The person who is to pay alimony and child support as well the benefactor need to make a lot of considerations before reaching a final decision. However, a lot of divorcing people fail to do this and end up in deep monetary problems that affect the course of their lives drastically. Financial Planning in a Divorce In an initiative to help you in this regard, we provide you some of the areas that require careful planning prior to a divorce: 1. Alimony: Alimony is the maintenance paid to the economically dependant person by his/her spouse at the time of divorce.
This can be a one-time bulk settlement or a monthly payment. When soon-to-be divorced couple negotiate on alimony, a lot of issues have to be taken into account such as job skills of the spouse to whom alimony needs to paid, his/her educational qualification, health condition, economic background, etc. The person paying the alimony should be willing to cover all the necessary expenses of his spouse. On the other hand, the spouse should make a reasonable demand that does not turn his/her soon-to-ex into near bankruptcy. This is a mutual arrangement and being unreasonable in your claim can lead to courtroom battles that can drain the finances of both the parties and also affect the future of children in the family. 2.
Child Support: When either of them is employed, the income to the family is reduced by half when they decide to divorce. If there is only one earning member, there is still financial burden on either of them since one of them is financially dependant and other person has to pay towards maintaining two separate households in the form of maintenance. These financial constraints do not affect the divorcing couple alone. It is a major blow to the luxuries of their children as well.
A look at the surveys would show you that there are a lot of children who drop out of school and college, since their custodial parent is unable to meet their educational expenses. Also, with time, non-custodial parent loses touch with his children and does not provide funds for their education and well-being. It is unfair to punish your children for their parent's divorce. So, when deciding on the child support, be generous and take into account all the expenses. Make sure it can cover all your child's wants and education.
3. Credits: After filing for divorce, it is necessary to close joint accounts to avoid one of the partners from taking advantage of the other. Since, you are discussing on all the settlement terms, withdraw the saving in your joint account and split it equally or in any other way that is suitable to both of you. Then, make sure to close the account in order to avoid the account from running into debts due to your spouse's transactions. 4.
Investments: So, when you are dividing the assets, you need to consider investments in the form of stocks, bonds and other holdings. You need to also consider the tax payable on encashment of the bonds held by divorced couple. However, it is possible to reduce the tax liability to a greater extent if these bonds are structured at the outset. You could contact a financial expert for further assistance in these issues.
5. Loans & Mortgages: When you are dividing your assets, it also becomes necessary to take care of the debts. Since, the income is going to be reduced following a divorce, make sure you would be able to make your monthly repayments using your current income. Also, if you are going to inherit the house, make sure you would be able to payback the mortgage or if not, would it be taken care of by your soon-to-be ex. 6.
Pension: Through negotiation, you could make an arrangement to receive a portion of your spouse's pension, on his/her retirement. This can come in handy in the older years and hence it should not be neglected. Seeking Professional Help Being in the midst of a divorce proceeding, you might not be in an emotional state to take care of your financial planning.
It is better to hire a certified financial planner to do the job for you. Some of the issues that would be handled by a financial planner are listed below:
In short, your financial planner would take care of all your financial arrangements in a divorce. Financial planning needs experience and knowledge.
- Gathers all the information pertaining to your financial status
- Analyses and prepares a financial recommendation based on your status
- Prepares an alternative recommendation that is agreeable to both parties
- Implements and monitors the recommendations
Hence, do not hesitate about hiring a professional to take care of the financial aspects. Remember that, the money spent towards the professional service is not a liability but more of an investment for a better tomorrow.
James Walsh is a freelance writer and copy editor. If you want to find out more about a solicitor managed divorce see http://www.managed-divorce.co.uk