During a divorce, if you have money or children to fight for, your relationship with your husband will be combative.
One attorney claimed the only triumph in a divorce is resolution. During the past 30 years, I’ve seen some divorcing customers do better than others.
If you want to limit tax and financial harm from your divorce, set aside unpleasant emotions and evaluate how complicated your divorce process should be. This will reveal your strategy and professional help you need.
Are there major assets to split? Assets include your home, pension, enterprises, investments, and personal property (including everything from pets to frozen embryos).
Was I in a long-term marriage (over 10 years)?
Are there minors involved?
Do I expect to pay or receive alimony?
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A long-term marriage with assets, economic inequality, and children will need extra help. It doesn’t matter how badly your spouse treated you or if you want retribution. California and 18 other states have “no-fault” divorce, meaning the court won’t care who messed up. Don’t pay legal fees if there are no assets or children to battle over. The goal is minimal damage.
Gather your financial information and store it somewhere safe, preferably not at home. “How to Navigate Combined Finances During a Divorce,” by Teri Parker, appeared in WMM on August 14. Even if you’re on good terms with your spouse, documents and files disappear, thus you needed to do this yesterday.
Hire the best attorney you can, even if your husband controls the checking account. (Suppose your spouse has hired someone.) If you can’t afford the retainer, ask the court to advance your equitable distribution portion to pay attorney’s fees.
To discover the perfect lawyer, interview several. If an attorney doesn’t answer your questions clearly, is dismissive, seems disorganized, or is too busy to return calls, move on to a second, third, or fourth lawyer. Your family law attorney (who should solely practice family law) and you will work together. Best to hire.
Next, obey your lawyer. It’s better to assume that your marriage will suffer during this period. In the end, you’re fighting over your future quality of life. If you avoid interaction and let your lawyers and accountants advocate for you, your negotiations will go smoother, your legal bills will be cheaper, and you’ll have a better connection with your ex-spouse at graduations and weddings.
Your trusted CPA may surprise you by saying they have a conflict of interest and can’t complete your tax taxes due to divorce. Hire a divorce-savvy accountant and financial consultant early.
You may also wish to employ a forensic accountant specializing in family law to help you determine (and prove, if necessary) if some of your assets are distinct property and don’t need to be split. Private investigators can identify hidden riches if you suspect your spouse is dishonest.
You should work with your spouse on taxes so you can divide more of the after-tax marital estate. If you overlook taxes, it can cost you in the future. Here are some issues tax accountants can tackle:
Timing of the divorce and filing statuses.
—Having both spouses on the title of the primary home doubles the home sale exception.
—Splitting (instead of cashing out) retirement assets and qualifying plan vs. IRA.
—Using a trust to pay alimony.
• Planning who claims the children to maximize child, childcare, and educational credits.
If you make less than your spouse, use reducing his or her tax bill as a negotiation chip.
If you don’t know what a QDRO is or how your spouse manages their records, that’s OK. If intricate issues occur during talks, don’t overlook them. One of my retired customers’ ex-husband received a third of her teaching pension, even though she had only been married for 10 years.
The instructor didn’t realize the QDRO she signed gave her ex-spouse a percentage of her retirement plan assets. Signing something she didn’t understand cost her her home.
You usually get one chance. You don’t want “shoulda, coulda, woulda” or “divorce guilt” afterwards, wishing you’d paid more attention or battled harder for what you wanted. Take emotions out of it, pick your battles, ask questions, and stay cognitively engaged until it’s finalized.