Understanding Finances in Divorce
Whether you consider your current financial circumstances to be relatively simple and straightforward or complex and perhaps confusing, the financial issues that arise when dissolving a marriage or domestic partnership are important to understand. There are tax and other financial considerations specific to a divorce settlement that may either prove to be financially useful, or if ignored, may be cause for unnecessary financial cost and confusion.
In a marriage it is common for one spouse to have primary responsibility for handling the family finances-budgeting, paying bills, oversight of investments and so on. After a divorce, it is important for both you and your spouse to understand and be comfortable handling all aspects of your financial life.
In order to arrive at a financial settlement that is reasonable, fair and works for the entire family, it is essential that copies of all the family financial information be provided. This includes, but is not limited to:
- Most recent three years of tax returns
- Current pay stubs
- Pension information
- Mortgage statements
- Bank statements
- Retirement account information and statement (IRA, 401(k), etc)
- Taxable investment account information
- Credit card statements
- Other loan/ debt information
- List of valuables and collectibles
- List and value of personal property including automobiles
- Business interests, if applicable.
- Estimated budget
Once this information is gathered by the financial neutral or coach, a net worth (asset and liability sheet) and combined budget statement will be developed to assist in the discussion of the financial settlement. Other questions and issues that may arise include:
- Division of pensions
- Social Security benefits for both spouses
- The best way to divide taxable accounts
- Can I take money out of my retirement account?
- Tax consequences of taking a distribution from a retirement account
- How to handle debt
- What to do with the marital home
- Can I or my spouse afford to stay in the marital home?
- What if the home is "under water" with respect to the mortgage?
- Will I have enough to live on?
- Tax consequences of paying/receiving child support and spousal support
- What happens at retirement?
These and other financial questions and concerns are best answered and resolved by a qualified Financial Specialist with training and experience in working with divorcing couples.