Even though divorce has become much more common in recent years, it’s still messy. It’s emotionally messy, and it’s especially financially messy. There are lots of financial issues at stake when it comes to divorce.
For instance, you don’t just have to divide up property. You also have to divide up debt. Any debt that is just in one spouse’s name can be left with that spouse. If you share debt, though, you have to decide what to do with it. The easiest option is to pay off as much as possible before the divorce. Another option is for one spouse to take more of the debt but also more of the shared assets during the divorce. The problem here is that if your name is on the debt, you can be responsible for paying it in full, even if your spouse agreed to pay some of it.
Another financial issue with divorce is retirement accounts. If you or your spouse has a retirement account, you’re each entitled to half under most state laws. You can pull the money out of a tax-advantaged account in your spouse’s name without paying a penalty if you follow certain laws. This money can be used to jump-start your own account for retirement, or to buy a new home for yourself and the kids after the divorce.
Of course, there are also tax issues with divorce. You’ll have to decide who gets to claim your children on the taxes. People who go through divorce need to make sure that child support is tax deductible, as well. Some lawyer’s fees for the divorce process are also tax deductible. Talk to your lawyer or tax professional to see what you need to know about taxes during a divorce.