Divorce and Money

Next to the children, divorce and money are the next important subject for divorcing parents. First of all you have to divide your properties and then you have to find a formula for how to support the ex spouse and the children financially. As women are usually less educated on the finances, they should prepare and inform themselves as good as possible and seek professional support when in doubt.

At the end of the day, the divorced family ends up with a higher total cost of living. After the divorce there are 2 homes to be maintained. Usually this results in a reduced standard of living for both the parents and the children.

The 2 things you need to do are:

  • Create your own financial plan
  • Open your own bank account

If you learn from your financial plan that you will not have sufficient financial resources for the coming period, you could:

  • Reduce your costs (housing, car, insurance, memberships, magazines...
  • Increase your revenues (change job, get a side job - e.g. start an online business

The Division of the Property

In some U.S. states properties are considered to be common by law when they are acquired during the marriage. Generally they will be divided equally. In other states, the division of the properties depends on the maritial agreement.

Divorce and Money: Division of Assests

The most common assets for divorce and money are: a house, a vacation home, cars, a boat, retirement plans, life insurance policies, stocks and bonds, the saving accounts, furniture, paintings, clocks, watches, juwellery, tools, pets. For business owners, their business. Think about the value of bonusses to be received. Often, bonusses are being earned in year X, but the actual payment takes place in year X+1 or later. This amount should also be included in the assets to be divided.

The debts

Debts are more difficult to divide than the assets. Small debts could be paid off against a savings account or by selling some asset. When there is a big debt, like the mortage on the house, things start to get more difficult. If neither of you will have an income after the divorce that allows for paying the mortgage, you should consider selling the house and pay-off the mortgage.

If you both have a big debt that cannot be paid off by selling assets, you might be in a difficult position. Once you are separated, one of you could stop paying. That leaves it to the other parent to pay for the debt alone. It is advisable to negotiate a condition in the alimony agreement that the amount will be changed if the person receiving the alimony stops paying his or her share of the debt.

Divorce and Money: Child Support

In divorce and money, child support is an important issue. To get child support, the requesting parent has to go to the court to obtain a court order for child support. This is the easy part.

Paying child support is a legal obligation. In the U.S. only 25% of the child support court orders are paid. On 50% of the child support court orders nothing is paid. There are methods to collect the child support, but they do not always work as you can understand from the figures. Apparently too many people get away with it.

How to collect child support?

The most used way to collect child support is to go the the child support enforcement agency in your district to get an order to withhold it from the wages of your ex partner. Some people change jobs to receive their full salary.

If your ex is self employed, his license can be withdrawn until all back payments have been fulfilled.

To receive your child support money, you have to be persistent.

Divorce and Money: Alimony

Alimony is the amount one of the ex partners has to pay to the other for maintenance. Alimony excludes child support. Every state has its own calculation method to determine the amount of alimony and the duration. Be sure that you know what your rights are before discussing alimony and child support. This can save you thousands of dollars a year.

Divorce and Money: Taxes

Taxes are another subject in divorce and money. Tax exemptions can be claimed in some states and countries for dependent children. Whick of you will get that potential benefit? In principle, child support and alimony are tax deductable. What do you have to do to get the deductions?

Are there still taxes to be declared or taxes to be paid from the maritial period? Are there taxes to be received?

Divorce and Money: Retirement provisions

One or both of you might have contributed to a retirement fund. At the time of the divorce, these contributions represent a value. That is often much higher than people think.

Divorce and Money: Health insurance

Health insurance is a difficult subject too. There are individual insurance policies and group insurance policies. The group insurance policies are usually much cheaper. If you are employed, you will probably have a group insurance. Children can be included in the policy. Of course, in a group policy, this is cheaper too.

If you are self employed, you might have an individual insurance policy. As it is cheaper to put the children on a group policy, you have to discuss with your ex to find out what the best solution is. It still occurs that children are covered on both the insurance policy of their father and of their mother. This is not needed at all.

Be aware of the health insurance coverage of your children if their other parent lives in another state. You should verify whether the insurance policy covers health insurance in a different state. If not, work out a solution with your ex partner and with your insurance agent or with your employer.

Are you a Child Friendly Divorced Parent? Do the
Self Assessment

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