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Three Ways You Could Be Hurting Your Assets When You Divorce
No matter which way you slice it, there is nothing fun about the divorce process. Even under the most civil, loving circumstances, the actual split and all it entails can be emotionally - and financially- draining. One area most people do not like to think about but are confronted with very early on in the process is money. Regardless of how peaceful the separation, the subject of money can test anyone’s patience and place them on the defensive, especially when it involves their lifestyle and livelihood following the divorce.
When it comes time to protect your quality of life and all you are accustomed to at the end of your marriage, how you handle your assets is critical. Even the smallest mistake can cost you a lot when it is time to negotiate settlements, and if you’re not careful, some errors can continue to cost you long after the divorce is over.
Here are three ways you could end up hurting your assets and their value when you divorce:
Preparing for Divorce: Safeguarding Your Finances
Protecting your finances as you prepare for the divorce process is perhaps one of the most important tasks you can take on before your marriage officially ends. Planning is everything, as divorce can easily wreak havoc on your financial standing if you are not careful. Protecting your assets and monetary funds is critical if you want to maintain the lifestyle you are currently accustomed to and ensure your financial future is secure.
Constructing a Game Plan
As a divorcing spouse, you are already facing an emotional toll; the last thing you want is to tack on additional stress due to financial trouble, especially when some of that trouble can be avoided if addressed early on. Here are some important steps you can take to safeguard your finances amidst your impending divorce:
Take inventory - As overwhelming as it might be, taking financial inventory is a must. Sit down and create a list of every account and asset you share with your soon-to-be ex-spouse. You will need to take stock of joint accounts and pay special attention to lines of credit, as well as wills, retirement accounts, and any pending purchases or joint business investments. Also take note of any life insurance policies you opened up while with your spouse. You may wish to modify the policy if you had them listed as a beneficiary. Once you have a clear, thorough list of all your debts, accounts, and belongings, it is time to sit down with your spouse and speak civilly about what you would both like to see happen with each respective item on the list.
Preparing for Divorce Mediation
The decision to attend mediation to settle your divorce matters is a beneficial one. Couples have the option to discuss their post-divorce arrangements and come to settlement agreements in the presence of a professional mediator, who is trained to minimize conflict and help produce positive results for the entire family. Before you begin the negotiation process, though, it is important to address core issues that will be discussed during mediation. This will help ensure everything runs as smoothly as possible and that you are not caught off-guard when it is time to reach an agreement.
Here are some key areas every couple should discuss in preparation of the mediation process:
Joint Accounts
Whether you share regular checking and savings accounts, vacation funds, or credit cards, it is important to take inventory of all your joint accounts and make sure you have copies of everything. This includes mortgage statements, wills, and trusts. If you are able to civilly discuss money matters with your soon-to-be ex-spouse before mediation, it is helpful to do so, but if that is not an option, gather the financial records for yourself and wait to tackle the subject until your mediation conference.
Divorce and Finances: How Divorce Can Affect Your Money
The divorce process can trudge up a myriad of emotions and bring a lot of unresolved conflict to the surface, especially when you are getting down to the wire. The closer you get to the finish line, the more stressful the situation tends to be, as it is a taxing experience for everyone involved. Despite these common bumps in the road, many divorces run smoothly and end on a mutual, peaceful note. The entire process can prove to be a positive path for the whole family, as it often removes everyone from an unhealthy environment.
Even when you are fortunate enough to skim through a divorce without much tension, one area that can be significantly affected in the aftermath is your finances. This doesn’t mean your financial well-being needs to suffer, however. Here are three ways your divorce can affect your money and how to combat those changes so they don’t take a turn for the worst:
The Road to Divorce: Relationship Red Flags That Can Lead to Separation
No one likes to think about the possibility of an impending divorce, especially after spending months or years investing time and energy into a relationship. It is not uncommon for one spouse to feel blindsided by the news that their partner is considering divorce, or to experience shock that there is even a problem to begin with. The reality, though, is the road to divorce often begins long before the final weeks and months of the marriage. There are numerous red flags that can signal the potential end - or the beginning of the end - of a marriage, and it can be easy to dismiss these signs early on if you are not tuned into the root issues.
