Dealing With Divorce – 7 Valuable Tips Before You Settle
Could divorce be in your future? If so, you’re one a large percentage of people who will to go through this life changing event. Every year from 2000 to 2015, there were over 800,000 divorces or annulments, according to government national data. Divorce is much more complicated than getting married and the consequences of mistakes during this highly emotional period can last a lifetime.
If you’re considering a divorce or are currently going through a divorce, there are some critical steps to take to avoid future surprises. While your divorce attorney will likely be your pillar of support, you still need to be aware of your situation and ensure that you’re taking every step needed to create a fair settlement. Here are some valuable tips to help get you through your divorce:
Insist on getting all of your spouses financial documents.
It’s time consuming and tiresome, but gathering all of your financial documents such as loan applications, wills, trusts, financial statements and credit card statements is important. Ensuring your spouse reveals all of their financial documents will help to accurately separate financial fact from fiction, and create a fair outcome.
Get all of your assets valued.
It’s a no brainer to get the house appraised, but believe it or not, most people don’t think beyond this large asset. Other things that should also be evaluated include pensions, family heirlooms, jewelry, art or anything else of value. Without knowing accurate values, you or your spouse could be left with the short end of the straw.
Health insurance and life insurance are a priority.
People don’t regularly like to discuss insurance as it’s planning for the unexpected, so it’s no surprise people tend to list it low on the priority list. If you don’t have health coverage on your own and you get it through your spouse, you may face a large increase post divorce. This needs to be factored in. Also, life insurance is just as critical, as any children will need guaranteed support if something happens to a parent. Contact your financial advisor to evaluate your insurance plans and determine any changes.
Don’t assume your lawyer will cover all aspects of your divorce.
Your lawyer’s area of specialization is law. Finances and investments should be handled by a financial planner and accountant. If your situation is even more complicated by multiple businesses or inheritances, this becomes even more important. It could be much, much less expensive in the long run to hire the right help now.
Understand how taxes will affect your divorce outcome.
No one wants to be faced with unexpected tax bills upon settlement. Taxes affect the value of any property and the amount of support to be paid. Alimony payments are tax deductible by the paying spouse but receipt of alimony is ordinary income. Child support is not taxable to the recipient nor is it deductible by the payer. Make sure you thoroughly understand tax implications of your situation.
Know what’s yours.
In many cases, half of everything is yours. In other cases, length of marriage, income and future earnings are considerations. If there are specific items that you don’t want, you may be able to exchange for something you do want. If you helped to put your spouse through grad school, then you may be entitled to reimbursement for the costs of some tuition. Be informed about division of property and assets.
You may be eligible for Social Security benefits.
While more and more women are working full-time, often the Social Security benefit of their spouse does prove to be larger. There are certain conditions where one spouse is entitled to earn a higher benefit than they would have on their own. It’s always a good idea to consult a financial advisor to discuss your situation and determine maximum benefits.
Lastly, think long term. Don’t settle for an arrangement that is great for five years then leaves you with little after that time frame. The negotiated agreement should allow you to live comfortably long after the divorce. Most of all, don’t just give in at the last minute to get the divorce completed. Take your time and know your divorce terms inside and out.
Would you like to learn how to achieve your best financial future? Simply request a call from a Bayntree financial advisor today.
Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.