A divorce can shake up emotions that can sometimes lead to irrational decision-making about finances. Taking proactive steps to protect monetary assets before filing for divorce may help prepare for better financial decisions during the divorce. Experts in California and other states suggest closing joint accounts, considering alimony and researching retirement accounts.
Alimony is considered a taxable income to the recipient, though that will no longer be the case for divorces after December 31, 2018. A legal agreement that does not label a payment from one spouse to the other as alimony will not need to be claimed as income on taxes. Laws regarding the tax deductibility of paying alimony and the requirement to report receipt of it as income have changed. Further, alimony, when awarded, is unlikely to last forever. Those who have no marketable skills like a stay-at-home mom may benefit from job training or going back to school to become employable and earn a living wage.
Experts agree that joint credit accounts should be closed, and balances paid off. Divorce negotiations will be less stressful with fewer debts. For joint bank accounts and investments, it may be beneficial to change the signature authority requiring both signatures to withdraw funds. One of the biggest assets within a marriage is retirement funds. It is important to research the value of all accounts and know the state laws about dividing them before the divorce negotiations start.
Divorce can be unpleasant for all parties involved, but effective planning before filing can help ease financial burdens. There are alternatives to traditional alimony, and some may benefit from an upfront lump sum payment instead of a monthly payment. An attorney who is experienced with divorce negotiations in California can help determine which approach is right for a particular client.
Source: goodmenproject.com, “11 Tips For Protecting YOUR Assets During Divorce -“, April 18, 2018