Divorce can be emotional, but it also can take a serious financial toll. It is important to understand the financial impact divorce will have both now and in the future. This includes considerations related to property division, tax ramifications, support payments, retirement accounts and budget adjustments.
Although it may seem complex and overwhelming, don’t get discouraged. Through solid planning, you can work toward successfully managing your finances during and after a divorce.
Below are steps to help you achieve financial success before and after a divorce:
- Carefully select legal representation – Choose a divorce lawyer who is knowledgeable about financial matters, experienced with property division and skilled with divorce negotiations.
- Inventory assets and liabilities – Gather documentation for your income, expenses, assets and debts, including bank account statements, retirement account information and real estate documents.
- Consider tax ramifications – During property division, keep in mind that some property may include taxable gains or be subject to future income tax while others are tax-free.
- Check credit reports – Pull at least one credit report for you and, if possible, for your spouse to check for debts or liens you may not know exist.
- Update beneficiary information – Review retirement plans, life insurance policies and estate planning documents and, if necessary, change your intended beneficiaries.
- Safeguard child support and alimony – If possible, work to ensure that future support payments will continue if your ex-spouse dies or becomes disabled.
- Adjust to a reduced income – Know your adjusted household income and cash flow, manage credit card debt and live within your means.
- Create and manage a budget – Understand your monthly expenses and pay bills in a timely manner. Create a budget to help balance income and expenses.
