Anyone who have been divorced at one point in their lives can attest to the need for financial tips while going through the process. This is a bitter time for any couple and in most cases, you will be battling to get as much of the conjugal properties and ownership that you once shared.
The divorce statistics in our country is not something to be proud of. According to the 2011 statistics from the census, out of a population of 250,392,781 million (15 years and above) in the country, 11% are divorced. The highest percentage of the divorced are during the age of 55 to 64 years old for men (16.4%) and women (20%). In most cases, the divorce rate is said to be half of the marriage rate annually. That means for even two marriages each year, one couple is filing for divorce.
Apart from the obvious emotional and psychological effects of a marital separation, you also need to know the implications that it will have on both of your personal finances. In fact, this is usually the reason why divorce proceedings last so long. It is true that divorce ruins credit – specifically your credit report. You are more in danger especially when your spouse racked up a lot of debt while you were together.
Money is the leading cause of divorce
There are many reasons why couples end up in divorce. However, the most prominent of them all involves money. It seems that getting financial tips could have served the couple better while they were still married. It may have helped save their relationship had they sought financial advice.
Based on an article from DivorceResource.com, it is said that financial disagreements play a big role in the downfall of a couple’s relationship. The study was conducted in 2009 by Jeffrey Dew (Utah State University). His study revealed that:
Couples who disagreed about money once a week have a 30% higher chances of getting a divorce as compared to couple who disagree only a few times a month.
Couples who disagree about money less than once every month has a 30% to 40% increase in the chance of filing for divorce.
Among the financial disagreements include debt, spending habits and high costs of living.
Most of the time, couples bring in debt into their marriage. The two common debts are student loans and credit card debt. A lot of people are hesitant to discuss money matters with their partners before marriage and that raises a lot of realizations when they are already together. Things like who will pay for what debt, how to budget their household finances, who will make the financial decisions – these are all important topics that needs to be talked over by any couple. Those who fail to communicate this usually end up feeling bitter, resentful and prone to blaming each other for any financial difficulty that could arise.
Financial aspects in your life that is at risk in divorce
While you may be reeling from the shock of your failed marriage, you need to clear your head to find some financial tips that will keep your spouse from taking your money. There are various financial risks that is involved in your divorce and that has to be something that you need to work on now. Believe it or not, you may still be in danger of being affected by your ex-spouse when they get in trouble with their finances. A property that went to you after the divorce may still be subject to repossession if you fail to protect yourself.
Here are two of the important financial implications that can change when you get a divorce.
When you get married, you get to have a lot of tax credits – especially when you are the breadwinner in the family. That will change when you file for divorce. One of the things that you need to find out is who will claim their child on their tax return. There are specifications like the support and the living arrangements that will determine who will get this tax break between the couple.
Not only that, any property that the couple will decide to sell and split between them may be viewed by the IRS as a taxable income. You need to be careful about these decisions. Transferring a property may not be taxable but if it will be part of a settlement – it may be tax accountable in the future. For instance, if one of the properties given to your ex-spouse is sold in the future, you will also be taxed on the profit of that sale. This is true even if you had no participation in the transaction because the IRS views you are a joint owner – since you purchased it jointly. Make sure you clear this up so you can disassociate yourself entirely to avoid negative implications in the future.
Division of property/assets
The last of the two financial tips will involve the accumulated properties and assets while the two of you were married. In most cases, the division of the property will depend on the value of the item. If the two of you cannot agree to divide what you own, the easiest course of action will be to sell it and divide the proceeds between the two of you. That division will be according to the percentage that will be agreed upon. While this is easy, remember that this will be taxable as an income.
If you want to avoid being taxed, the best course to follow is to take your pick among your properties and assets. In doing so, you need to consider how that property or asset will be valued in the future. For instance, choose an asset that will grow in value over time instead of one that will depreciate.
What should you do when you separate from your spouse
Divorce with debt becomes all the more complicated so you really need to read a lot of financial tips to help settle your financial difficulties as you say goodbye to your marriage. Given that, here are some of the things that you need to take care of immediately when you know that you will be going through a divorce.
Get legal advice. This is the first thing that you have to do. Look for someone who can professional provide you with legal advice about how you should proceed. Among the things that you need to discuss are the state laws and the implications on your children, property and assets.
Open a separate account. The most difficult part of a divorce is separating what is both under your names. It is best to just remove your money from your joint account and open one under your name alone. Make sure to check with your lawyer to ensure that your actions will not be held against you in court. If you both have credit cards under that joint account, it is time to cancel that to avoid your ex-spouse racking in debt that you may be held liable for.
Update important documents. We are talking about any beneficiaries that you have or something similar. You can remove your spouse there and just include the name of your children.
Child support. It is also important, especially for women, to file to child support to ensure that their husbands will follow through with their financial support. This is not always inclusive of divorce proceedings so make sure you discuss this with your legal counsel.
While these financial tips are helpful, it’s always best to consult a professional before making any decisions. Getting divorced is hard, but don’t let it take over your finances as well.