
Divorce is rarely as painful as splitting couples fear, but the divorce process is often much smoother if both partners do their financial homework before heading to the negotiating table. A recent article from Fox Business highlighted five different steps divorcing couples should take before signing on the dotted line. First, people who are headed towards divorce should evaluate their assets honestly. Usually, the biggest asset owned by a couple is their home, but several other types of property also count as marital property during a divorce. Other assets to identify and sort through include retirement accounts, stock options, and deferred compensation. And individuals might want to sort through the tax consequences of pursuing certain assets. Sometimes, it’s best not to chase some types of property. Second, couples should weigh their debts. This task can be arduous, but sources recommend gathering a 12-month history of all debts, including utility bills, credit card debts, and loans that are held jointly. The Fox Business article recommends that couples pay off their debts as much as possibly before filing for divorce. If they are stuck with massive debts at the negotiating table, the couple might find their divorce delayed over an argument about who will assume responsibility for the debts. Next, both spouses should obtain a free credit report. Sources indicate that couples are often unpleasantly surprised by forgotten debts that show up on a credit report. According to Lili Vasileff, a financial planner in Connecticut, [i]t’s important to know your credit rating and correct inaccuracies while you still have one household and joint source of income so you can remedy any inaccuracies and strengthen your financial position in advance.” In addition to these three steps, divorcing couples should also keep close tabs on their spending habits. By doing so, both spouses can determine the type of budget they’ll need to have in their lives after divorce. Often, couples find that they have to change their lifestyles in order to make ends meet after a divorce cuts their income in half. This review, however, needs to be honest, as people often “tend to underestimate how much they spend,” according to Vasileff. Finally, couples need to accurately identify all of their income sources. Alimony and child support are both determined by how much money each member of the marriage is contributing to the family. When identifying income sources, divorcing couples should remember that these sources extend beyond work income, and may include payouts from investments or ownership stakes in businesses. Share:
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