Divorce is an incredibly difficult process for everyone involved. Not only does it require you to separate yourself from your former spouse and transform your life to fit your new needs, but it can also lead to considerable financial upheaval. A divorce process can prove expensive all on its own — and taking on too many debts or losing too many of the assets from your marriage can impact your finances even more.
Are you in the middle of a divorce? Do you need help protecting your finances? Consider these strategies with a divorce attorney that can help improve your ability to protect your personal finances in a divorce.
- Know How Property Distribution Will Look During a Virginia Divorce
- Plan Ahead for Debt Distribution
- Look at the Family Home Carefully
- Take a Close Look at Your Investments Before You Divide Them
- Pay Attention to Potential Tax Consequences
- Create a Budget as Soon as Possible
- Keep Emotions Out of the Financial Equation as Much as Possible
- Avoid Racking up More Debt Where Possible During Your Divorce
1. Know How Property Distribution Will Look During a Virginia Divorce
Virginia state law relies on an equitable division of property, investment accounts, and financial assets during your divorce. Most of the time, one party does not simply walk away with all the financial assets that you and your former spouse collected over the course of your life together. You need to prepare for the real estate you will likely end up with during your divorce.
Assume you will keep any assets that you brought to the marriage directly and which you did not share with your spouse: For example, if you owned your home before the divorce, you may get to keep it after the divorce process. On the other hand, the property that you bought together may get divided according to the fair and equitable lines set out by the judge.
2. Plan Ahead for Debt Distribution
Just as property distribution relies on equitable division, so does debt distribution in your divorce. If you and your partner have shared debt, you may take some of that debt out of the divorce with you. You may, for example, end up responsible for paying for half of any credit card debt that you share.
If you keep an asset, like your home or car, you may find yourself responsible for dealing with any debt left on that asset. Plan ahead with a certified financial planner (CFP) for the debts you will likely take out of your marriage and create a plan for paying them down.
3. Look at the Family Home Carefully
Many couples fight over the family home in a divorce. You may have generated equity in it throughout your marriage and thus may not want to give it up. Likewise, if you have primary custody of the kids, you may want to keep them in their home if possible.
That does not necessarily mean that keeping the family home will be the right decision for you, however. Take a careful look at your home when divorcing as you may need to give up other assets to keep it. You may need to buy your spouse out of the home, which may mean refinancing the mortgage. Can you afford to do that?
As you consider whether to keep the family home, make sure you incorporate factors like upkeep, insurance, and taxes as well as the cost of the mortgage. If you know you will not be able to afford the house, you may want to make other financial decisions.
4. Take a Close Look at Your Investments Before You Divide Them
The paper value of your investments may not match up with their actual value over time. While some investments involve relatively little risk, others may bring a considerable risk of losing the initial funds you put into the investment.
Carefully consider which ones you really want to keep as well as their actual worth. You may also want to consider cashing out some of those investments, whether to help buy your ex-spouse out of the house or to take care of some of the joint debt, financial issues, or expenses you have related to the divorce proceedings.
5. Pay Attention to Potential Tax Consequences
Taxes can create immense headaches as you manage your divorce and its aftermath. Make sure you understand the potential tax impact of your divorce, including how much each asset is worth or which impacts you might face due to income from investments. The better you understand those issues, the better you can protect your finances.
6. Create a Budget as Soon as Possible
Before you move forward with your divorce, take the time to create a budget. This budget can serve as a guideline that can help you make decisions about how you need to divide assets or debt in your divorce agreement.
Making your finances work on a single income may look dramatically different than a budget created for a two-income household. An effective post-divorce budget can help you make decisions about housing, spending, and how much income you need after your divorce.
7. Keep Emotions Out of the Financial Equation as Much as Possible
It’s easy to let your emotions drive your decisions as you prepare for divorce. You may feel bitter toward your ex-spouse, especially if infidelity or abuse played a role. You may also find yourself clinging to the familiar: your home, your vehicle, wedding gifts, or any other items associated with your former life.
As much as you can, avoid letting your emotions influence that process. Instead, focus on creating a fair and equitable division of your marital assets that does not cause undue stress for either spouse.
8. Avoid Racking up More Debt Where Possible During Your Divorce
Divorce brings with it a number of expenses with which you may have to deal. Your divorce may mean that you need to acquire a new place to live, pay alimony (or spousal support), or pay child support, for example. If you and your spouse shared a vehicle, you may now need to acquire one. Your new place needs furniture. Even kitchen supplies could prove a challenge.
Instead of rushing out to make purchases, however, try to wait it out for as long as possible. Avoid bringing in unnecessary debt from life events like a new car. You can always start making purchases once you have a better idea of what your finances will look like in your new life.
Protect Your Finances During Your Virginia Divorce
Managing a divorce isn’t easy without a financial advisor. You want to protect your finances as much as possible — and an attorney can help. Contact the Law Office of Michael Ephraim today to learn more about how we can help your financial situation during a divorce settlement.