Surprising Ways Divorce Can Affect Your Finances
In the past, many women were under the financial authority of their husbands. The same cannot be said for today as both men and women shoulder more equal responsibilities regarding finances. In fact, 75% of couples share at least one bank account in the U.S.
For many, sharing bank accounts seemed like a good idea at the time. You get married and plan on spending the rest of your life and assets together. However, many people find that combined bank accounts make it more difficult and costly to separate when couples get divorced. It’s certainly not impossible, but combined finances can add a layer of complexity to the situation.
Here’s what you need to know about how a divorce can affect you financially.
If you’re considering a divorce, you may want to look at how it can affect your finances. Aside from paying court and legal fees, your personal finances are likely to change and see an impact as well.
You’re ready to move ahead if you already know this information. However, many people don’t know the financial implications of getting married and divorced. The top 3 common misconceptions about personal assets in a divorce include:
Each one of these can leave you largely confused and unprepared moving forward. Here’s what you should know.
Remember, Texas is a community property state. This means that any assets or property acquired during the marriage needs to be divided in a divorce. There are a few exceptions to this rule, including:
However, anything else is fair to bring up with your lawyer. It’s important to go through assets with a fine-toothed comb and decide what you want to walk away with. The term “fair” doesn’t always mean just that. You need to be clear with your divorce lawyer about which assets you’d like to keep or divide.
Yes, whether or not you used the account in question, shared debts are shared even after a divorce. It’s understandable to be alarmed by this fact, but it doesn’t mean there’s a need to panic. Your divorce attorney can help you greatly when it comes to understanding how your finances may look in the future.
If you don’t know where to start, begin a list with basic typical shared debts for large items like your home or mortgage payment, car payments, credit cards, school loans or payments, and any other loans. Then, touch on smaller loan items and jot those down as well. For example, write it down if you’re still paying monthly for furniture, electronics, and other similar items. Even if you’re unsure of whether it’s shared or not, keep it on your list for now.
There are some exceptions to shared debts in which you may not need to pay anything. Those exceptions include:
If you’re unsure whether you need to cover partial or total debts for your spouse, contact an attorney who can help.
There are tax consequences you need to know following your divorce. You may be used to filing together or letting your spouse handle all tax forms. However, it will be up to you to file your taxes according to your new marital status. This is especially true if you make considerably less than your former partner or have no income.
You can use other assets to help offset the imbalance of income. But it would be a major mistake to think you can simply take the money and use it without impact. This is because taking money out of certain accounts like retirement, IRAs, etc., leaves you subject to paying withdrawal penalties and, in some cases, income tax to the IRS. So, before you take out any money to supplement your income, be aware and certain of any effects it will have on your taxes.
As a married couple, you might be used to being on one insurance plan with your spouse for medical, dental, and vision. After a divorce, you and your spouse are no longer expected to care for one another’s health financially.
As the policyholder in Texas, a divorce is considered a qualifying life event for insurance companies. This means you can talk to your benefits department and take your spouse off your policy. From the date your divorce is finalized, you are no longer responsible as their insurance provider.
If you aren’t the policyholder for your insurance, it’s essential to prepare to be on your own policy. You can join your employer’s offered health insurance plan or shop around for individual plans. Depending on your health, age, gender, and other factors, being on a solo plan can be more expensive than you think, so it’s important to save or prepare for this upcoming cost.
Other insurance plans you will want to consider when preparing for your divorce:
The average cost of child care for an infant in Texas is $9,324 per year. That’s nearly $800 extra per month per child. Costs for a toddler are lower but still significant at $7,000 per year. Even if your spouse is paying child support, you should not assume that it will cover any and all expenses concerning your child or children.
You might need to consider health insurance for your children if they will no longer be covered under your ex for whatever reason. Sit down with your attorney and flesh out the details regarding your income, child support, custody terms, spousal support, and the realistic cost of caring for your children.
Even if the division of debts is addressed and agreed upon in court, lenders may still see you as liable for debts accumulated together during your marriage. While you may trust your ex-partner to keep their word, it’s important to be prepared if they don’t. Missed payments, split payments, and continued revolving credit can negatively impact your credit score.
Finances are not always clear-cut when divorcing a spouse. This is why it’s critical to have an experienced divorce attorney on your side. Cassandra Daniels of the Daniels Law Firm knows how divorce proceedings are handled, and she can help you, too.
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