Ending a marriage requires the resolution of many legal and emotional issues. But, quality of life often depends on financial security. Certain divorce issues require scrutiny while undergoing a divorce.
Couples acquire financial assets such as cash, savings accounts, stocks and bonds, real estate, mutual funds and savings bonds. Allocating these assets is not as easy as just determining equal division.
These assets may be more important to the spouse with the lower income who may need them to pay their living expenses. Acquiring assets also leads to different tax liabilities. For example, retirement assets are taxable if a spouse withdraws any money absent the taking of some important legal steps. There may also be financial penalties for early withdrawals.
Spouses must also decide how pensions and other defined benefit plans are divided. They should also address whether a spouse is entitled to survivor benefits from their former spouse, especially if they planned to live on these benefits in the future.
A house may have different financial and emotional considerations. If any real estate is going to be sold, the spouses must consider who will pay its expenses until the sale is final. They must also determine how any profit will be divided or, if it is sold at a loss, how the debt will be allocated.
The spouse who holds on to any real estate will likely have to pay its mortgage and debt. However, a divorce decree does not terminate any obligation for payment of any mortgage or debt for the property jointly held by the couple.
Credit cards may be an ongoing debt. Spouses should learn about any outstanding balances, who holds the cards and whether a spouse has ongoing charging privileges.
Each spouse should keep any joint tax returns for at least five years. Records may be needed to determine the cost basis of any property that a spouse continues to hold.
At least one of the spouses may have to file as single and pay a higher tax. The spouse who is the custodial parent may receive tax advantages by filing as a head of household.
An attorney can help a spouse plan for these and other important legal issues. They can help seek a fair and equitable divorce decree.