Getting divorced can be both emotionally and financially draining. Although there’s no “good time” to get a divorce, there are certain circumstances that might make certain times better to file for divorce than others — especially if protecting your money is a concern.
GOBankingRates spoke with divorce lawyers and financial planners to find out when the best time is — financially — to file for a divorce. Find out the financial secrets only divorce attorneys know.
When Your Business Is Not Doing Well
If you anticipate that you will have to pay alimony, you should file for divorce when your finances have hit a low point, said Stuart Slotnick, co-chair of the matrimonial and family law practice group at Buchanan Ingersoll & Rooney PC. “If you expect to make more money in the future and also expect to pay support, you should file, for financial reasons, when your business is depressed,” he said.
Along those same lines, if you are planning on making a profitable business transaction, you should hold off on doing so until after you file, said Max Barger, a wealth strategist regional manager at PNC Wealth Management and co-chair of PNC’s Planning for the Modern Family National Practice Group.
“If you are considering a big transaction, like selling a business, it may be wise to push that transaction off until the divorce is settled,” he said. “While the value of the ongoing business may be included in the divorce settlement, you may be able to keep appreciated value out of the discussion.”
When Your Spouse Is Doing Well Financially
On the other hand, “if you expect to receive support, the best time to file for divorce may be when your spouse is doing very well financially,” said Slotnick.
After You’ve Already Discussed the Division of Assets
Divorce and splitting assets go hand in hand. Some divorces are contentious, but if you’re able to openly discuss the division of assets to protect assets before divorce, it will make for a smoother process — and will ensure you won’t be stuck with any unanticipated financial losses.
“You should have a very clear understanding of how things are titled, what that means and its implications,” said Morris Armstrong, a Cheshire, Conn.-based enrolled agent. “If you are considering divorce and know that the home will be sold, you may want to consider some upgrades, provided that will make the home more marketable and easier to sell. Again, [an] open discussion is usually best.”
After Making a Major Purchase
If you would not be able to purchase a car or home as a single person, it could be in your best interest to make these purchases before filing.
“In many situations, one spouse might not be able to get a car loan or a house mortgage based on their income alone, so a good plan would be to sit down and see if there are financial limitations in this regard,” said Patrick Simasko, an attorney and wealth preservation specialist at Simasko Law. “If so, then it might be prudent to obtain these large ticket items prior to the divorce.”
Even if you are not financially reliant on your spouse, if you were already planning on making a major purchase in the near future, you should do so before filing.
“Upon filing, a restraining order is issued to prevent either party from doing any unusual or irregular financial transactions,” said Rosemary Frank, a financial advisor and divorce financial consultant at Rosemary Frank Financial LLC. “Everything must remain status quo, paying regular living expenses, until full settlement or judgment.”
However, you should not make a major purchase as a way to safeguard your assets or transfer money before divorce as this can be a red flag, and might even make your divorce negotiations more complicated.
“A major purchase, like a home or a boat, could threaten to delay and stretch out negotiations and settlement,” said Barger. “If you’ve unilaterally made the purchase, it could be a contentious decision or perceived as bad faith, and end up being more costly for you. There may be a temptation to make a purchase to move money around, thinking it may protect your assets. Tread carefully here, and follow the advice of your attorney. If you are trying to conceal assets or devalue them purposefully, you may face allegations of fraudulent transfer or bad faith.”
Before or After Filing Your Taxes, Depending on Your Financial Situation
“Filing taxes as married or single or head of household can be financially beneficial, depending on the couple’s income,” said Pam Friedman, a partner at Silicon Hills Wealth Management. To determine which status will benefit you the most, prepare sample tax returns for each status, and calculate the net refund or balance due.
Keep in mind that if your divorce is not finalized by Dec. 31, you are considered married for the tax year.
Know Before You File: Taxes Have Changed for Divorced Parents — Here’s What You Need to Know
After Securing a Steady Income Source of Your Own
Make sure you have a good grasp on your financial situation before you divorce. If you are currently unemployed or underemployed and have been relying on your spouse to be the breadwinner, you should ensure that you have secured a steady income of your own before filing.
“Before deciding to divorce your spouse, you may want to consider if you will be able to make your financial commitments independent of your spouse,” said Barger. “For example, it may not be good timing to file for divorce if you don’t have a source of income.”
Another thing to consider is your credit score, and how your divorce might affect your ability to be approved for credit lines once you are single.
“A divorce can sometimes wreak havoc on your credit score,” said Madison Parker, a certified financial planner at Parker Financial Group. “If either spouse has neglected their credit, the consequences after divorce can be crippling. Good credit is often necessary for a handful of common post-divorce things like buying a home, buying a car, renting a property, opening your own credit card and sometimes even to secure a new job. If spouses can remain civil while they work to improve one or both of their credit scores, it may be advisable to postpone divorcing until an agreed upon credit score can be reached.”
During a Strong Real Estate Market If You Are Selling a House or During a Weak One If You Are Keeping It
“If you have a marital residence, an important factor to consider is how the real estate market is doing,” said Parker. “Both spouses could be impacted by the conditions of the real estate market if you have to sell the house and split the proceeds in order to purchase separate places. Alternatively, you and your spouse might agree that one spouse will continue living on the property while the other receives marital assets for their share of equity. In this scenario, the spouse continuing to live in the property would likely benefit from a weak real estate market so a lesser value of assets would have to be sacrificed. In contrast, the spouse receiving other property would likely benefit more when the market is strong.”
Now that you know when to file for divorce, click through to find out why one woman said getting divorced changed her views on finances and made her happier.
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