Divorce changes nearly every aspect of your life. However, one of the most prominent changes is to your financial state. A massive portion of divorce is separating your finances from your spouse’s. Continue reading to learn everything you need to know about the financial side of divorce.
What Financial Assets Are Assessed?
One of the first steps of divorce is an assessment of all financial assets. These assets can include cash, checking accounts, savings accounts, investment accounts, retirement accounts, stocks, and bonds. Any businesses and real estate owned by either person will also be reviewed.
How Is Property Divided?
Property does not include only real estate, but also collectibles, antiques, financial property like stocks, and other physical assets. Property can be divided based on an agreement decided by you and your spouse, state law, or by a judge in court. One way spouses can create an agreement on the division of property is through bartering assets for assets. Another way is to sell all marital assets and divide the proceeds.
How Is Debt Divided?
In a divorce, both parties must decide who is responsible for various debts. To start, create a list of all accounts and their balances. Unfortunately, there may have been loans or credit cards acquired that you do not know about. To ensure all debts are disclosed in the divorce process, both spouses should request a full credit report from the three major reporting agencies. The reports will provide a list of credit accounts, the type of account, the name(s) of the borrower, and payment history. During the divorce process, you should aim to prevent debt balances from increasing. There are many options to consider for handling debt in divorce. You can try to pay off balances to eliminate credit accounts, make an agreement to exchange debt responsibility for more assets, or share the debts equally.
What Happens To Retirement Savings?
By law, you are entitled to half of your spouse’s retirement savings. This money does not have to be used for retirement savings once it is in your possession but be sure to follow the IRS’s regulations regarding distributions. You will want to avoid the 10% penalty for early withdrawal, if possible.
How Are My Taxes Affected?
The changes in your life caused by a divorce can also bring adjustments to your tax situation. By not knowing how your taxes will be modified, you could cost yourself a substantial amount of money. You should discuss and agree on which spouse will claim dependents and who can claim head of household. You may also see a significant change in income, so be mindful of how this will affect your tax bracket and tax rates.
Divorce is difficult and the massive changes in your finances can add even more challenges to the process. If you are currently going through a divorce and need assistance with your finances, our advisors at Curo Private Wealth are happy to help. We can help you settle into your new financial situation. Schedule a consultation with us today to get started.