It’s no secret that a
divorce can be particularly damaging on either spouse’s finances. Unfortunately,
many divorcing couples often go through the experience without so much
as a safety or a basic understanding of the repercussions of a divorce
on their finances.
While the U.S. divorce rate has been in steady decline over the last 20
years, it’s still estimated that more between 40% to 50% of all
marriages in the country end in divorce. But among baby boomers, divorces
have actually been on the rise, earning the nickname “gray divorces.”
For these former couples, the cost of a divorce can be especially high
as they no longer have time to recover from the financial damage they incur.
In any case, the consequences of a divorce can be significant for anyone
going through it. To keep your finances in good health, be sure to consider
the following factors.
Get Professional Help
A divorce can take a huge toll on your emotions. One moment you’re
emotionally charged with fear or anger, the next you’re feeling
sad and lonely. This rollercoaster of emotions is a perfect recipe for
making bad decisions. The best way to minimize the likelihood of making
costly mistakes is by getting professional advice from a divorce lawyer
and financial advisor. This is especially important for women, who still
tend to be more negatively impacted by divorce than men, suffering serious
setbacks to their standard of living.
Get Insurance for Support Payments
For divorces that involve children, one partner is usually tasked to pay
child support and/or
spousal support for the other. The parent taking greater responsibility for raising the
children is usually the recipient of such support.
But the challenge with making these payments over a long-term period will
always be liquidity. Chances are high that the paying ex-spouse could
soon find himself unable to pay for support, which in turn means that
their former partner will have to shoulder the financial burden of paying
This is where financial advisors can come in by running estimates on marital
assets and taking into account factors like liquidity, taxes, and risk
to help a divorce lawyer reach a realistic settlement.
Consider Tax Implications
Taxes are an often overlooked factor in many divorce cases, with many ex-spouses
focusing only on
dividing assets. For instance, assets of $1 million in a 401 (k) are worth much less than
the same amount of money in a taxable account. This is because a 401 (k)
will ultimately be subject to marginal income-tax rates when used in retirement.
In contrast, the latter will be taxed at a lower capital gains tax rate.
If you are interesting in filing for divorce with an experienced legal
team in Daytona Beach, FL,
contact Stepniak & Park today.