Divorce process is filled with financial and emotional concerns. Fortunately, spouses can ease up the financial consequences by organising their finances and preparing an elaborate documentation for court or mediation hearings. In this article we are going to analyse the financial aspects of divorce, and share 6 tips that will help you prepare for this traumatic process.
1. Do Know You and Your Spouse’s Debt
Spouse’s hidden debt often resurfaces during the divorce process. In nine community property states spouses collectively share all the debt that was created during their marriage. In all other states spouses are only responsible for the debt that was made in their name, and the one that was incurred by jointly issued credit cards and loans. In community property states, it is completely irrelevant whether a spouse benefited from the debt that they need to repay. That’s why you need to know your debt, and the best way to do this is by obtaining your and your spouse’s credit reports before the divorce process starts.
2. Do Document All of Your Goods
You should photograph all household valuables and obtain their loan documentation, bills and warranties. This includes all of the expensive Hi-Tech gadgets, jewellery, art pieces, expensive pieces of furniture and valuable sentimental items. Spouses often hide or sell valuable assets during the divorce litigation so, by documenting them, you will have a proof of their existence and you can ask for their return or compensation on court or mediation hearings.
3. Do Collect All Important Financial Documents
There are nine community property states in the U.S., where all the property acquired during marriage is shared between the two spouses. This means that your rights when filing for divorce in California guarantee you the ideal half of your marriage’s community property. In order to make your divorce process easier, you should collect all of the financial documentation beforehand, including: tax returns, brokerage statements, loan and bank documents etc. This will make the whole process easier. In states that don’t follow community property principle, these documents will speed up the litigation process and give the full perspective of your collective finances to judge or a mediator.
4. Don’t Forget About Your Health Insurance
Medicare program starts when you turn 65, before that you need to pay for your own health insurance. Many employers don’t cover their employees’ health insurances, and if you work for one of them, you are probably insured through your spouse’s policy. If this is the case, you can extend your insurance coverage for 36 months after the divorce, through COBRA Continuation Health Coverage. You can also opt for public health insurance through Health Insurance Exchange, which is now guaranteed by Affordable Care Act. Of course both of these coverages require you to pay a certain amount of money, so you need to think about your options before your divorce litigation ends.
5. Don’t Ignore Tax
Any asset you choose to take, including: alimony, house, retirement plan or brokerage account, requires you to pay the appropriate taxes. These can be quite costly, and you need to consult your tax attorney beforehand.
6. Don’t Necessarily Ask for the House
For most couples their house is, by far, the most valuable item they own. Your home usually has a huge sentimental value, plus looking at your spouses while they are moving out makes you feel victorious. In spite of all this, you should check whether keeping your house is a financially reasonable thing to do. Most divorcees require smaller apartments, and big family houses are likely to cause various unexpected expenses. Since most couples divorce in the first few years of their marriage, most of their properties are still in the first phases of mortgage loan repayment. This means that their home does not have a big value on the open market, which is why they should focus on saving: 401(k) plans, brokerage accounts and other more valuable assets.
Although financial preparations require both time and effort, they can easily save a substantial amount of your funds. We are not only talking about increasing the share of assets you will get, but also about saving money on attorney’s discovery fees. Financial side of divorce process is very important, so before you start your single life you need to relieve yourself from your partner’s debts and build a strong financial foundation by saving as much money as you can.