When you are going through a divorce, finances can be a constant source of headaches. However, that doesn’t always have to be the case. Here’s what you need to know about splitting finances in a divorce:
There are a couple of things that will affect how you go about divorce financials.
Divorce law is different in every state. This means that in line with finances, you will divide your property based on the state laws. For instance, some states view the property as either community property or separate property. Community property is split into equal halves. For separate property, everyone gets to keep what is theirs.
Other states classify all property as one. What happens then is that various factors are considered in order to split it. This is referred to as equitable distribution. In the long run, the property is divided but not always into equal halves.
In relation to your state of residence, you need to understand what type of property you are splitting. There is community property and separate property. Community property is what you acquired together while you were married.
Separate property is what you may have owned prior to getting married. This can be things you bought, gifts you received, and any inheritance. The property you placed under your name while married will also fall under separate.
The type of divorce you are getting also affects the divvying up of finances. An uncontested divorce is where both parties are on board with the legal separation and file divorce papers without much hassle. In this case, the finances splitting process tends to be easier and less expensive. There isn’t much need for countless court proceedings for the divorce settlements.
A contested divorce is where one party may not necessarily be on board with the idea. This will lead to court proceedings, and the division of finances may be an area of much debate.
There is also a separation that could go the collaborative, mediation, or arbitration way. The court is hardly involved in these types of divorce. Therefore, the division of finances may be more peaceful as both parties work together to have an amicable divorce.
Regardless of where you live, the type of property you own, and how you choose to separate, there are things you need to do to make the splitting of finances less stressful.
You must get to know what you currently own and what you rightly deserve after the divorce. Be well versed with your state’s divorce laws so that you are fully aware of your rights.
In addition to that, get in touch with your financial institution and get bank account statements for your personal and joint accounts. This will help you know where your bank account balances stand and how to move on from there. Know the law according to the state and seek the help of a divorce financial advisor if need be.
Before you settled on the decision to get a divorce, you had a household income. There were also monthly expenses according to your needs as a family. Upon separation, these aspects do not remain the same. This is why it is necessary that you create a post-divorce budget. Make a list of all your expenses and create a reasonable budget.
This way, you will not be caught off-guard by your financial obligations once the divorce process is complete. If you have children, creating a budget will help you communicate to them on time in case the lifestyle they are accustomed to will need to change because of a reduced household income.
It will do you well to involve professionals in your divorce proceedings, no matter how you choose to go about your separation. Get a family law attorney or a mediator to help with the separation details. There is also no harm in getting a financial planner or financial advisor to take you through the financial details of the divorce.
These professionals will be better placed to give you well-meaning advice in case you get stuck. Getting professionals may cost you some money, but you are likely to save more money in the long run than if you decided to go it alone.
Do not make the mistake of ignoring debt while you work on your finances. This includes joint and credit card debt. If you can, pay off your joint debt. If you can’t, work with your spouse and develop a plan on how to settle the debts. You are still required to honor your loan agreement even after the divorce judgment.
Remember to take note of your date of separation so that you know exactly how much you owe by then. Any debts accrued after your separation debt should not fall under your financial obligation.
Get accounts professional to help you figure out what tax obligations you will have once the divorce decree is issued. Understand the tax implications of any properties you may get to keep. Having amicable divorces helps because you get to work together with your partner to ensure you both don’t end up having to file excessive tax returns.
While the divorce process is ongoing, ensure you stay aware of everything that is happening. If you have joint accounts, ensure you keep track of your partner’s activity on the account. This will help you avoid any surprises. While you are at it, ensure you also spend responsibly to avoid getting on the wrong side of the law. Try your best to make the financial aspect of the divorce as smooth as possible for both parties.
Divorce is a difficult thing to go through. Therefore, it is essential to take all the necessary steps to ensure you don’t make it any harder than it should be. One way to do that is to try and make the financial aspect of the process smooth
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