The financial aspects of divorce last a lifetime. Here is a breakdown of financial and practical matters that can help inform your decision-making.
- Divorce is typically a gut-wrenching ordeal, even when the breakup is mutual. The emotional trauma will fade over time, but the financial aspects of divorce will have a lifetime impact.
The importance of expert advice cannot be overstated, but it's a good idea to be familiar with a couple of major financial issues as well as some practical matters that should inform your decision making.
Child support is a court-ordered, periodic payment following the end of a marriage or other relationship. Funds are expected by the court to be used for the child's expenses. Child support is not taxable to the person who receives it, and it's not tax deductible to the person who pays it.
The underlying principle of alimony, or spousal support, is to minimize any unfair economic consequences of a divorce. Because alimony involves so many complex determinations, the court would much prefer divorcing parties to work out an agreement between themselves. It's essential to have a good lawyer in alimony negotiations to make the best argument for your position.
Prior to bringing in the lawyers, if at all possible, calmly exchange ideas with your spouse on how you will divide finances. Take care of health insurance coverage for the custodial parent and your children if any. If you owned real estate as a couple, whoever gets the house should decide what to do-- sell it or keep it.
Get copies of your credit report. This is a convenient, one-step way to put all marital debt on the table for review and discussion. Fill out new beneficiary designation forms for assets like IRAs, retirement plans, and life insurance. These assets pass at death to the person named on that form-- likely, your ex.
Remember, your separate property like assets owned prior to the marriage as well as gifts and inheritances are not on the table. Unfortunately, however, when money is co-mingled with marital funds, the separation can become problematic. Stay financially fit, friends.