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    Monday, August 08, 2022

    Know your finances in a divorce

    Getting divorced is often a painful emotional experience. It's about the personal loss, of course. But spouses also have to deal with something more concrete: the financial fallout.

    That aspect of breaking up can be particularly trying, since the tendency is it's usually one person - often the husband but sometimes the wife - who primarily handles the finances.

    That can leave the other person in the dark.

    So, first things first. Paulette Retsinas, a CFP with Chelsea Groton Financial Services, says she tells people who are contemplating a divorce or are in the process of getting a divorce to get educated. Understand the finances of the home. Understand the finances of retirement, savings and education.

    Figure out what the marital estate is. Meaninga: What is the house worth? What are the details of the life insurance policy?

    Divorce attorney Pam Bacharach says the key is to have a plan. Simply put, she says, "Where are you going to live, how much is it going to cost, where is it going to come from?"

    Have a budget that takes into consideration your new circumstances. Shannon Heap, a certified public accountant, says, "You're going from a situation where you're operating one household, whether you have children or not ... and after the divorce, now you've got two households. Regardless of what the income situation is, you're now doubling your overhead expenses."

    You're going to have to operate two smaller households - in other words, downsize - because, in most cases, the money just isn't there to do otherwise.

    Other issues need to be considered. For instance, it's important to know how you're going to divvy up retirement accounts. Know what's available and the taxes that you'd incur by taking out money.

    Be aware of tax ramifications of other issues. Heap says alimony is tax deductible for the person paying and is taxable income for the person receving it. Child support, however, is neutral; there's no tax deduction for the person paying and it's not taxable income for the person receiving it.

    If you keep the house, be aware of all the costs that go with that. It's not just the mortgage, it's also the property taxes. If the house isn't in good shape, expect to pay for repairs.

    If you're the one who's moving, you'll want to have some cash available for the things you might have to buy - more furniture, for instance, or a washer and dryer.

    Don't ignore the implications of life insurance. Put in writing who the beneficiary is so that can't be changed later. Carefully consider who the owner is, since the owner can decide not to pay any more into the policy; make sure some parameters are set so the policy stays intact.

    Disability insurance is another significant issue to consider. If you're depending on an ex for alimony or child support, you need to think about what would happen if he became disabled and couldn't work, Retsinas says.

    People often focus on life insurance, but, she says, there's a higher chance of a person becoming disabled than dying.

    The best thing is to know all about the family finances and the potential pitfalls during the marriage.

    "I think so many women fall prey to this (feeling), 'Okay, I've got my knight in shining armor, I don't have to worry about this anymore," ' says Deborah Owens, who wrote "A Purse of Your Own: An Easy Guide to Financial Security."

    It's not just divorcees who face this kind of monetary dilemma and need this kind of knowledge. Owens, who has offered financial pointers on PBS and NPR, says nine out of 10 women will end up responsible for their own finances - whether it's because they get divorced or because they are widowed.

    At any point in your life, Retsinas says, you should have an accountant or financial planner. During a divorce, these experts can work with the divorce attorney.

    Keeping a focus on financial matters during a split, she adds, is vital.

    "Sometimes, you get so caught up in the emotional upheaval in a divorce ... that these other things get put aside, and these things later on are very important," Retsinas says.

    Ultimately, though, Retsinas says, this can be "the time where you say, 'Okay, this is how I've been in the past. Now I'm going to take control." '

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