10 Financial Divorce Considerations

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You’ve heard the old saying, “Money is the root of all evil.” Of the issues that couples argue about, money tops the list. And sadly, arguments over money can often lead a couple to divorce. A divorce can have lasting implications, not to mention it is very expensive and stressful. There are ten financial considerations you need to keep in mind if you are going through – or about to go through – a divorce.


The biggest hit of course is income, since you will lose your spouse’s income. If you are a stay-at-home parent or your spouse is the breadwinner, this could be disastrous, even if you will receive alimony or child support.

Marital Home

If you must sell your home and any other properties you jointly own, you need to have an agreement about who gets the profit or if it will be shared, and who will be responsible for paying the mortgage and other related bills until it is sold. Also, you will want to maximize both your $250,000 capital gains credit.


You cannot file a joint return if you complete your divorce on or before Dec. 31, the last day of the tax year. If your divorce is finalized after Jan. 1, you will have to file a joint return for the previous tax year, if you had previously filed your taxes jointly. However, you have the option of “married filing separately” if you want to keep your tax liability separate from your spouse. The “married filing jointly” status usually offers the most tax savings.


Here’s where things can get complicated when it comes to taxes, custody, and financial aid for college.

Minor children can be claimed as dependents on just one spouse’s tax returns if you are divorced – usually by the one who has legal custody. If you have split custody, you and your ex-spouse will have to decide who takes the claim.

Speaking of custody, that’s another issue. Who will have custody? What about visitation (now known as “parenting time”)? How much child support will be needed? These are important terms that need to be carefully worked out.

Divorce can impact your child’s ability to qualify for financial aid for college. Most colleges base financial aid on the custodial parent’s income. However, the FAFSA (Free Application for Federal Student Aid) bases “custodial parent” on which parent the child lives with the most, not who has legal custody.

Health Insurance

If you are covered by your spouse’s health insurance, you may consider paying for it privately or getting it through your employer if you are working. You may qualify for the federal COBRA program that provides health insurance coverage for 36 months. This program is expensive, and you must pay the premiums.

Social Security

Did you know you may be entitled to a portion of your ex-spouse’s Social Security benefits? If you were married 10-plus years, did not remarry, are age 62 or older, are not working, and your benefit is smaller than your ex-spouse’s, you can collect up to 50% of your ex’s benefit.

Joint Debts

You may be divorced, but any debt that accumulated during the marriage must still be paid off. Any joint credit card bills, loans, and mortgages are required to be paid by both you and your ex-spouse. If you cosigned a loan for your former partner, you are on the hook to pay it if your ex defaults. You may be able to remove yourself as a cosigner if your ex refinances the loan, or has made a certain number of on-time payments.

Post-Marriage/Prenup Agreements

Keeping assets separate is the best way to protect both married partners in the event of a divorce. A post-marriage pact spells out who is responsible for debts and assets accumulated during the marriage. A prenuptial agreement stipulates who gets what assets that were brought into the marriage by both partners.

Develop a Post-Divorce Budget

Can you financially make it after you are divorced? List your bills, assets, income, and investments. Factor in your age, financial and family obligations, and eligible retirement benefits. Make sure that you are financially prepared for divorce before the decree is signed.

Update Your Estate Plan

Once you are legally divorced, your estate planning documents must be reviewed and updated. Remove your ex-spouse’s name from your Will, Health Care Proxy, and Power of Attorney. Name new beneficiaries and agents.

If your ex-spouse is named as a beneficiary on your Will, he/she may still be legally entitled to receive assets upon your death despite being divorced from you. This can lead to contests of the Will and a long and expensive ride for your loved ones.

Don't Be Hasty

There is much to consider before filing for divorce. Don’t rush into it. Try to work things out or seek counseling or mediation.


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