Divorce is a difficult emotional experience for everyone involved, but if you handle things correctly, there are ways to keep divorce from destroying your finances as well. Dividing your possessions, changing your housing situation and dealing with legal expenses can all be factors that have a negative impact on your financial situation. There’s no doubt that things will be tough, but if you stay smart there are ways you can keep your head above water.
How to Keep Divorce from Destroying Your Finances
- Don’t forget about the liquidity of your assets: You need to be vigilant about exactly which assets you accept during your divorce. Even if on paper you are getting 50 percent of the total wealth, you have to consider liquidity. Some assets, such as retirement accounts, will be difficult to turn into cash in the event that money becomes a problem. This could create serious financial issues for you later on. It’s fine to accept some illiquid assets, but make sure you are ready in terms of cash flow. Don’t underestimate the additional new costs of living.
- Watch your taxes: Make sure when you are planning your finances that you have done your homework on the tax impact of divorce. For example, paying alimony is tax deductible and receiving it is taxable income, but you will not have to pay taxes on child support you receive. Understand the tax impact of your divorce, so that you can plan your finances accordingly.
- Get the right lawyer: A good divorce lawyer can tackle the details of your divorce to ensure that you are protecting yourself and getting your share financially. Additionally, if you are concerned about the legal fees of a drawn-out divorce, you should consider working with an attorney who has experience in mediation. Mediation can be a faster, more affordable and often less combative way to handle the divorce process.
There are undoubtable financial and emotional challenges to most divorces, but if you stay on top of your money and work with a talented lawyer you should be able to avoid financial catastrophe. Divorce is a hard enough time already. The last thing you need is to add struggling finances to the list of concerns.
Julian, Crowder & Shuster, P.C., are Lewisville divorce lawyers who help their clients navigate the legal difficulties of divorce and other family law issues.