When a married couple decides to get a divorce, they may be particularly worried about the financial consequences of their decision. While it’s true that a divorce can alter your current financial situation, you can successfully adapt to these changes by focusing realistically on your financial limits. If you are unsure of what to expect before and after your divorce, it can be easy to stress and overthink your decision.
For this reason, practical financial planning is essential to proceeding with your divorce, if this is the most suitable alternative for your family. In this article, you will learn about three financial areas you should be cognizant of in the midst of divorce proceedings: assets, debts, and expenses.
Managing Financial Assets in Divorce
In the middle of a divorce, all assets acquired during matrimony is known as “community property”. Financial assets such as checking accounts, savings accounts, cash, stocks, bonds, money-market accounts, real estate investment trusts (REITs), saving bonds, and mutual funds are core examples of community property. Once a divorce is finalized, this property is divided equally among both parties. For lower-income-earning or non-working spouses, the possession of this property will be extremely important towards covering future living expenses.
It’s imperative to understand how the equal division of community property will benefit you when your divorce is finalized. If you and your former spouse cannot agree on the terms of community property, or if there is any confusion detailing this division, it would be wise to consult a divorce attorney for more clarity.
Keep Your Debts in Mind
Once you have assessed your financial assets with your former spouse, it’s now time to account for any shared debts that can negatively affect your finances. Usually, the spouse that keeps the house will be responsible for making necessary mortgage and debt payments. However, if a joint debt has been accumulated, both spouses will be required to pay the debt.
For example, if two former spouses shared the same credit card, they are obligated to compensate for all debts that have been charged to their shared account. In essence, a divorce cannot nullify any debts owed to a creditor and both spouses are responsible for shared debts.
Inquire About Necessary Expenses
In the event of a divorce, the lower-income-earning or nonworking spouse is generally able to receive spousal support to temporarily pay for their living expenses. Before a divorce settlement is reached, it’s important to understand if you’re eligible to receive spousal support, especially if you would have difficulty maintaining a suitable standard of living after the divorce.
In addition, child support is a necessary expense that can catch some individuals off guard. If you and your former spouse have children, it would be wise to factor in this ongoing expense when you are weighing your options for divorce and child custody. Preparing your finances for child support beforehand is key to avoiding a financial meltdown later if you are unprepared.
If you are contemplating following through with a divorce, take the time to recognize and properly anticipate your assets, debts, and expenses to avoid being blindsided in the long run.