Divorce is not only emotionally exhausting, but it can also be financially draining. The consequences of divorce may have a long-term effect on the financial health of both spouses regardless of income level, if they don’t plan out their exit strategy.
For divorcing couples in Alabama, it is often the lack of focus and attention to detail during the seismic shift in priorities that allows important money matters to slip through the cracks. One spouse may not realize their error until they get a notice from the IRS or realize that they no longer have access to the retirement benefits they thought they had.
Mobile residents can benefit from a careful and detailed legal assessment of their situation that will help preserve their financial security for the future.
How do I reduce financial risk during divorce?
Whether you are a business owner or employee, when it comes to accounting, it is essential to have an accurate overview of both household and individual income, assets and debt. A cool assessment of bank and savings accounts, annuities, real and personal property, stock interests and life insurance, as well as mortgages, loans and liabilities, is essential when determining how the court may split assets.
There are other considerations that people often don’t think about until too late, such as:
- Life insurance: Don’t let the spouse paying alimony or child support try to negotiate a flat death benefit, as it will likely be far lower than a life insurance policy with the wife and kids as beneficiaries.
- ERISA plan benefits: If one spouse has an employer-sponsored retirement plan, the other spouse needs to know how and when to claim their share of the benefit. This can also impact the amounts and terms of support payments.
- Estate plans and life insurance: Once the divorce is final, beneficiary designations will likely change. If one spouse remarries or passes away without taking care of this detail, it can have unpleasant consequences from an estate planning perspective.
- Tax status: If the couple knows they are heading for divorce, it is best to file as married filing separately to avoid entanglements later. It is also with to account for tax liabilities or credits such as loss carry forwards as part of property division.
Property division in Alabama
As Alabama is an equitable division state, the court will determine what it considers to be a fair, but not always equal, division of marital property. Marital assets are everything that the couple acquired during the marriage, including bank accounts, income, retirement plans, annuities and business interests, as well as the family home, investment property and vehicles. The couple will also split shared debt as well as assets.
While couples are in the midst of negotiations, they often cannot see the forest for the trees and may grow sentimental about the family home. Upkeep for a home using one income may prove to be a financial burden. Finally, the best way to keep a check on finances during the divorce is to try to keep things out of court as much as possible. Court costs and legal fees can burn through savings more quickly than many people realize.