It is undeniable that financial concerns are near the top of the list for almost every couple going through or considering a divorce.
Still, many people will not be fully aware of how post-divorce mistakes can have a negative impact on their financial lives. Whether it is a high asset divorce or one of lesser means, it is imperative to think about these issues with help from a qualified legal professional. Finances will need fine-tuning after a divorce. With separate financial situations, a likely reduced income, assets that have been split and restarting one’s financial profile, there is much to consider.
It is often impossible to keep the exact same standard of lving after a divorce as a family had before. After a divorce, there are two households (hopefully!) and with that comes two rents and all the expenses that come with running two households. To keep as much of the pre-divorce standard of living as possible, there are decisions to make. Creating a realistic budget is the first step in this process. There is some very useful software now available or a financial professional can help. Assessing the amount of money you expect to receive in the divorce is almost, as is discussing with a fianncial advisor what type of investment portfolio you should have and what your expected rate of return will be on those investments. It’s also important to remember that some expenses may change after divorce. Health insurance in particular can be a major minefield, and has to be considered before a divorce is finalized.
There are also important changes that have occurred in the tax code that must be considered as well. The most important change is to alimony. Prior to December 31, 2018, alimony paid was deductible by the payor, and taxable to the payee. That has all changed for any judgments of divorce after January 2019. Alimony is now no longer deductible by the payor. This is a factor that must be considered before agreeing to any allimony numbers. Finally, if there is a retirement account like a 401(k) or other pensions, people will frequently need to share that with the former spouse. Those who have retired and gotten a divorce can face a struggle in maintaining their standard of living but good planning before and after the divorce can help mitigate this.
Divorce is complicated in myriad ways and preparation is one of the most vital aspects to a successful outcome and future. A law firm that has helped many people with their divorce cases can assist from the beginning. Calling for a consultation is a foundational factor in being fully prepared.