Are you preparing for divorce? If so, it is entirely possible to remain financially stable before, during and after the process but it’s going to take some diligence on your part. The best way to begin your divorce is to start preparing today. To stay organized from day one, follow these steps:
- Gather copies of all important financial documents, such as tax returns, insurance information, bank statements, auto registrations, and insurance policies.
- Become educated on California’s divorce laws, especially as they pertain to child custody, child support, spousal support, and property division.
- Meet with an experienced divorce attorney.
- In addition to meeting with a lawyer, seek help from financial experts to help you navigate your divorce.
Now that you have an idea of how to get started, let’s take a look at the important financial considerations during a divorce.
1. The marital residence. A lot of spouses mistakenly treat the marital residence like it’s a prized possession but in reality, it can be anything but. When getting a divorce, it’s important to carefully consider the marital residence and what should be done with it. If you wish to keep the home, ask yourself the following questions: Can I afford to keep the house? Can I qualify for a mortgage in my name alone? Is there equity in the house? Can I afford utilities and property taxes? Would it be better to sell the house and split the proceeds?
2. The costs of housing. In Los Angeles County, the cost of housing is high. If you’re going to be paying child support and/or spousal support, take those payments in consideration when budgeting for your new life as a single person. When selecting a new place to live, make sure it’s within your budget. If you expect to receive spousal support, be aware that it is not automatic or guaranteed.
If your marriage was less than 10 years, and spousal support is awarded, it will likely last one-half the length of the marriage. For example, if you were married for six years, spousal support may be awarded for three years. In any case, an award for spousal support can be unpredictable, so it’s best to remember that when you’re budgeting for housing, you may not be receiving spousal support. It’s good to keep this in mind so you don’t rely on a spousal award that may not come.
3. The types of accounts. Tax-wise, the type of accounts you have matters. As far as the value of an account is concerned, it’s important to pay attention to whether it is tax advantaged or taxable, because these can affect the value of an account. Our firm can help you with this issue.
4. The issue of health insurance. Are you currently on your spouse’s health insurance policy? If that’s the case, we recommend shopping around for new coverage while the divorce is pending – you’ll need to obtain your own policy.
5. The issue of life insurance. Will you be receiving child support from your soon-to-be ex-spouse? If so, you may want to consider getting a provision in your divorce settlement that says your spouse must secure life insurance to cover the costs of child support should anything happen to him or her. If you will be paying child support, you can volunteer to obtain such a policy to gain peace of mind knowing that your children’s needs will be met should the unthinkable happen to you.
How Are Marital Assets Split in California?
California is a community property state, which means that all “marital assets” are owned by both spouses and are therefore subject to a 50/50 split. Likewise, marital debts are considered community debts and both spouses are responsible. Separate property, however, is not subject to division. Separate property includes assets and property acquired before the marriage, and gifts and inheritances acquired before or during the marriage. Hidden debt is one thing that is not a welcome surprise my most spouses.
If you’re on the brink of divorce, our advice is to identify any and all joint debts and see what can be done to pay off the debts, remove a spouse’s name from the accounts, or refinance the accounts in one spouse’s name alone. When you’re able to sever all financial ties from your soon-to-be ex-spouse, you can walk away from your divorce with a financially clean slate.
During a divorce, it’s important that you understand your assets:
- Real estate property
- The marital residence
- Any retirement assets
- Life insurance policies
- Taxable accounts
- Health insurance
- Military pensions
- Any businesses owned by either spouse
You also want to take the following debts into account:
- Auto loans
- Credit card accounts
- SBA loans (for a business)
- Personal loans
- Unpaid medical bills
- Chapter 13 bankruptcy repayment plans
- Unpaid state and federal taxes
- State and federal taxes coming due
Social Security and Divorce
Did you know that if your marriage lasted at least 10 years, you may be entitled to Social Security benefits on your former spouse’s record as long as you are at least 62-years-of-age, you are single, your former spouse is entitled to Social Security retirement or disability benefits, and the Social Security benefit you’re entitled on your work record is less than the benefit you would receive on your spouse’s earning record.
“But what if I remarry, can I still collect benefits on my former spouse’s record?” If you decide to remarry, you would not be able to collect benefits on your ex-spouse’s record unless your new marriage dissolves due to an annulment, a death or divorce.
To speak with a Los Angeles divorce lawyer from our firm, contact Claery & Hammond, LLP. All of our initial consultations are free.