Financial Considerations Prior to Filing for Divorce

When contemplating a divorce, many people are not only facing emotional stress but also worry about their financial well-being. It is extremely important to think about your financial situation and try to plan ahead as much as you can prior to filing for divorce. Some helpful tips in doing so may include:

1. Creating a list of your financial assets. These may include cash, saving accounts, stocks, bonds, and any real estate investments. You should also consider whether some assets have tax consequences if you access them early. For example, retirement assets generally carry a penalty on early distribution as well as you having to pay the income tax on them.

2. Create a list of your debts. Any debt that was accumulated during the marriage will be considered marital debt and both spouses are obligated to pay the debt. A judgment of absolute divorce does not terminate your financial obligation to the creditor. Often times, parties are able to come to an agreement as to who will be responsible for making payments towards the debt.

3. Taxes. You should have a copy of your prior years' tax filings and consider your tax implications as to whether you should still file jointly while separated or file as single. You should consult with a CPA to learn more about your options before reaching an agreement with your spouse about your taxes. If you have children, you should also consider a head of household filing status if you are the custodial parent.

Divorcing couples often need to make hard yet sound financial decisions. Unless you are changing jobs and earning a higher salary, it is very likely that you will have the same amount of income but more expenses when you are divorcing. It is important to be realistic about your future and reach a meaningful agreement on the division of marital assets/debts when appropriate. Of course, not everyone is able to reach a mutual agreement and in that situation, the court will issue a court order after a trial to determine how the marital assets/debts should be divided. If you have any questions, please feel free to reach us at (443) 741-2567.