Divorce is often emotional and stressful. When navigating this complex process, the last thing on your mind may be your financial situation.
However, divorce impacts your finances in many ways. Knowing what financial changes may be coming and what steps you should take to protect yourself will pay off and help you set yourself up for a secure financial future.
Debt division
While you know you have to split your marital assets in a divorce, you may not realize the same division process applies to marital debts. Just like with assets, the first step is determining how much you owe and whom you owe.
It’s wise to get a copy of both people’s credit reports when doing this. Some debts will be shared, while others will belong to just one spouse. The shared debts need to be handled or divided so that you don’t have to continue worrying about them after your divorce.
Tax considerations
Before the divorce is finalized, you should decide who gets to claim the tax exemption for dependents since only one parent can do this. Additionally, you may need to take additional steps to ensure that alimony payments are tax deductible.
Working with an accountant on these issues is recommended to ensure that you don’t make mistakes that could cost you hundreds or thousands of dollars.
Understand your financial situation
In your marriage, you may have been hands-off regarding the family finances. If so, you probably let your spouse handle budgeting and paying the bills. If this is the case, you must educate yourself about your financial situation and how to set yourself up to avoid financial hardship in the future. It’s also important to consider your legal rights considering finances in divorce to avoid issues.
