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Do not overlook financial implications of divorce

Divorce is a difficult time for both spouses involved. While both parties will likely want to complete the divorce process quickly, it is critical to avoid moving too fast to the point where they make a disastrous mistake. 

Many spouses realize they will have to contend with alimony and child support payments in some fashion after divorce. However, there are many other financial considerations a spouse should never ignore. Consulting with financial professionals can help spouses navigate the following areas. 

Taxes

Beginning in 2019, the Tax Cuts and Jobs Act will go into effect around the country. This new law stipulates that divorcees will no longer be able to write off alimony payments on their taxes. This can create a much greater burden for individuals who have to pay the other spouse. Anyone with a divorce that will not finalize until after Dec. 31, 2018, will need to consider this. Child support payments will remain tax-deductible, so it may work in the higher-earning spouse's best interest to try to pay more in child support than alimony. 

Debts

For the most part, any debts incurred prior to the marriage remain under the one person who accumulated the debt. However, debt acquired during the marriage, even if it was merely one person spending the money, becomes shared in divorce. It is critical to keep an eye on a partner's spending habits before and during divorce so that the debt does not grow. 

Retirement

It is paramount for both spouses to only divide a joint retirement account when a judge orders it. In many cases, there will be penalties set forth by the IRS for prematurely taking money out. Over the course of the marriage, both spouses should maintain records of all deposits made into the retirement account. This allows them to keep track of what money went in prior to marriage and how much went in during.

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Salem, MA 01970

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