Kevin Qualls Family Law
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Overcoming divorce's financial traps

Spouses in Orange County who are considering divorce should know that it can have severe financial consequences. This can be especially true for women. According to studies, a wife's standard of living may decline by 27 percent after separation. Factors, such as insufficient child support, may lead to this decline. Accordingly, it is important to plan for these financial consequences and potential divorce problems.

A spouse should begin putting aside funds to help cover divorce expenses. These include legal costs, new living expenses and therapist bills. Expenses for one household are now multiplied by two.

The timing of the separation should also be considered. The other spouse may receive a bonus or other money that may be divided in the divorce. In addition, Social Security allows collection on an ex-spouse's earnings after 10 years of marriage. Before separation, a spouse should also buy the clothes that are needed, repair the car and take care of larger expenses involving children.

A spouse should also locate all financial records before the divorce starts. Clear copies of all tax returns, loan documents, wills, trusts financial statements, bank records, credit card statements, deeds, vehicle registrations and insurance inventories and policies may be needed. Likewise, spouses should keep copies of their separate property such as inheritances and their spouse's business records.

Banking records and brokerage accounts, pay stubs, retirement plans and insurance policies should also be evaluated. Even if an asset is unwanted, it can be traded for something that is desired. An expensive hobby or collection may also play a role in property division.

Taxes may be the hidden cost of divorce. There may be tax consequences from alimony, or from receiving a retirement plan or the house as part of the settlement. A spouse may also consider an indemnification clause for protection if there was a chance that the couple's joint returns left out income or overstated deductions and the IRS conducts an audit.

Financial and property decisions should be based upon a spouse's long-term interests, not on revenge. Opportunities for fair and reasonable settlement and expediting the conclusion of the divorce should be pursued.

To address many of these financial issues, an accountant may provide help. An experienced family law attorney can also provide invaluable advice and help protect a spouse's rights and ability to obtain a fair divorce decree.

Source: Women's Institute for Financial Education, "The twelve financial pitfalls of divorce," By Ginita Wall, CPA, CFP, Accessed April 22, 2017

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Kevin Qualls Family Law
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