Divorce is an emotionally stressful time for many people; it is easy to overlook financial details during the entire process, especially if the other issues, such as child custody, are in the forefront. However, failing to pay attention to the matters of dollars and cents can be devastating to the parties in a divorce. That is why you should keep the following financial considerations in mind when you are going through or about to go through a divorce:
Plan for post-divorce budgeting and financial arrangements
Another area that is neglected by some parties to a divorce is setting a budget that accurately and realistically reflects a loss of income. Living on one income can be difficult for those who have been used to two incomes, and for spouses who have not worked, this can be a crippling realization. However, the key to avoiding financial devastation is to get professional advice and counsel before the divorce is finalized and begin the process of budgeting. Certified financial planners and CPAs are both able to provide this type of sound advice and can help parties to a divorce set up plans that account for income adjustments.
Use mediation to settle the divorce if possible
Mediation can be a lower-cost alternative to a divorce that is litigated inside a courtroom through an adversarial process. Mediation is simply using the services of a mediator, who is often an attorney experienced in divorce cases, to conduct negotiations between the parties. There are several potential benefits to using mediation, not least of which is the savings financially. For example, mediation is often less-stressful for both parties and children, and it can help create a calmer atmosphere whenever cooperation is required. In addition, there is a higher likelihood that both parties will be happier with the end results of mediation; depending on a court to make decisions rarely leaves one or both of the parties satisfied.
Work together to prevent tax mistakes
When a marriage is dissolved, there are also significant tax ramifications that should be addressed. The parties to a divorce can be caught off-guard by what the Internal Revenue Service and local tax agencies will require of two independent tax filers. That is why it is important to consult with a certified public accountant or other qualified tax expert if a divorce is pending or in process. Though it may be difficult to cooperate during this time, the wisest course of action is for both spouses to recognize the need to join forces in their efforts to keep tax burdens low.
Separate emotional and financial issues
As mentioned, divorce is an emotional rollercoaster and can be an exhausting process for the parties. During a divorce, property concerns can become particularly contentious, as both parties may seek possession of certain items and lose their ability to be objective. This can lead to serious financial mistakes by taking on burdens that are unwise. That is why it is critical that a reasoned approach be made regarding possessions that may prove to be unreasonable to take on from a financial perspective. For example, if one party is determined to keep paying the mortgage on a home that was financed jointly, the costs of ownership may objectively prove to be too much. To prevent this from occurring, it is helpful to make a list of all property and divide it into "needs," "wants," and "sentimental" categories. This will force the divorcing parties to consider each item on a rational basis.
Update wills and other estate planning documents
One financial mistake that can prove devastating to those involved in a divorce is a failure to review and update wills and estate planning documents. These documents will likely not express the new final wishes of those divorced, but if a party to the divorce dies without drafting a new will, then the surprises can be distressing to family members. Besides wills, there are also other estate planning considerations; for example, if a trust is in place for a family member, then that will need to be addressed.
For more assistance, contact a lawyer form a firm like Ivy Law Group PLLC.
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