouse can amicably agree on how to split your marital assets and property, you can shorten the length of time it takes to finalize your divorce and reduce your legal costs by filing a marital dissolution agreement.
- Anticipate tax status changes
When negotiating your divorce settlement, keep in mind you may need to pay taxes on your portion of the settlement. In addition to changes to your filing status, some assets, such as retirement accounts, life insurance proceeds, child support and alimony payments and other aspects of your divorce settlement could have unexpected tax consequences. You may want to consider consulting with a financial expert while you finalize your settlement agreement to keep from being blindsided.
Divorce means you will need to adjust to living on a different income than during your marriage. This is often a big adjustment that brings about many other changes. Keep realistic financial goals about your divorce in mind as you go through the separation process so you can take the necessary precautions to remain financially sound.