Paying Attention to the Warning Signs
Whether you are newly married and have been feeling uneasy about your recent partnership or you have been married for years and are beginning to question your marriage’s foundation, if you are sensing something is amiss, it is wise to pay attention to your instincts. Even if things seem to be running smoothly in the moment, those unsettling feelings are often an indicator that trouble is brewing. These warning signs can morph into much larger problems down the road if not acknowledged early on.
Division of Asset Obstacles and How to Overcome Them
Regardless of how much or how little you and your soon-to-be ex-spouse own, the division of assets in the divorce process can significantly impact your financial standing after your marriage is over. Whether you need to look out for your own well-being or you have additional family members to care for after the separation, money matters. What you and your spouse split and how you split it will be a defining factor in the overall quality of your long-term financial security.
Where Asset Division Can Get Tricky
Determining Value
Some couples make the mistake of believing that the most important factor in the division of assets is the flat dollar value. Whatever something is worth must determine its overall value and it should simply be divided evenly, right? This is not always the case. When it comes to most assets, their worth must be based on more than just their dollar value. For example, you must take into account factors such as an asset’s liquidity as well as how its sale will be affected by taxes. The long-term worth of a piece of property is just as important as its immediate worth.
How Will Your Divorce Affect Your Taxes?
Divorce can be overwhelming on its own, but adding the possible tax implications of divorce to the mix can definitely contribute to the stress of the process. You and your spouse have already decided to split. Your lifestyle, future, and any children you both share will be affected by the separation. Decisions must be made regarding filing the paperwork and how you will handle mediation or time in court. The last thing you are probably thinking about when you are ending your marriage is your taxes, but the reality is that your divorce does have the power to impact your taxes both during and after the transition.
Filing Status
The first factor you should be aware of is your filing status. For example, the “Head of Household” status typically provides a slight advantage to divorcing taxpayers, compared to the “Married Filing Single” or “Single” statuses, but certain requirements must be met to be considered head of the household, so you need to ensure you are in line with those requirements first.
Legal Separation: Is It Right for You?
For some couples facing marital troubles, divorce as a solution is a last resort and legal separation is the first course of action. There are countless reasons you or your spouse might not be ready to call it quits just yet, and legal separation allows you time to assess the damage and decide whether or not divorce is the right choice.
How Is Legal Separation Different from Divorce?
Like divorce, legal separation is a legal action that officially deems you both separated in the eyes of the law. However, legal separation is a term and is not an actual divorce. According to the law, you are still married and may not marry other people. Your property and possessions are not divided up unless you ask the court to divide those things for you. The court can decide other things with a legal separation, such as child support, parenting time (visitation), and allocation of parental responsibilities (child custody).
Why Mediation Is the Perfect Recipe for Amicable Divorce Resolution
Couples looking for a smooth, amicable divorce solution often turn to mediation to settle their differences and come to agreement on lifestyle arrangements following the end of their marriage. While it is true many divorces can take a turn and become messy, the bulk of them actually result in a peaceful, mutual split. It is not uncommon for this kind of separation to stem from a thorough, professional mediation process.
Why Do Amicable Divorces Benefit from Mediation?
Respect: Although mediation is typically pursued by couples who struggle with conflict resolution, those experiencing amicable divorces greatly benefit from the mediation process as well due to one simple factor: Both spouses are interacting in a civil manner. Couples who are already cooperating with one another and communicating peacefully are on the fast track to success when they enter mediation. The trained mediator can more effectively do their job to facilitate settlements and manage negotiations when both parties leave hostility and conflict at the door. If your divorce is mutual and you and your spouse are communicating with respect and patience, your meditation experience can be a positive, productive one.
Are You Guaranteed Alimony after Divorce in Illinois?
Among the many questions divorcing spouses have following a separation, questions regarding alimony, also known as spousal maintenance, tend to be a big concern. This is particularly true for stay-at-home parents or spouses who are not the main earners in the household. Taking on greater financial responsibility - or in some cases, any financial responsibility at all - can be a scary thing, especially when one spouse has become accustomed to a certain lifestyle and is suddenly thrust into a new routine.
Alimony’s Nationwide Evolution
As societal roles and career opportunities have changed for both men and women in recent decades, so have the expectations and allowances surrounding spousal maintenance. More women are working now more than ever, and the concept of stay-at-home fathers is far from new. According to Labor Department statistics, nearly three-quarters of women work. In the year 2010, 97 percent of the 400,000 people receiving alimony were women, and that trend has been a continual one.
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