Four Ways to Lessen the Financial Impact of Divorce
May 9, 2023
There is no question that divorce will impact your finances. Often, couples are taking the income which supported one household and stretching it to support two. And when money was tight before the divorce, this stretch can feel like financial ruin. Aside from income, couples are often depending on shared retirement and other assets. Now those will be divided too. So how can parties going through a divorce lessen the financial impact?
Going to court is expensive. Between filing fees, discovery requests and answers, filing motions, preparation for court dates and long court hearings and trials, the cost of battling it out quickly gets out of hand. And, in most cases, this kind of litigation is totally unnecessary. Two reasonable parties with two reasonable attorneys can come up with a settlement that would look very close to the outcome you might get from court after weeks, months or even years of litigation.
2. Sell the Marital Residence
Selling the marital residence doesn’t always make sense. Sometimes, the mortgage is small enough that it would be difficult to buy or rent something comparable. But, often, that mortgage is too much for just one of the parties. And, when you factor in that the person staying in the home will need to “buy out” the other party, it can really become untenable. Though people are often reluctant to sell the home they have lived in, it can be advantageous or even necessary in many separations or divorces.
3. Work Together on Budgets and Future Plans
Pennsylvania has a formula to calculate child support, and there is a different formula for alimony while the divorce is ongoing. But there is no such formula for alimony after the divorce is finalized. Because there is a no real formula, there are wide differences in outcomes when you go to court. This means that each party is taking a risk by asking the court to decide on alimony issues. But, if the parties share reasonable budgets and discuss their future plans, it can become clearer how the incomes might be shared and for how long. As an example, one of the parties might be planning to return to school to raise his or her earning potential. It might benefit everyone if the other party pays alimony while his or her former spouse goes to school. Or maybe one of the parties will have to maintain the marital residence so that a child can graduate from the school he or she has been attending. Additional support until the child graduates might make more sense. Although the decision to get a divorce terminates the romantic relationship, that does not mean that parties cannot work as a partnership to fulfill mutual goals for the betterment of the family as a whole.
4. Adjust Who Receives Liquid Assets and Support
One party may need an income and the other has an income but would like to protect his or her retirement assets. Or maybe one party intends to buy a new house immediately and would like a down payment while the other party has no such plan but would like to retire a few years earlier. When crafting your settlement, you can adjust which party gets what to align better with specific needs and desires.
There is no way to eliminate the financial impact of divorce, but if the parties can work together, it is possible to avoid financial ruin.