Divorce-related financial issues are expected to rise as the rate of separation is also expected to rise in the near future. According to a recent article, with the economy of the country improving, it is expected that the number of couples divorcing will also rise. The U.S. Census Bureau noticed that when the economy was low, divorce is low too. Apparently, it was too costly for ex-couples to maintain two households – especially if they already have kids. This is why couples usually try to make things work between them.
Since the economy is doing quite well lately, you might as well expect that a lot of couples will be divorcing too.
There are many financial issues that you need to look into when you are faced with divorce. This unfortunate incident in your life may seem like a purely emotional one. Although it is a very difficult time in your life, you need to think about all the effects that your marital problems will bring to your life – and that of your family.
We all know how money problems can drive couples to file for divorce. It is a sad fact in life that we have to deal with. While some couples grow closer and stronger after a financial difficulty, some are not that lucky. Some people are driven apart because of their financial troubles. There are just couples that can no longer stay together and divorce is one way for them to finally be free to live a life that they feel they deserve to have.
Whether your finances may or may not be the primary reason that your marriage ended, it is very important that you be careful about money matters from now on. Even if your divorce is just about to be processed or it is already nearing its conclusion, you have to think about how you can protect your personal finances. Even after divorce, your ex can still affect your financial condition. For instance, if the two of you co-signed on a loan, you will both be responsible in paying it off. Even if the courts ruled that your ex is responsible in paying off a loan, if they fail to commit to the payments, your credit score will also suffer.
There are actually a lot of financial issues that can arise when a couple files for divorce. But to simplify it, you can categorize it into two: your financial obligations and benefits.
What happens to your financial obligations?
When you were a couple, there were a lot of things that you shared – including your financial obligations. Whenever there was an expense in your home, both of you contributed. Whether these expenses included your food, groceries and home repairs, you had to shoulder a portion of that. You shared in paying off your bills at home. Your cable, Internet and mobile subscriptions – these are shared expenses. If you got a car loan to purchase a family car, you shared in paying this off on a monthly basis. The same is true if you got a mortgage and other loans that you borrowed. Even if one of you stayed at home and only one earned an income, that salary is also shared between the two of you. In essence, you always shared in the expenses.
So what are the financial issues that you need to face when you are divorcing your spouse?
On top of your list is debt. This is actually one of the most complicated issues you have to face. All your credit obligations will have to be dealt with. This includes your car loan, mortgage, credit cards and other personal loans. If you could not tackle debt as a couple, then you will be forced to tackle it individually. Your debt will not go away just because you asked that your marriage be dissolved.
In most cases, the court will rule who will get to pay for what. Whoever will shoulder the debts will depend on certain factors. Take for instance credit cards. According to data found on NOLO.com, your liability will depend on where you live, how you acquired the debt, and how the court rules your accountability.
In the US, there are states that follow the common law and the community property law. When the state where you incurred the debt follows the common law, you will only be liable for the debts that are under your name (solo and co-signed). If your spouse got a loan under their name, you will not be held liable for that.
However, if you live in a community property state, you have bigger financial issues to think about. Any debt that is acquired will be considered joint liability between married couples. This is true even if you had no idea that your spouse borrowed money. This is also true even if your name is not associated with that loan. As long as the debt was made while you were married, you are both liable for that.
In case the court ruled that your ex will pay for a particular debt, you need to continually keep tabs on that. This is especially true when you co-signed that loan. Even if the court said that the other party should be making payments, if they fail to pay, your credit report will suffer. The creditors and lenders will not care about the court ruling as long as they get paid. So get in touch with the creditor or lender and have them send you the monthly billing statement too. That way, you can check if your ex is paying their dues or not.
The other financial obligation that you need to think about is who gets to pay for what when it comes to your kids. Now the courts will also take part in deciding how much should be shouldered by both parties. This is not just one of the financial issues you have to face – it is also a very emotional one.
Your kids will suffer greatly because of this divorce and you need to make sure that their financial needs will not be compromised to lessen the blow. Be clear about who needs to shoulder certain expenses and be vigilant in making sure it will be met.
There may be other financial issues when it comes to your obligations but these two top the list.
What happens to the financial benefits?
On the other side, you also have to consider the effects of your divorce on the financial benefits you were receiving. Consider carefully how the family finances are set up. If both of you are earning an income, you will be on a level playing field. But if one of you stayed at home while the other worked for the household, then that is a different issue. Obviously, one of you will be on the losing end.
Whether you were the one who was financially dependent or you were the one working, you need to deal with these financial issues when you get a divorce.
In a community property state, any account that you open after getting married will be considered a joint account. So if you want to protect your own account, you may want to close the old one and open a new one after you get divorced. Otherwise, your money might be unjustly split between the two of you.
If you have an actual joint account, you may want to close it, divide the amount and then open two separate accounts. Rename everything so it is clear who is authorized to withdraw from them.
Do not forget to include your digital assets too. If you have any online store account, online bank accounts, and other online payment gateways like PayPal – these have to be changed as well.
Even if you have a written will, there are times when your ex-spouse still has a legal right on whatever you left behind. Do not forget to change the beneficiary details that you have on your life insurance, retirement accounts, etc. If you plan on leaving everything to your kids, then remove the name of your ex in all the documents.
You also have to revise the information on your government accounts – like your Social Security. There are Social Security rules and considerations that you need to look into after divorce. The spousal and survival benefits will change if you make changes in your marital status. If you remarry before the age of 60, you may lose the benefits that are rightfully yours on your first spouse’s Social Security. But if you remarry after the age of 60, things will be a bit more different.
Employer sponsored benefits
The last of the financial issues that you need to look into is employer sponsored benefits. This involves benefits like heath insurances. If your spouse was covered before, you may want to remove them already. Or if you were in your spouse’s benefit, you may lose that coverage after divorce. You need to get your own health insurance. It all depends on your specific situation. Do not ignore this because you might be caught in a tight fix when you get sick. You thought you still had coverage when it fact, it was gone after you got divorced.
These may not be the only financial issues that you need to look into but they are probably the most important ones. Divorce is never easy for anyone and can really take its toll on the whole family – both emotionally and financially.