It is unfortunate that many marriages will end in divorce, and the repercussions of that split can last for years. Financial strain is one factor that often leads couples to divorce in the first place, and the couple’s money worries are often amplified by the divorce process. If you are thinking about getting a divorce or are currently in the process of getting a divorce, you need to know what types of financial implications you could soon be facing.
Your Income Will Change
This may seem obvious, but it is important to keep this in mind when you are thinking about your future after divorce. You will be going from a two-income household to a single-income household, and that transition can be especially challenging. Your standard of living will be markedly different, and you will have to adjust to a new standard of living.
Your Credit Score Will Change
It is not uncommon for your credit score to go down as you go through a divorce, and this can sometimes continue for years after your divorce. As additional financial strain is placed on you and your estranged spouse, it is inevitable that some bills will not get paid on time. You can get a free credit report annually, so pull your report and see if there are any blemishes on it. If you have dings on your report or a low score, it can prevent you from opening new accounts — something that may be a necessity after your divorce. If you have a low credit score, start working on increasing that score now by making additional payments to debts and paying for any accounts that are in collections.
You Will Need to Open Your Own Bank Account
If you only have a joint banking account with your spouse, create an account with only your name on it. If your paycheck is deposited in the joint account, change that so it goes into your own account. Do not move money from a joint account to an account in your name unless your attorney has advised this, or unless there is a court order allowing you to do so.
Joint Debts Will Still be Valid
Just because your divorce is final does not mean your financial obligations to your creditors are over. If you have a joint loan on a vehicle, a mortgage, or other account with your spouse, you will both be responsible for paying off that debt; however, your court order or agreement should direct how debts are to be paid following your divorce.
Split Real Estate and Associated Costs
If you have a home or other property together, the property may be sold, or one spouse may keep the home. A separation agreement or court order will set out the terms for who will pay the fees associated with selling the property or maintaining the home until it is sold, as well as who will get the profits from the sale. Alternatively, one spouse may refinance the home in order to buy-out the other spouse.
Your Taxes Will Change
Taxes are already complicated enough, but they will get more complicated while you are going through a divorce. If you have children, you will need to determine who will claim the children on their taxes. We advise that you seek the help of a CPA or other tax professional to ensure that the tax implications of your divorce are being handled correctly. Before your divorce is finalized, be sure that all prior tax debts have been paid. After the divorce is finalized, be sure that each of you has copies of your joint tax returns for the last five years.
Change Your Insurance
Typically, one spouse is the policyholder for health insurance. If you are the policyholder, you will need to have your spouse removed from the policy at the time of divorce, or vice versa. If you have children, you will need to determine whose policy the children will stay on, or if they will get a different one.
Schedule a Consultation with one of our Divorce Attorneys at Robison Smith Law if you have further questions.
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