The greatest impact of divorce is typically its devastating effect on the family. However, divorce can also be devastating on family finances. Studies have found that spouses who divorce will have to generate 30% more income in order to maintain their lifestyles. Being knowledgeable about your obligations and rights is the best way to decrease the costs and lessen the anguish of divorce. Part 1 will discuss the financial obligations.
If children are involved, both parents chief concern should be the welfare of their children. Unfortunately this occasionally does not occur. A former spouse who is paying child support may think the other spouse is wasting the money or the amount is too high. The state granting the divorce will determine child support payments through established guidelines that take into consideration the incomes of both parents, number of children, custodial responsibility, and time spent by each parent with the children.
Although it is a legal and moral obligation, only 50% of child support is paid in the U.S., and only 50% of that is fully paid. Should there be a change in the financial status of a parent, such as a loss of employment, child support payments mandated by the divorce agreement may come under review and be revised by the court.
An additional financial obligation that may also arise in a divorce is alimony or spousal support. A spouse granted alimony may be rescued financially, but it may be devastating financially to the spouse required to make the payments. Without a prenuptial agreement, alimony is set apart from child support, and it is typically granted to a spouse who is not financially advantaged.
Alimony is deemed temporary assistance for a former spouse who is unable to meet his or her needs without the financial assistance from the other spouse . How alimony is determined can be subjective and varies depending on the court and state. As a result, lawyers and counselors often advise divorcing individuals to avoid courts and seek arbitration or mediation instead to potentially prevent an unfair alimony ruling. Unfortunately, these alternative dispute resolution methods, although much less expensive, have not been foolproof in preventing that outcome.
Part 2 will discuss Division of Property and Financial Impact.
Professional Guidance for Divorcing Individuals
John Faggio, CPA, CFP®, CDFA™, is a Financial Divorce Specialist. Faggio Financial helps divorcing individuals reach an equitable financial settlement in a professional, cost-effective, and expedient manner. Call (410) 988-7333 for John’s guidance today.