Wednesday, March 25, 2009

Financial Issues to Consider When Going Through A Divorce

Besides the emotion involved with ending a marriage, divorcing spouses must be on guard to consider the best interests for their financial future, and the future of their children. Here are a few tips to consider:

1. Obtain complete information with regard to the marital estate. You cannot negotiate without a comprehensive review of all assets and debts.

2. Consider very carefully whether you want to keep the marital home. Sometimes, the equity in the home is such a huge percentage of the marital estate that in the divorce, you may receive the home, and little else. Prepare a budget and consider whether you will be able to afford the payments as well as the upkeep (maintenance, taxes, insurance, etc.). Additionally, carefully think about whether you should give up income producing assets in return for the marital home.

3. Consider the cost of health insurance once you are divorced if you are currently on your spouse’s plan. If you cannot obtain insurance through your employer, get several quotes so you can compare.

4. When considering any type of financial settlement, think where you will be in one year, five years, ten years and twenty years and think about various contingencies so, inasmuch as possible, you do not agree to something that you will be unable to afford later. Good planning now may mean a more comfortable future. If you are going to pay or receive alimony, carefully consider the tax consequences.

5. If you or your spouse is self-employed or is a partner in a closely held business, obtain an appropriate business valuation so you understand how that asset will come into play in the overall settlement. Speak to an attorney before obtaining any appraisals as different businesses are valued differently for purposes of divorce.

6. Consider the costs of any assets you will receive in divorce, such as the transaction costs for selling stock or a home, the tax issues and the tax basis of those assets.

7. If you are receiving support, you should also negotiate life insurance in case the spouse paying support dies.

8. When reviewing the assets, pay careful attention to 401(k), pension or other employee retirement plans so that you obtain your fair share in a settlement.

9. If you negotiate with your spouse, before signing anything, obtain legal advice so you do not bind yourself into a disadvantageous situation.

A thoughtful, comprehensive and enforceable financial agreement will prevent headaches later. Remember, you will be living with the financial consequences of your divorce for the rest of your life.

3 comments:

Louise Williams said...

Linda, I just found your blog. I can't tell you how much I appreciated this post! I am moving in the direction of filing for divorce and this post has really been an eye-opener. Thank you!

backup contacts said...

Very informative, just hope this doesn't add to the constantly rising divorce rate.

California LAwyer said...

I really enjoyed reading this post. I never considered those financial issues when I got a divorce.... Wish I read this earlier :)