If you’re thinking about divorce, you’re likely agonizing over your decision. While you’d love to be living without the constant bickering and tension that you know are affecting your kids, divorce would likely mean making some economic sacrifices. Living in the Bay Area is expensive, and you’ve built a life predicated on two incomes. Will you be able to afford your current lifestyle on a single income or will you need to make changes, including selling your home? Should you be talking to your boss about a raise or looking for a new job altogether—one that pays a lot more money? What about the timing? Can you be looking for a new job while you’re in the process of getting a divorce?
Here at California Document Preparers, these are among the concerns we frequently hear from our clients. While they invariably decide that creating a new life, free of an abusing spouse or a dysfunctional relationship is worth it, there is significant anxiety associated with the decision. And ultimately, many of those anxieties are related to the economics of divorce.
If you’re contemplating divorce, here are six things to do now to prepare
Take stock of your mutual assets. Take stock of account balances and understand the total value of joint assets, including checking, savings and brokerage accounts, retirement plans and life insurance policies, real property, vehicles and other acquisitions that are part of your total net worth. You will need this information as you begin the division of property.
Be fiscally conservative. Resist the urge to make significant withdrawals or expensive purchases prior to or during the divorce process. You’re going to have some big expenses coming up.
Prepare for a new career ASAP. As soon as people know they are getting a divorce, they should think about how they will support themselves in the years after the divorce. If one spouse has been a stay-at-home mom or dad, it’s time to get serious about reentering the workforce. A common mistake is waiting until a divorce is final before beginning a job hunt. By that point, precious months have been squandered that could have been spent polishing skills, getting new training or networking to build important business contacts.
Don’t get emotional about your home or other items. In many cases, people give up valuable assets or other rights in order to keep the family home. Selling the house can be traumatic because there are so many emotions tied to the family home—it’s where you once lived happily together and raised your kids; it may be in a great neighborhood where you’re surrounded by friends, but sometimes it’s the right thing to do. Try to look at the big picture, with the house as just one part of the overall accumulation of assets.
Think about the tax implications. Next to a house, a retirement fund may be the most valuable asset a person owns. But couples shouldn’t simply cash out and split the proceeds. There are tax consequences of trading one asset for another as you divide your property. The vacation home is a tax-free benefit while the 401k is taxable.
Consider all insurance options. Divorces commonly require one spouse to pay child support or maintain health insurance for dependents. But if that person loses his/her job or is unable to work for whatever reason—something that is all too common these days—a significant amount of support suddenly disappears. Picking up the cost of health insurance for dependents can be a significant financial contribution.
We assist clients who can agree on division of property and a parenting plan. Our family law team prepares the legal documents, notarizes and files them with the court. Divorce is never easy, but we’re sensitive to the emotional needs of our clients and are in touch throughout the divorce process. We’re helpful, compassionate and affordable.