When divorce is unavoidable, it can all too often spell financial disaster for one or both partners. Not only are two individuals wrestling with incredible emotional strain during this situation, but they may both need to reach into their savings in order to afford legal counsel, find housing, pay bills, and support children while the details are worked out.
With so much at stake and so many different details to consider it is critically important that divorcees ask and answer the following 7 financial questions:
1. Will I Be Required To Pay Alimony, Or Am I Eligible For Alimony Payments?
Alimony, including maintenance and spousal support, is usually awarded according to several guidelines investigated on a case by case basis. Only a legal expert can help you determine the exact factors that may influence your decision, but the test usually considers factors including:
- Need (including Income, Investments, Lifestyle, and Physical Health)
- Ability to Pay
- Marriage Length
2. How Will We Divide Retirement Plans?
Retirement plans and pensions are considered marital assets and therefore will be fair game for proceedings if you were to go to court. Even if you have an IRA in your name only it is typically considered marital property. Fortunately, it is sometimes possible for one party to keep a retirement plan while offsetting the cost with other assets and thereby avoiding the 10% penalty for early withdrawal (before 59.5 years of age).
3. Who Will Keep The House?
Houses are big, valuable assets and dividing them is often a contentious business. Often one or both spouses will have deep emotional connections to the structure and will be unwilling to sell, or the custodial parent will argue that they need the house in order to provide shelter and continuity for children.
4. Can You Afford to Keep the House?
Even if the house were awarded to you, would you be able to afford the utilities, maintenance, and taxes that come with it? How many other assets is it advisable to part with in order to hold on to the house? And, lastly, what are the current economic and market conditions influencing the value of the property and the feasibility of selling?
5. If I’ve Never Worked, Can I Still Tap Into Social Security?
Possibly. If your spouse has worked and if you have been married at least 10 years, then (divorced or not) you are entitled to one-half of your spouse’s Social Security or your own, whichever is higher. This does not affect your spouse (they still receive 100% of their Social Security payments) and does not need to be negotiated.
6. What Will Child Support Cost Me / How Much Am I Eligible For?
This will vary dramatically state-by- state. You’ll need to consult your state’s Child Support Guidelines and recruit the help of a legal expert as well as financial and tax experts, like us, who can estimate the real dollar amounts.
7. Will I Be Able To Retire? When?
Divorce can upend decades of careful saving and planning, and leave divorcees confused and financially shaky. Fortunately, Heritage Financial is here to help. We work with individuals just like you to straighten out upturned finances and give you reliable estimates and a real financial plan to get you back on track so you can save and live in security.
Call us today at 480-397-1184 and schedule an appointment to learn more.