Divorce affects every aspect of your finances. Here is how to cope in the aftermath of divorce.<\/p>\n
Money is one of the most oft-cited divorce catalysts today, but ironically, getting a divorce is one of the worst things that can happen to your finances. In addition to the high lawyer fees, your household will be split in two, putting a strain on both parties\u2019 subsequent budgets. Divorce can have a major impact on the other areas of your financial life as well. This article can help you navigate the world of post-divorce finances with ease.<\/p>\n
There are two types of child custody: Physical custody is the right to have your child live with you, and legal custody of a child is the right and responsibility to make decisions about the child\u2019s schooling, medical care, religion, etc. Both types can be awarded solely to one parent or jointly to both parents. A parent who holds sole custody is called the \u201ccustodial parent,\u201d and this can be in reference to either physical or legal custody.<\/p>\n
When one parent is granted sole physical custody, the other parent usually must pay an agreed-upon amount of child support to the custodial parent every month. Whether you have children or not, you or your ex may be required to pay alimony, as well. Alimony is tax deductible for the spouse paying it, and it counts as taxable income for the spouse who receives it. Paying alimony can actually have great tax benefits, and it\u2019s an above-the-line deduction, so you can receive the benefits without itemizing. Child support is just the opposite: you cannot deduct it on your taxes if you\u2019re paying it, but you don\u2019t have to pay taxes on collected child support.<\/p>\n
As long as you were divorced by December 31 in a given year, the taxes you file the following spring will read as if you were divorced for the entire year. Once your divorce is complete, you no longer have the option to file jointly; you\u2019ll have to file as either single or head of household. Your filing status will depend on whether you have children. If you are the custodial parent, you can file as head of household and claim your children as dependents, reaping the benefits of the child tax credit and dependent exemptions.<\/p>\n
Many recently divorced women find themselves without access to credit because all of the bills and credit accounts were in their husbands\u2019 names. Your first step to building credit is to get a copy of your credit report, which you can get for free once a year. The next step is to cancel any joint accounts or credit cards you held with your spouse. If you don\u2019t have any cards in your name, sign up for one. You may not be eligible for a very high credit limit, but getting into the habit of using your card and paying it off each month will slowly build your credit so you can eventually apply for more.<\/p>\n
Many women elect to stay home if their husbands\u2019 salaries are enough to support the family. If you find yourself in need of a job after an extended absence, it\u2019s best to explain that absence to prospective employers. You may want to adapt your resume to a skills-based format rather than using a chronological structure, to de-emphasize your time off. If you took classes or volunteered, describe your experiences and skill building in business terms\u2014don\u2019t get emotional or nostalgic.<\/p>\n
Your and your spouse\u2019s retirement benefits should have been divided during the divorce proceedings. If you received a distribution from their 401(k), you\u2019ll need to either roll it into yours, if you have one, or set up an IRA.<\/p>\n
If your spouse contributed to the Social Security system, you may be entitled to receive half of their Social Security benefits after you divorce. You are eligible if:<\/p>\n
If you were covered under your spouse\u2019s employer\u2019s health plan and their company employs at least 20 people, they are obligated to inform you about the option to receive continued coverage for 36 months post-divorce under the federal Consolidated Omnibus Budget Reform Act (COBRA). You must enroll in COBRA within 60 days of the divorce becoming finalized or else you waive access to continued coverage. Because COBRA expires after 36 months and is expensive, it\u2019s usually better to go through your own employer or obtain individual coverage if you can. Though most employers only have open enrollment once each year, yours might make an exception for life events such as divorce.<\/p>\n
In addition to health insurance, you may need to replace other insurance coverage that you had under your spouse\u2019s employer or get new coverage, such as disability, life, or renters insurance, that you may not have needed when you were married. If you\u2019re receiving alimony and child support, you may want to see if you can get something written into your divorce agreement that requires your ex-spouse to buy a life insurance policy so that their obligation to you and your children could be fulfilled in the event of their death.<\/p>\n
If you weren\u2019t in charge of the household finances while married, you\u2019ll need to get up to speed now. Gather important financial documents and take inventory of your spending habits and regular income so you can create a budget. Between the loss of your spouse\u2019s income, the addition of new bills and the need to purchase new housewares, you may find that you can no longer afford the lifestyle you\u2019ve grown accustomed to, but you should be able to adjust your budget accordingly.<\/p>\n
After your divorce, you\u2019ll want to change your will, power of attorney and beneficiary designations. Most states will automatically block a former spouse\u2019s inheritance in a pre-divorce will, but it\u2019s still a good idea to alter your will to reflect the change. Your beneficiary selections are not automatically blocked when your divorce is finalized, and they can actually trump your will if the two are in disagreement, making them an important part of your post-divorce to-do list. However, make sure you consult your attorney before making any changes to beneficiaries. If you do so before the divorce is finalized, you could be accused of attempting to remove your spouse\u2019s access to benefits.<\/p>\n
Divorce can be a stressful time, both on your emotions and on your finances. Getting your to-do list set and checking items off can be a good way to alleviate stress. This list may seem daunting, but if you tackle one task at a time, you can be on your way to financial independence in the next chapter of your life.<\/p>\n","protected":false},"excerpt":{"rendered":"
Money is one of the most oft-cited divorce catalysts today, but ironically, getting a divorce is one of the worst things that can happen to your finances. In addition to the high lawyer fees, your household will be split in two, putting a strain on both parties\u2019 subsequent budgets. Divorce can have a major impact on the other areas of your financial life as well. This article can help you navigate the world of post-divorce finances with ease.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/posts\/1905"}],"collection":[{"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/comments?post=1905"}],"version-history":[{"count":2,"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/posts\/1905\/revisions"}],"predecessor-version":[{"id":2364,"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/posts\/1905\/revisions\/2364"}],"wp:attachment":[{"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/media?parent=1905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/categories?post=1905"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.truenorthwealth.com\/wp-json\/wp\/v2\/tags?post=1905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}