No matter how stoic you are, divorce proceedings are difficult. The emotional tumult can disrupt many other aspects of our lives, such as work. The mental stress can cultivate bad habits. And the financial implications can ruin a person’s life.
For instance, a case taken to its legal conclusion, can cost a person almost $15,000. However, divorce is typically even more expensive since this figure doesn’t reflect the effects of post-divorce financial arrangements. While consulting a divorce attorney is crucial, you should also consult a CPA to untangle the confusion surrounding finances and divorces. Here are some of those entanglements.
Property
There is not a set method of dividing property after a divorce. The separated parties can reach a compromise or agreement on how to separate property, or the state can issue a court order detailing the arrangement. In some states, community property laws prevail. These laws state that regardless of who acquired an asset during a marriage, the asset is considered a joint marital asset. These assets are divided equally between both parties. Other methods for dividing property include bartering and distributing the proceeds from the sale of property.
Debt
Figuring out how to distribute debt is one of the more vexing financial entanglements of divorce. The first thing to do is request your credit report and check your individual and joint accounts and debts.
Moreover, to prevent the debt from growing, make sure you cancel any joint credit cards you have. With this done, you can figure out how to resolve the debts. Ideally, you should pay off all your debts immediately.
If that is not possible, you can reach an arrangement on how to divide the debt up, such as exchanging debt for more property.
Taxes
Despite not being an immediate concern, the tax implications of divorce can turn costly if ignored. For instance, some of the questions you will need to answer include:
· Who can claim a dependent on their tax returns?
· Who can claim the Head-of-Household status?
· How will you avoid child support being non-deductible?
A CPA (certified public accountant) can help you handle these issues, since tax law is complicated, changing, and interdependent with other laws. If you need a CPA firm that can assist you with divorce financial planning and tax planning and compliance, get in touch with us, at Harmon/Harmon. We offer divorce financial advisor Austin TX and forensic accountants in Austin, TX, and we’ll help ease the financial difficulties of divorce for you.