As discussed in Part 1, the financial effects from divorce remain as devastating as ever, even though American divorce rates have dropped the past three years. Part 2 will discuss the financial impact of alimony and legal expenses. Consult with a financial divorce specialist for professional guidance.
Varying greatly state to state how it is determined, spousal support or alimony is normally granted to the spouse who is financially disadvantaged and it is usually deemed as temporary assistance during separation.
The first factor for calculating alimony is the duration of the marriage. In the majority of jurisdictions, alimony will only be considered for marriages that have lasted 10 years. The age of the spouse, employment status, income, assets, financial need, and the reason for divorce are other factors. However, the determination of alimony by a judge is still thought to be quite subjective.
Typically, the spouse who is the primary financial resource will pay 50% of his or her income minus 40% of the income being earned by the other spouse. Some have said that the settlement usually ends up making sure that the two households have about the same monthly income. When the divorcing couple has children, child support is given emphasis and is determined first. The granting of alimony will have one spouse paying a significant amount of his or her income to the other for several years.
Court costs and attorney fees will mount rapidly because the divorcing couple will have contentious issues to settle and will be paying for two law firms that are by nature adversaries. Obviously, the situation is worsened if the two spouses are not amicable. For those who are still friendly and opt to economize, a Do It Yourself (DIY) divorce will still approach $2,000 in most jurisdictions. The greater the disagreements over assets, custody, or alimony, the more costly the legal costs will be.
As a result of mounting legal costs, Alternative Dispute Resolution (ADR) and mediation techniques have increased to resolve divorce disagreements inexpensively. Experts also advise that spouses retain a Certified Divorce Financial Analyst (CDFA) for an objective analysis of their assets and respective living situations to find the best way forward to reach a fair financial settlement.
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) 884-4098 for professional guidance today.