Everyone understands that a divorce can damage the finances of either spouse. Most couples who are divorcing go through the process without understanding fully how much of divorce will affect their finances.
Over the past 20 years, the divorce rate in the United States has been declining steadily. Still, approximately 40 to 50% of all US marriages will end in divorce. There are some things for you to consider to keep your finances in good health through a divorce, though.
Seek professional help: your emotions can take a huge hit through a divorce. You may feel sad and lonely at one point, then charged up with anger or fear the next. This constant roller coaster of emotions put you in a position where you are a lot more likely to make bad decisions. To keep you from making costly mistakes, you should consider getting advice from a financial adviser and divorce lawyer. Since women tend to be impacted negatively more by divorce than men are, this is especially important for them.
Get insured for support payments: when a divorce involves children, one partner is typically told to pay spouse port and/or child support to the other partner. The recipient of the support is typically the parent taking the most responsibility for raising any children. Liquidity can be a challenge over the long term with making these payments, though. Many times, the ex-spouse left paying the support may find themselves unable to continue making payments, leaving the other former partner shouldering the responsibility of paying the bills. When this happens, a financial adviser can run estimates on the assets from the marriage and take into account any risks, taxes, and liquidity to help the divorce lawyer come up with a settlement that is reasonable.
Take tax implications into consideration: in many divorce cases, taxes are overlooked. The ex-spouse is typically focus all their attention on dividing the assets. For example, if the 401(k) has $1 million in assets, it is worth a lot less than if the $1 million is in an account that is taxable. All this information needs to be taken into consideration as the assets are divided.
Follow the steps above to help you keep your finances in good health you ever face a divorce.