Divorce can ruin your financial life, especially if you don't take the right mitigative measures. If you are going through a divorce, take the following precautions to safeguard your post-divorce finances:
Estimate Your Living Expenses
It is difficult to plan for your post-divorce life if you don't even know how much you need for your expected lifestyle. That is why the first thing you should do is create a budget for the day-to-day expenses you are likely to incur once you are divorced. This should include both the regular/known expenditures, such as rent/mortgage, groceries, and transportation, as well as some small emergency cash. Try to limit your budget to things that mimic your standard of living during the marriage; it's unlikely your standard of living will go up unless you get extra sources of income.
Understand the Tax Consequences
Some of the properties or money you will get in the divorce settlement may be taxed. For example, alimony received is usually taxed, while child support is typically not taxable. You need to know which of the assets will be taxed so that you know exactly the net value of your divorce settlement. It would be disappointing to budget with a $5,000 rental income from a property only to later learn that a percentage of that money will be going to the IRS.
Don't Ignore the Future Value of Assets
It's also important to remember that the assets you are dividing today may not have the same value in a few years. This is true for all assets, including money. For example, inflation may devalue money, a real-estate property may appreciate or depreciate, a car may depreciate, and a painting may appreciate in value. Don't forget to ask yourself how much the value of each property may change in the future before agreeing to a settlement.
Aim for Diversified Assets
To secure your finances, it's best to get multiple assets than to get one expensive asset. For example, it's best to get a boat, part of a house, some cash money, and a car than to, say, get a single painting that is of the same value of all those things. What if it turns out the painting was over-appraised? What if the painting is stolen or depreciates in value? The risk of your financial fortunes taking a hit is greater if you depend on a single item; the more you diversify, the more secure your finances will be.
To learn more about family law, talk to a divorce attorney today.
Share26 April 2018
Like many people, I once found learning about law very intimidating. My brother went to law school and I remember glancing through a few of his books and wondering if I was actually reading English due to all of the legal jargon in them! However, when I ended up in a sticky legal situation due to accidentally breaking a small law I didn't know existed, I realized that I needed to learn more about the law, so I could make sure to follow it precisely in the future. My brother helped to break down some complicated legal concepts to me, and I have since been studying up online. I want to post what I have learned and continue to learn about law in the future on my new blog, so my knowledge cannot only help myself, but also help others!