Divorce does not just herald the beginning of a new chapter. For many separating couples, it also brings about an increase in financial awareness. In addition to deciding who gets the kids, dog and vacation property, you have to figure out how to finance a divorce while preserving as much of your wealth as possible. Finances are often a bone of contention for many separating couples. Filing for divorce often brings about the need to make lifestyle changes that may threaten your financial security.
Without preparation and the right resources, it may seem difficult to successfully navigate the divorce process. In addition to becoming more financially literate, you will need to take measures to protect your future. Here are two financial consequences of divorce to consider:
Changing tax obligations
Divorce means a change to your tax filing status. If there are children, then you may need to make adjustments for custody and possibly alimony income. These factors can bring about major changes to your tax situation. Before agreeing to any divorce offers, make sure you understand the potential effect it may have on your future tax filings.
Lingering joint debt
In a divorce, the courts can assign joint liability to both partners on some marital debts. Also, many creditors and lenders do not recognize divorce as a reason to eliminate financial obligations. That means that you should try to pay down as much debt as possible before filing for divorce. Set aside money and financial resources for yourself. Monitor your separate and joint accounts and try to keep them current.
When contemplating divorce, you must consider more than the initial price tag of the separation process. Many factors can cause your divorce expenses to skyrocket unexpectedly, such as an uncooperative spouse, limited financial resources, children, living expenses, etc. Take time to plan an exit strategy that preserves your financial resources and health.