Ending a marriage can be a juggling act involving your family, custody, dividing assets and your emotions. But hasty financial decisions can have long-term consequences.
Financial planning during a divorce requires time and deliberation. It often takes time to determine ownership of assets that the couple acquired.
The value of assets may change over marriage. For example, a house may have appreciated, and maintenance costs can increase over time. Spouses may also disagree on valuation of a complex asset, such as a business.
Each spouse should do their own assessment of major assets to assure fairness. Mediators, arbitrators and judges can review valuations and help make reasonable determination.
Some spouses may try to hide their assets in trusts and overseas accounts to avoid giving up assets. Or they may use less-sophisticated schemes such as transferring assets to family members or friends or putting off bonuses and raises.
Attorneys can help search for assets and seek a court order requiring your spouse to provide documents and information about their property. Financial institutions may be compelled to produce account documents.
It is also important to uncover information about marital debt. The three major credit bureaus can provide credit reports that disclose credit card, vehicle, student loan, personal loan, mortgages, and other hidden debt. Bad debts and pending lawsuits involving business should be uncovered.
Creditors may hold a spouse responsible for their other spouse’s unpaid joint debt from credit cards. Uncover these debts and, when possible, pay them off or refinance them.
Spouses may jointly own or have their own individual retirement accounts during marriage. But one spouse may have a lower-valued IRA because they gave up work to be a full-time parent.
A qualified domestic relations order permits the fair division of retirement plan assets. With a QDRO, the account holder or recipient will not have early withdrawal penalties before they reach the age of 59½ years.
Long-term child support
Parents should consider, in addition to daily expenses, long-term costs such as future educational costs, medical expenses and health insurance, and extracurricular and social activities.
Each parent’s income, the time spent with each parent, other custody decisions, and the child’s age play a role in determining costs. Parents have to decide which parent will claim the annual child tax credit.
Parents should also consider a life insurance policy that names the other parent and children as beneficiaries for the parent who pays support. This helps assure continued child and spousal support if that parent dies.
Property division and support can be complicated and have long-term consequences. Attorneys can assist spouses with these matters.