Divorce can be not only a hit to the heart, but it can also have a significant effect on your financial circumstances. At the outset of the divorce process, you are especially vulnerable to getting caught up in the emotional aspect of divorce rather than focusing on the financial impact. However, you need to realize that it is very likely you will get over the emotional hurt with the passage of time. The same cannot always be said of recovering from financial injury if you don’t pay attention to these five things that affect the impact of divorce on your finances:
Children. If you have children, there will be child support and you will either be paying it or receiving it. If you are paying, working with your lawyer is essential to determine a settlement that will allow you to support yourself and your children. Consider the risks to your plan as well — i.e., if your ex fails to pay or seeks court-ordered changes due to a job loss or health problems.
Assets. New Jersey is an equitable distribution state, requiring that all marital property is divided fairly — which does not necessarily mean divided equally. If possible, it’s best if you and your spouse can come to an agreement on how your property will be divided rather than having a judge decide. Work with your lawyer and financial advisor on asset protection strategies, but be prepared to compromise. Also, don’t give in to the temptation to cash in retirement accounts early, as this can trigger taxes and penalties.
Debt. In addition to asset division, your divorce settlement will also address debt obligations. Check your credit report to get a full accounting of your debt responsibilities, both individual and joint, and be sure your spouse does the same. You don’t want to be held responsible for any debt racked up while you were married that you didn’t know about.
Budget. After divorce, there will be two households to support instead of one. You need to develop a new budget so you can determine what kind of changes need to be made to accommodate your new normal.
Savings. When you divorce, you need to revisit your savings plans for things like retirement, college, and health care. You will probably need to adjust these to your new financial reality, so consulting with your financial advisor will be key to making good decisions about saving for your long-term needs.
You can rely on Murphy & Cistaro to skillfully negotiate and mediate your issues to a satisfactory resolution. Should the need arise, you can also count on our experience for being aggressive litigators if the situation calls for a more assertive response. Contact us today for your free consultation.