Life doesn’t end after a divorce—and neither do financial obligations. While many divorcing couples may get divorce loans to help focus on getting a larger share of the pie, this isn’t necessarily the best approach. When divorcing, especially from a high-asset divorce in Tampa, it’s important to plan for life after a divorce. This means creating a reasonable budget and realistically considering one’s financial future. Our Tampa asset protection attorneys will look beyond equitable distribution, discussing a few concerns for divorce finances and addressing the financial impact of divorce for Florida couples.
How Divorce Finances Can Cause Tax Issues
How assets are distributed can have tax implications. In addition, if the family home or other property must be sold as part of the settlement, those sales may be subject to various taxes depending on how they are handled. To learn more about this, visit: Home Equity in Divorce.
No one (except maybe accountants and IRS agents) likes thinking about taxes. However, ignoring the tax implications of how alimony is distributed, when the family home is sold, etc., can be costly.
A good financial planner or accountant versed in divorce issues will be able to discuss the various tax implications of any possible agreement. They’ll also be able to answer questions such as, “How is an LLC treated in divorce?” or “What do I do if my spouse is removing marital property before the divorce is over?” If they don’t, the divorcing parties must ask. Divorcing couples who can discuss their finances more openly and who are willing to work together may be able to avoid some tax pitfalls so they aren’t penalized for separating.
How Divorce Finances Affect Children’s Education
Divorce isn’t inexpensive and can have a large impact on the future. The financial implications of divorce can extend further than just the divorcing couple. When one home becomes two homes, expenses increase. This may mean there is less money to save for college.
For parents who want to help pay for their children’s college educations, it’s a good idea to investigate the best way to set money aside. Will one parent handle college costs? Will both set aside an equal amount? Will you agree to set up child support for college students? Again, how this is done can have tax implications for either party, and an in-depth conversation about your goals with your accountant will be necessary.
How Divorce Finances Affect Retirement Plans
Depending on the structure of the household before divorce—both parties working vs. one party working—retirement may or may not be an issue. When IRAs and 401Ks must be divided, however, it’s important to consider not only one’s future retirement but also one’s future earning potential. In addition, certain retirement accounts have penalties associated with them for early withdrawal or other actions. If you are nearing retirement age, this should be on the top of your list to discuss with your accountant or financial planner.
This is just a short overview of some possible financial concerns. If you have financial concerns not mentioned here, discuss them with your lawyer and accountant.
The Financial Impact of Divorce for Florida Residents
During a litigated divorce, each party will likely have their own financial advisor who advocates on their behalf. This can create an antagonistic back and forth, with each partner attempting to get “more” and with little concern for the financial future of the other partner. Creating a realistic budget and being open about one’s finances can help a judge make a fair decision in what is likely to be a difficult situation.
For those who opt for a collaborative divorce, the expectation is that each partner will openly and willingly work with a financial neutral. This individual keeps the best interest of both parties in mind and helps the separating couple create a fair financial agreement that meets everyone’s needs.
The divorce process can be confusing, especially once it’s time to deal with finances. If you’re considering a divorce, make sure you investigate all the options open to you, such as a courtroom divorce or a collaborative divorce.
Consulting with a skilled Tampa divorce lawyer can help you better understand the various divorce processes and how finances are handled in each.
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