Divorce is common enough that you likely know several people who’ve gone through one, but that doesn’t mean you should rely on those people for advice. The stories you’ve heard from other people about their divorce likely include some misinformation. In other words, you shouldn’t leap into action before you have even filed for divorce out of fear of a worst-case scenario.
In fact, before you even discuss divorce with your spouse, it may be in your best interest to talk to a professional, possibly multiple professionals, about the impact of a divorce and the best way to manage it. Proper advice and planning mean you’ll be better prepared to address complex financial issues.
In addition to consulting with an attorney, speaking with a financial advisor or accountant could also be beneficial, as divorce often has substantial tax implications. The sooner you begin planning and coordinating your approach to divorce with your ex, the easier it will be for you to minimize the financial consequences on your household.
Early advice helps you avoid major money mistakes
People eager to protect themselves in the early days of divorce can often end up making mistakes that come back to haunt them later in the process. Draining joint accounts, closing or maxing out credit cards and other impulsive financial decisions can have consequences for you down the road and potentially impact how the courts rule in the asset division process in your divorce.
Taking a calm and measured approach to managing your assets and finances as you consider divorce will help you avoid making expensive mistakes, such as hiding assets or dissipation of the marital estate.
Consider the long-term financial and tax implications of your divorce
Not that long ago, there were tax benefits associated with paying alimony, but changes to the tax code have shifted how the government views alimony funds for the purpose of income tax. Now, your best option may be to put alimony funds in a trust for tax purposes or negotiate special terms to limit tax liabilities.
The more familiar you are with the rules that guide both asset division and the taxation of shared assets and child or spousal support, the more you can potentially reduce your financial liabilities during and after a divorce. The better you understand the tax rules that apply and how the courts will likely divide your assets, the easier it will be for you to plan for a stable and secure financial future.